Falling oil prices: A big headache for Venezuela’s Maduro?

According to some media reports Venezuela’s President Nicolas Maduro’s popularity is just around 25 percent and the economy feels the heat from falling oil prices. Meanwhile one of the leaders of the political opposition María Corina Machado was charged with conspiracy for allegedly participating in a plot to assassinate President. What do do expect from Maduro in this situation? How dangerous is the current situation for his regime? Read few comments.

Lilian Tintori, wife of Venezuelan jailed opposition leader Leopoldo López. Credit: Archive of Lilian Tintori

Lilian Tintori, wife of Venezuelan jailed opposition leader Leopoldo López. Credit: Archive of Lilian Tintori

Damarys Canache, Associate Professor, Department of Political Science, University of Illinois

President Maduro has seen a dramatic dip in his popularity in the last months. Not surprisingly, this has happened in tandem with the rapid deterioration of people’s quality of life. There are simply too many serious problems occurring all at the same time: food shortages, high inflation, a spiral of crime and violence.  I don’t see how any government can emerge unscathed from it.

Venezuela’s economy is highly dependent on oil and therefore on the fortunes of the oil market. The ongoing dip in oil prices is putting additional pressure on government finances.  Rentier states, such as the Venezuelan state, experience cycles of boom and bust, and now Venezuela is entering a bust cycle for which the government did not prepare adequately. Unfortunately, this situation portends harder and more difficult times for the Venezuelan people.

For what I perceive from the performance of President Maduro, I am very skeptical  of his capacity and willingness to take the sort of policy decisions, for example reduction of government expenditures, increase in gasoline prices, dismantling the strict currency control system, etc.,  that could  improve the country’s finances and reinvigorate the economy.  In this context, the logical outcome is that the economic situation in 2015 likely will continue to deteriorate, and with it we will probably see an increase in social and political instability. I think that President Maduro will confront challenges not only from the opposition forces, but also increasing dissent from within the own ranks of his party, the PSUV. This means that the electoral chances for the PSUV in the next election for Congress are not too good, and for the first time in more than 15 years the PSUV and Chavistas are in real danger to lose an electoral contest. Of course, this assumes that the situation of instability that will ensue in the next months is resolved through electoral means.

Victor Bulmer-ThomasProfessor, Associate Fellow, Chatham House

It is a very difficult moment for him, but it will not destroy him. The fall in oil prices has come at a bad time. The budget needs a much higher oil price to be balanced. The only way out is a big cut in expenditure (already announced) and a severe devaluation (under consideration). Unfortunately, any devaluation feeds through quickly to inflation which is already very high. It will not destroy him because the opposition is badly divided. Also there is so much waste in the state sector that expenditure can be cut quite sharply without too much impact on the economy. Oil prices will recover next year, so the question is whether the regime can do enough to stave off default on the external debt in the meantime. There are many plans under consideration. Some are likely to come to fruition.

Matthew BrownReader in Latin American Studies, University of Bristol

The rise and fall of oil prices always has an effect upon Venezuelan governments’ ability to fulfil their social spending plans. He retains a popular mandate for the duration of his term, and I don’t foresee any immediate change in the way Venezuelans govern themselves. Nevertheless, the next presidential elections will be as close as when Maduro narrowly scraped home, especially if oil prices do not bounce back.

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