Friday 3 March, 2017 Update: Venezuelan Monetary Reserves Diminishing

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Venezuela is rapidly approaching the moment when economic Armageddon becomes a grim reality and there is practically nothing its government can do at this point to reverse course. Data released by the nation’s central bank indicates Venezuela has only $10.5 Billion in foreign reserves left. In 2011 the amount was $30 Billion, and by 2015 that number had diminished to $20 Billion. Venezuela will pay $7.2 Billion to countries it owes debt payments to this year, suggesting that the moment when Venezuela runs out of money entirely could arrive at some point in the near future. The government has promised not to default on its debts, but at the current pace default is a very real possibility.

As the monetary reserves are thinning, hyperinflation has resulted in food and medical shortages that are compounding the everyday trials and tribulations being endured by Venezuelans. Food, and staple goods are becoming more and more scarce. Many hospitals are unable to render more than the most basic care. The sick and elderly are dying in ever-increasing numbers. The crime rate has soared with looting and unrest now the norm in many cities.  As bad as the humanitarian crisis is, the economic crisis that Venezuela is mired in bodes even worse for the nation’s long term fortunes.

An Economic collapse is imminent. Some economists say that it has already arrived and will only worsen as time goes on. My personal belief is that Venezuela is teetering on the brink of collapse, and has been for some time. Conditions have deteriorated at a rapid clip, but it will take something major for the collapse to begin in earnest. Defaulting on its debts will probably do the trick. The moment that happens, the economy will collapse entirely, bringing about a complete and irreversible collapse of Venezuela as a nation-state. There will be a massive exodus of citizens into neighboring countries, potentially causing a refugee crisis like South America has never before seen. Colombia will bear the brunt. Tens of thousands of incoming Venezuelan refugees would tax Colombia’s national infrastructure and act as a potential destabilizing force at a time when Colombia is finally getting its act together domestically.

Internationally, there is little that the world community can do but watch and wait. In the United States the number of Venezuelan immigrants entering the country over the last year has skyrocketed. Now, with the immigration laws and policies about to be restructured, there is concern in the US-Venezuelan community that the number of future immigrants will be limited. Activists in Florida are expected to petition President Trump to exclude Venezuelans from future immigration restrictions as the humanitarian crisis there appears likely to continue and worsen.

Venezuela In Crisis

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Conditions in Venezuela continue to deteriorate at an alarming rate as the political and economic crisis that has beleaguered the nation rages on with no end in sight. If recent events are an accurate indication, the crisis is dangerously close to reaching a climax and potentially sending the nation spiraling out of control. With the world’s attention primarily focused on events in the Middle East, Ukraine and Asia, the situation in Venezuela has not received the scrutiny it deserves until lately. The current crisis did not develop overnight. An economic disaster has been encroaching upon the nation at a glacial-pace since 2013. Venezuelan President Nicolas Maduro’s failed economic policies have played a major role in bringing about the current situation. Now it has arrived in full force and its ramifications threaten to tear Venezuela asunder.

The Venezuelan economy is suffering from a deep recession and hyperinflation. The gap between revenues and spending is widening and the nation faces a tremendous fiscal deficit. Government efforts to narrow the gap have fallen short. More money is being printed, but it is unlikely that this will be anything more than a throwaway measure. Basic goods are in short supply. Black markets have cropped up on social media, allowing citizens to barter or acquire goods at a reasonable price as the bolivar is on the verge of becoming essentially as valuable as toilet paper. Electricity and water rationing are now a part of daily life. Add to the mixture the effects of a global collapse in oil prices and it is plain to see the recipe for disaster coming to life.

Unrest is increasing across Venezuela and public opinion is moving towards the ouster of Maduro, who is now fighting for his political life. Early in May, the opposition presented a petition containing 1.8 million signatures and demanding a recall referendum to election officials. Polls suggest over 70 percent of Venezuelans want a government change. In response, Maduro has tried to lay the blame for the economic conditions on foreign agitators and ‘threats from abroad’ naming the United States specifically as the greatest agitator. Last week, he declared a new three-month state of emergency, hinting that the measures may be kept in place until 2017. Large protests have taken place in Caracas and other cities as thousands of demonstrators are calling loudly for the referendum to be granted. Spontaneous protests are becoming more common around the country.

To even the most naïve folks it is obvious Maduro is using the state of emergency to consolidate and strengthen his hold on power. Over the weekend, Venezuela held the largest military exercises in its history. Ostensibly, the maneuvers were held to show that the government can handle foreign threats, however, the exercises has also demonstrated that the government is preparing to contend with domestic threats as well. With the pressure on Maduro and his government increasing steadily, the military option remains open. Using the deteriorating situation as justification, Maduro can order the military into the streets to restore order and round up large numbers of opposition leaders.  These unfortunate souls could then be branded as anything from criminals to insurgents to American-sponsored agitators. Convictions are all but assured since Maduro has reshaped the Venezuelan judicial system and installed many of his own supporters as justices.

South America has been a continent of relative stability in recent decades. This year, with a major political crisis playing out in Brazil and now Venezuela threatening to unravel, that stability might be a thing of the past very soon. Argentina and Brazil today have agreed to mediate the crisis, but it is unlikely that the two regional powers can bring Maduro and the opposition to a compromise or offer enough aid to pull Venezuela away from the brink of full blown economic disaster.