• The Inside Line

Venezuela and the game of ostrich

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That the Venezuelan economy has been precarious in recent years is hardly news. Since the death of Hugo Chavez, it has been increasingly difficult for successor Nicolas Maduro to keep Venezuela's oil-powered socialist dream both alive and popular.

As the price of oil has tanked in recent weeks, Venezuela's oil-dependent economy has collapsed, and the country is edging closer and closer to chaos.

Back in November 2013, the Venezuelan government was already rationing basic essentials such as toilet paper. Chavez' devotion to oil saw the Latin American country move away from manufacturing, concentrating national attention on making the most out of what were the world's largest proven oil reserves.

When the price of oil was sky-rocketing in the early part of the millennium, Chavez' faith in oil paid off. While no country can ever truly be a paradise, for low-income Venezuelans, the oil years led to a period of wealth distribution and perceived growth even as those Venezuelans with international business interests warned that the glory years wouldn't last. After all, they never do.

But since the death of the charismatic and broadly popular Chavez, the global price of oil has come down, affecting Venezuela's currency reserves. As the country's credit rating has tumbled, suppliers of basic essentials and raw materials to Venezuela have demanded payment upfront, or refused to extend lines of credit, making access to basic goods and services increasingly impossible for the average man or woman on the street.

These shortages have now become critical in hospitals and pharmacies, with access to medicines and surgical equipment increasingly limited. There have been deaths directly traceable to a paucity of medical supplies, with doctors forced to make the most of whatever medications they have on hand to try and ease the suffering of patients, irrespective of their ailments or the treatments' original purpose.

Maduro last month announced emergency measures to relax currency restrictions preventing the import of vital goods, but with approval ratings of 20% even among the United Socialist Party's core voter base, the president's attempts to stem the tide appear to be far too little, vastly too late. Maduro has tried to blame the financial crisis on coup attempts by external governments trying to destabilise Venezuela, but the familiar tactic is not as effective in his hands as it was when Chavez did the same.

Maduro is also pointing to internal enemies, blaming private shopkeepers for artificially creating queues for basic essentials in order to "annoy the Venezuelan people", going so far as to arrest private business owners for what he called "provoking" the populace. "Those who use their stores to hurt the people will pay with time in prison," he said, ignoring the fact that private businesses rely on sales - rather than provocation - to make money.

But with inflation at over 63%, and a GDP contracting seemingly by the hour, Venezuela is currently in a precarious financial position caused not by a group of conspiring merchants keen to publicise their shops with long queues, but rather years of financial mismanagement coupled with an unfortunately-timed drop in global oil prices. Unless the government stops playing ostrich and faces the reality of their problems with a view to fixing them, even the world's largest proven oil reserves will not prove to be much of a financial cushion.

Of course, if Pastor Maldonado's comments on the current Venezuelan crisis are anything to go by, playing ostrich is something of a national sport. The PDVSA-sponsored driver told the attendant media that he was unconcerned, saying "I am not PDVSA. I am not an expert in oil. For sure, the oil price is suffering at the moment." When asked whether he was worried, Maldonado's response was "why?". It was a response worthy of Nicolas Maduro.

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