Dressed for a funeral

A sombre necktie must have seemed more fitting than the faux epaulettes or track gear that Venezuelan president Nicolas Maduro usually fancies for his rambling national broadcasts. His four-hour economic address yesterday looked like a last stand for the country’s head of state.

In the wake of another desperate overseas effort to resuscitate oil prices and the sacking of a quixotic economy minister deemed too radical for the Bolivarian revolution, Maduro delivered the bombshell: higher gasoline prices and a major currency devaluation.

The details are still sketchy. But, on the face of it, the package of policies demolishes the pillars of the socialist revolution ushered in by Hugo Chavez, the long-serving late president who swept into office in 1999 on a popular backlash to IMF-inspired economic adjustments. A humbled Maduro all but conceded yesterday that he has failed his mentor.

He might not last in office to see through the consequences. Political opponents and members of the ruling elite alike want him out. Anticipating a reaction on the street, Maduro pledged higher wages, a crackdown on tax evasion, centralising food distribution and targeted social subsidies to counter the bitter pills of pump price hikes and a “floating” currency.

But, unless this is just the start of a comprehensive policy transformation, none of the measures goes far enough to rescue Venezuela’s oil-based economy. Venezuela’s gasoline prices will still be the world´s cheapest, and the retention of a “protected” currency rate will sustain the rampant corruption and distortions that have pillaged a country with the world´s largest known oil reserves.

The government might fend off a debt default for now, but it may not succeed in eluding another traumatic political upheaval. With hyperinflation on the horizon, impoverished Venezuelans waking up to Maduro’s “new reality” see that as the lesser of two evils. And for the country’s gutted oil industry, a devaluation windfall is only likely to offer a passing respite.

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