Venezuela

Nicolas Maduro, Now The Hard Part

In Venezuela, Hugo Chavez's handpicked heir will find securing his narrow victory was nothing compared to actually serving as president of a country with deep structural ills.

Maduro's turn
Maduro's turn
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-Editorial-

CARACAS – Hugo Chavez" designated successor, who won last week's election by a tiny margin, was sworn in Friday -- and thus begins a new chapter of Venezuelan history.

But do not expect it to be a happy chapter, as President Nicolas Maduro discovers that winning an election is much easier than governing. To start with, the social programs implemented by Chavez cannot be repeated. Fourteen years of Chavez rule reduced poverty from 48% to 27%, and implemented free education and healthcare as well generous housing subsidies.

But the most Maduro could hope is to simply maintain the massive network of social programs launched by his predecessor; but even if he does achieve that, the country’s situation would not improve.

Even though he can indeed be credited with improving the situation of the poor, Chavez’ consecutive governments have effectively gutted the country -- and the signs of ruin are already starting to show.

The sustained rise in oil prices in the last decade helped finance its social programs, but for years the country has spent more than it makes. Fiscal spending doubled during the Chavez years and today it approaches 45% of the GDP, 20 percentage points above Latin America's average. The fiscal deficit total $30 billion, close to 10% of the economy, and the budget deficit amounted to 13% of the GDP last year, a much higher percentage than that of crisis-stricken European countries.

The government has used Central Bank reserves as a cash machine and borrowed as much as possible, but no one else will lend them money and the country has already spent a large part of the money the Chinese had recently lent them in exchange for future oil sales.

Even though the price of oil has not decreased, production has. While oil money goes toward social programs, the government has mortgaged future production by denying money for investment and development to state-owned oil and natural-gas company PDVSA.

The shortage of money will be an immediate problem for Maduro, but not the only one. Inflation this year will reach 30%, and, in a region where local currencies are increasing in value to the dollar, Venezuela just devaluated its currency by 32%.

Food scarcity and rampant violence

The ideological and improvised agricultural reform that Chavez launched, together with the nationalization of the food industry and price control, have destroyed the agricultural sector. To a point where the scarcity of basic foods such as eggs and flour is common today, and Venezuela has been forced to import sugar, rice, coffee, milk, and meat.

What's more, the infrastructure is dilapidated, there are frequent blackouts that affect large areas of the country and violence has increased to a point where last year, there were 16,000 murders, making Venezuela the sixth country in the world with the most homicides.

Neither Maduro nor Capriles gave details during their campaigns about what they would do to address these problems if they were elected. By losing the elections, the opposition does not have the responsibility to do anything anymore. On the other hand, Maduro is now responsible of what happens in Venezuela in the next few years. His slim victory of 50.7% against Capriles’ 49.1% will wear off quickly.

Instead of questioning the results and asking for a recount of the votes, the opposition should celebrate the results with joy. If Capriles had won, it would have been his responsibility to improve Venezuela’s situation – although it would have been almost impossible for him to do so. Independently from who is in government, the economic situation will get worse before it gets better.

There is a double and maybe even a triple irony in this. By losing, Capriles won, and by winning Maduro lost. Meanwhile the person responsible for this catastrophe, Hugo Chavez, rests up in heaven.

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