Rampant inflation is pushing Venezuelans to boiling point.
On Feb. 18, Venezuela’s embattled president Nicolas Maduro announced a 6000% increase in gasoline prices to help plug the nation’s gigantic budget shortfall. For Venezuelans demanding Maduro’s ouster for savaging the economy, the date is highly significant. Exactly two years ago, on Feb. 18, 2014, Maduro ordered the arrest and imprisonment of the leading opposition leader, Leopoldo Lopez, now 44.
On Thursday, I spoke with his father, Leopoldo Lopez Sr., about the crisis in his home country, and his son’s plan to depose Maduro. “The people are close to starting riots,” he says. “It’s not mainly the increase in gasoline prices, it’s the long waits to buy milk or sugar, the companies that are shutting down production because they can’t get raw materials, the price and profit controls that everybody knows aren’t working.”
Oil accounts for 95% of Venezuela’s national income, and the price collapse has opened a gigantic deficit of 20% of GDP. The nation’s businesses, mostly government-controlled, need dollars to buy raw aluminum for cans, steel for cars and many other raw materials. But now, the flood of petrodollars is dwindling. And businesses can’t raise dollars through exports, because currency controls vastly overvalue the Bolivar and make Venezuelan products unaffordable on world markets. Nor can domestic producers purchase materials in Bolivar, because prices are tightly controlled. “I was talking to the head of a company that makes cans for sardines, beer, and lots of other products, and he said that production has almost stopped,” says Lopez Sr. “It’s the same for cars, for cookies. People can no longer buy 97% of all medicines available a year ago.”
In response, the government is devaluing the Bolivar by 37%. The cheaper Bolivar is supposed to raise exports, and enable companies to purchase more supplies from abroad. It won’t work. The lowest official rate is now around 400 Bolivar to the dollar; the black market price is 1200. What U.S. supplier would sell steel or aluminum to a Venezuelan manufacturer at one-third its dollar value?
Hence, the government’s solution to collapsing oil prices, flooding the market with fast-depreciating Bolivar, will continue, pushing inflation to 720% this year, according to the IMF.
Surprisingly, Lopez Sr. doesn’t think the gasoline hike will be fatal to Maduro. “I used to fill my tank with 65 liters for 5 Bolivar, and give the attendant a 10 Bolivar tip,” he says. “The 5 Bolivar for a tank of gas was less than the cost of a cup of coffee.”
No, he says, the killer is rampant inflation and rationing that makes folks’ daily lives miserable, and could hasten his son’s rise to replace Maduro.
“People are waiting four-to-five hours to buy a liter of milk or kilo of rice,” Lopez Sr. says. “They take your finger print when you buy” and everything is strictly rationed. A customer is limited to, say, one bottle of cooking oil a week. If he or she breaks the bottle, and returns for a new replacement, the store will check their fingerprint, and refuse the sale.
Several months ago, while Lopez Sr. was in the U.S. for medical treatment, the government pledged to revoke his passport if he returned home. “I’m sure I would have been imprisoned like Leopoldo,” he says. Lopez Sr. drew fire as a member of the editorial board of El Nacional, a leading independent newspaper that ran investigative series highly critical of Maduro. As a political refugee, he received Spanish citizenship and is now living in Madrid, hoping to return when Maduro is overthrown.
In December, the dictator’s departure looked close at hand. The opposition parties won 75% of the seats in the National Assembly and, on Feb. 18, the legislature passed an amnesty law that would have freed the younger Leopoldo and all political prisoners. “But the executive branch says they will refuse to enact the law, and send it to the Supreme Court,” says Lopez Sr. Just before the opposition swept the elections, Maduro stacked the Supreme Court with 13 new numbers, ensuring that the Court will strike down the amnesty provision.
Meanwhile, Leopoldo, Venezuela’s most popular politician lives in military prison called Ramo Verde south of Caracas, the capital city where he served as mayor of a large municipality. “He’s the only prisoner in one of the two buildings there,” says his father. “There are 150 prisoners in the other building. He gets to see only his immediate family. He can leave his cell at 7 a.m. when he can go to a space with a little kitchen where he can cook for himself. They take him back to his cell at 7 p.m. He’s been extremely isolated for two years.”
Still, the opposition leader and the assembly majority share a plan for forcing Maduro from office. “Leopoldo has been very clear,” says his father. “He says the only way to really change things is to change the government. He favors having the legislature vote introducing a referendum calling for Maduro’s resignation.” He adds that the law allows for a referendum starting at the halfway point in a president’s term. That window will open in April. Whether the Assembly can force a referendum is uncertain; Maduro will almost certainly use every means possible to stay in power until his term officially ends in 2019.
Until then, only a popular uprising could force Maduro from office. And Venezuelans are boiling with rage.