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Is Venezuela Rebounding?

Venezuela looks different in 2022. Some Venezuelans are once again making weekend plans. Restaurants, shopping centers, night spots and parks are beginning to fill up again. They’re no longer wheeling nearly empty shopping carts out of the supermarkets, nor are there lengths of empty shelves.

In Venezuela, according to the official media, 202,609 new businesses have registered. Many sell a little of everything, all day long, because it takes a lot of hard work to fulfill the basic needs. Venezuela has been “becoming less worse” since the end of 2021, when, little by little, nearly imperceptibly, the economy began dollarizing.

Although there are still persistent lacks in health care and other basic services and average incomes are still very low, Venezuelans are smiling now, because some have recovered a little buying power, and with that, hope. Not only people’s attitudes have changed: the government of Nicolas Maduro has loosened the controls on business and currency, and even put up for sale some of the property belonging to the confiscated (and ruined) businesses from the time of Hugo Chavez. Seen in terms of social Darwinism, Maduro has simply adapted his surroundings to fit his objective of staying alive – in power, that is.

Luis Salamanca, political scientist and university professor, says Maduro’s pivot isn’t due to an ideological change, but to the pragmatism needed to remain in Miraflores, the presidential residence. “Maduro continues to be an ideological follower of Chavez, but he’s also a great opportunist, very calculating. He’s tickling the keys to see how the country will react, and he’s managed to float this campaign of “Venezuela’s all better”, Salamanca told Connectas.

According to expert calculations, during the nine years of Maduro’s rule the Venezuelan economy shrunk 80%. Much has been said about the causes: the bankruptcy of the oil industry; nepotism; increased public spending with no corresponding increase in production; misappropriation of billions of dollars in public funds; confiscations; centralization of the economy and multiple controls over the business owners.

In 2016, the economic crisis reached its most critical point for Venezuelan households. That year, 70% of Venezuelans lost an average of over 17 pounds of weight. Many ate whatever they could, only once a day. Photos and videos circulated on social media showing some people eating garbage, a situation that existed in several cities across the country.

In 2018, a year after the US sanctions were decreed against Venezuelan officials, Maduro began showing his first signs of pragmatism. That year, he announced a plan of economic recovery that included an increase in public spending, in sales taxes, and partially freeing up the currency.

More such decisions were announced in the years that followed: the principal controls over production and prices were softened; transactions in dollars were allowed to go forward; he opened the way for the unobstructed movement of products through Customs. Recently, he also decreed a restructuring of the currency. In the view of Henkel Garcia, director of the consulting company Econometrica, it’s not necessarily a matter of radical new measures, but a change in posture: just by reverting the controls, some signs of improvement are appearing.

However, Garcia says the principal factor creating economic growth in 2021 is the rebound effect of the pandemic. “This caused a major contraction in the economy in 2020. Once the quarantine policies were loosened, the previous [growth] levels returned and this appears as economic growth. If we grow by 15% in 2022 – which seems possible to me – and we add to that the growth in 2021, we would still close this year with an economy worse than that of 2019. To speak of economic recovery without putting it in context isn’t enough, in my view.”

In addition, specialists point to the fact that only the commercial and import sectors have recovered, leaving out manufacturing, industry and production. They all agree that the growth is fragile because it’s not backed by a solid institutional structure or a coherent macroeconomic policy. Maduro often makes contradictory decisions: he loosens government controls but also increases public spending, and with that increases the flow of paper money, thus feeding inflation.

The phenomenon hasn’t reached all levels of society. A study conducted by the ANOVA policy research group and published on May 6th, concluded that the recovery hasn’t improved the income of the poorest sector, while the 10% at the top did improve their economic status.

Omar Zambrana, economist and founder of ANOVA, explained that this partial recovery has only deepened inequality. “The productive activities that are being activated aren’t generating employment nor substantial wage increases, and as such are leaving a part of Venezuelans out.”

Clearly, access to services and job opportunities for those living in Venezuela’s capital doesn’t match the reality of Venezuelans in the interior of the country. According to the last “Encovi” survey of the Andres Bello Catholic University – realized between February and March of 2021 and published in September  -94.5% of Venezuelans have low incomes, and 76.6% live in extreme poverty.

With this system, the economy can grow but as Henkel Garcia warns Connectas: “without a backdrop of solid institutions, recovery has a limit.”  However, the expert adds, “it’s impossible to determine what that limit actually is. For example, there are elements that limit the service sector. If electricity improves here, that would raise the limit. If there were to be a political change and a reform of the country’s institutions, with new leaders who inspire trust, then that limit becomes the maximum potential we’re capable of.”

Nothing, however, indicates that Maduro is interested in creating institutional change. On the contrary, everything seems to point to the fact that his privatization measures are aimed at giving some oxygen to the economy, improving his image internationally, and showing that under authoritarian rule the country can function and even grow. All this under the conviction that in a stable atmosphere, with less cause for protest, remaining in power is always easier.

Salamanca warns that Maduro doesn’t need to improve his deplorable popular image because “his power doesn’t depend on electoral competitiveness; Maduro’s power rests on his control of the government apparatus, the Supreme Court, the National Electoral Council and the Armed Forces.” In addition, Salamanca recalls, since the beginning of his rule nine years ago, Maduro’s popularity has been low. The majority of Venezuelans dislike him, including some of the citizens that support the Chavista vision. “No president with this kind of opinion profile can win a competitive election.”

None of the recent measures suggest that Maduro is preparing to participate in elections that fulfill the minimum standards for a democracy. At the same time, a more efficient economy will work to calm the population’s complaints, so he can continue controlling the government and using it as an instrument to perpetuate himself in power, one way or another.

It all depends on whether the current happenings are really the seeds of a coming bonanza of growth. According to the specialists, the perception of improvement that many Venezuelans have is nothing more than wishful thinking. Salamanca compares it with the tunnel effect: “You’re in a long tunnel, in an enormous line of cars, and none of them are moving. Hours pass. You’re at the back. Suddenly you see that some vehicle towards the front of the line is moving. What’s your reaction? There’s a change. Now I’m going to get out of here, finally. This punishment is coming to an end. Hours pass and you’re still in the tunnel. That exit from the tunnel was an illusion. We remain trapped there…. “

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*Grisha Vera is a member of the “Connectas” editorial board. Each week, the Latin American journalism platform “Connectas” publishes articles analyzing current events in the Americas. If you’d like to read more like this, click the link: www.connectas.org.

This article was originally published in Spanish in Confidencial and translated by Havana Times

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