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Ex-Ambassador Explains The Paradox That Led To Crisis In Venezuela
Ex-Ambassador Explains The Paradox That Led To Crisis In Venezuela
Harrison JacobsFeb 25, 2014, 23:34 IST
REUTERS/Jorge SilvaA woman walks past an empty section where toilet paper should be on display in a super market in Caracas May 17, 2013. Venezuela President Nicolás Maduro has only exacerbated problems inherited from predecessor and mentor Hugo Chavez and holds primary responsibility for protests throughout the country, says Duke Professor Patrick Duddy, the former US ambassador to the Bolivarian Republic of Venezuela from 2007 to 2010.It all comes down to economics, including a paradox involving the combination of price controls and currency controls, as Duddy explained (emphasis ours):What we can see from the statistics is that things have gotten worse in the last 9 months … Last year, inflation was about 25%. This year, inflation is at 56% … The Scarcity Index is often well over 20%. Food prices have gone up much higher than the overall inflation rate. Prior to the legislative elections in December, the government not only railed against the private sector and high prices for consumer goods, but they essentially mandated that prices be lowered as a concession to the public, thus essentially emptying the shelves in the stores that did have some stock. But how were they going to replace that stock when these items are not manufactured in the country and the government is restricting access to dollars? The economic circumstances have become worse and the government has become increasingly defensive, as the circumstances in the country have generated predictable criticism and concern.And that's why you have Venezuelans fighting over chickens in a grocery store, as food stables are increasingly unavailable.Since 2003, access to dollars has been limited to those in state-run companies and certain important business sectors. The effect is that bolivares are valued at far less than the official exchange rate. While the official rate is 6.3 bolivares to the dollar, it actually trades for 10x that on the black market. Maduro added to the chaos, with his administration announcing in January that Venezuelans traveling abroad could only obtain foreign currency at a rate higher than the official rate, determined by a weekly currency auction.In addition, Maduro enacted the Fair Price Law, which set maximum profit margins at 30 percent for companies and requires them to obtain "fair price certificates" to access dollars. The law carries prison sentences for those convicted of hoarding or "destabilizing the economy."Similarly, last year, the government took over an electronics retailer accused of overpricing its products. Maduro promised the effort would reduce consumer prices by 5 percent. Instead, prices rose 4.8 percent. "Their efforts at converting what was a market-oriented economy into a socialist economy have eviscerated much of what was a fairly productive private sector," said Duddy.While Maduro's policies have worsened the economy in Venezuela, his inability to lead has also been a problem, according to Duddy, who says his default response to conflict is to distract and blame.During the current protests, Maduro has refused to acknowledge the grievances of the protesting public, and has instead taken to accusing the political opposition and the protesters of being "fascists" that seek to destabilize the government. Duddy calls the claims "preposterous.""That is a part of their effort to vilify their opposition and rally their own base," explains Duddy. "… [It is] part of a campaign to distract attention from the desperate circumstances inside the country and which are a consequence of their own policies." Maduro has blamed the current protests on the United States, saying that they helped organize student protesters in order to "create youth groups that generate violence." That accusation has led Maduro to throw out eight U.S. diplomats in the last year, including three vice-consuls, for conducting standard diplomatic activities, says Duddy."This is a pretty transparent attempt to suggest that other countries, the United States in particular, are responsible for their problems," said Duddy.This strategy isn't an isolated incident. Last year, Maduro blamed the United States for "giving cancer" to President Chavez. In December, he blamed a power outage in Caracas on a conspiracy by the Opposition. Perhaps the most egregious example of the blame game is Maduro blaming the deaths of six protesters on "fascist groups" associated with the protesters and the opposition, rather than pro-Chavista militant groups that most people agree were to blame.While Duddy says it's far too early speculate whether the protests could lead to a resignation by Maduro or other elements of the Chavista government, he was adamant that the future success of the government will be determined by whether it can stop running from problems and start addressing policy issues like how to develop one of the largest reserves of fossil fuels in the world. "[The Chavista government] has been in power for 15 years and it's no longer plausible for them to blame anyone else for their problems, certainly not the United States," said Duddy.
