Political and economic crisis set to worsen in Venezuela

  • 03 May 2016 16:02
Article written by Junior Risk Analyst Julia Westbury, published 28/04/2016
Venezuela

Political and economic crisis set to worsen

Venezuela’s economy remains in a severe crisis. On 12 April, the International Monetary Fund (IMF) announced that inflation is expected to increase by 481 percent in 2016 and by some 1,642 percent in 2017. However, experts have conceded that, in reality, inflation may reach 2,200 percent in 2017, resulting in the total collapse of the economy in 12 to 18 months. The IMF also estimates that unemployment rates will hit 17 percent this year and 21 percent in 2017, comparable to the 25 percent witnessed in the US during the Great Depression of the 1930s.

Venezuela, which depends on oil revenue for 95 percent of its budget, has been under a state of emergency since 15 January following the global collapse in oil prices, combined with years of persistent mismanagement of the state-owned oil company Petroleos de Venezuela (PDVSA). Economic woes have also been exacerbated by continuing drought conditions. Venezuela relies on El Guri, a massive hydroelectric dam in eastern Venezuela, for almost 70 percent of its power supply, but a severe drought, compounded by a lack of investment in infrastructure, has drastically reduced hydropower output in the country.

President Nicolas Maduro’s government has implemented several drastic measures in an effort to curtail energy usage as the country struggles to deal with the ongoing economic crisis. On 25 April, authorities implemented mandatory daily four-hour power supply cuts across the country. This drastic measure will last for a 40-day period. Maduro has also now imposed a temporary two-day working week for public sector workers in order to save energy.

Venezuelans are losing patience, with thousands of people participating in anti-government demonstrations across the country in recent months. However, despite the widespread optimism following the opposition’s victory in the December 2015 legislative elections, the opposition Democratic Unity Roundtable (MUD) coalition has been unable to push for drastic political changes. Although the MUD has launched proceedings aiming to constitutionally oust Maduro from power before his presidential term ends in 2019, Maduro has many powerful allies in influential state institutions. The Supreme Court, which primarily consists of judges who were appointed by either late president Hugo Chavez or Maduro, has already blocked the constitutional amendment proposed by the opposition, which would cut short the terms of all elected officials, including Maduro’s current term in office. Following the judicial rejection, the opposition’s last legal resort is to recall Maduro by popular referendum. For this, the opposition needs to collect 197,978 signatures, one percent of registered voters, by 27 May. Should this hurdle be cleared, another 7.6 million signatures will need to be collected in order for a referendum to be authorised and Maduro’s political apparatus is expected to try to block the initiative.

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