Pax Bodegonica's Demise?
Our friends at Caracas Chronicles had this for a headline : “Is The Pax Bodegonica Coming To An End?” Could the brief period of stability and fragile economic recovery called “Pax Bodegonica” be in trouble? With no political contests on the horizon until 2024 political protests have decreased. (Skeptics might think that the population is just worn out after the Maduro regime put down the last round of protracted political protests by killing over 140 protesters, wounding thousands, and jailing many more… followed up by the pandemic)
With Maduro finally crying “Uncle” and allowing some capitalism to “seep in around the edges” of 21st Century Bolivarian Socialism (and it’s total failure) by allowing the use of the US dollar and relaxing price controls, the “Pax Bodegonica” has been struggling to maintain a delicate balance. Now this is in jeopardy, not by political issues but by “Pax Bodegonica” (Madurismo) itself.
Remember, while hunger may be a favorite weapon of the Maduro regime it is also a motivator. Maduro’s economic recovery is being felt by some business owners and well-connected Chavistas but over 95% of the population still lives below the poverty line with 75% in extreme poverty (under the UN metric of earning a dollar a day or less) so while inflation may be down (if you can call 155%-170% down) and food is available (but not affordable) the people are still starving. They’ve been starving since the “Guarimba” of 2014, food-related protest in which Maduro killed over 40 protesters, wounded hundreds more, and jailed thousands.
Political protests have been replaced by labor (wage and benefits) protests, so much so that even without political protests the overall number of protests is up 15% from last year.The people aren’t happy…starving people rarely are. The Maduro regime has been trying to keep inflation down (after over 4 years of hyperinflation, the second longest period on record) by using dollars to buy bolivars and create artificial demand for the local currency which keeps the exchange rate down. This is where it gets tricky.
In the past whenever the people protested beyond a level the government was comfortable with they just raised everyone’s wages and “printed” bolivares to cover it, which creates inflation by devaluing the bolivar. At some point somebody must have made Maduro realize that unprecedented currency devaluation (14 zeros have been lopped off the bolivar between Maduro and Chavez) and unprecedented hyperinflation (at one point reaching over one million percent) couldn’t continue indefinitely without being a threat to maintaining power.
Now that they’re actually paying attention to inflation (four years of hyperinflation will do that) they’re trying not to create bolivares out of thin air. To do that you need real money, like the dollars the BCV (Venezuela Central Bank) has been using to buy bolivares. The problem is that the Chavista government is, for all intents and purposes, broke. They have no money and no credit…anywhere.
So what do they do now that people are demanding the government actually pay their full salaries and benefits (as meager as their wages are they need every penny and the government was screwing them)? They do the only thing they can… back off some of their dollar usage to buy bolivares, use the dollars to fund the government (as much as possible), and print some bolivares to calm people down. Then, hopefully, they can return to using whatever dollars they can scrape together to return to using dollars to buy bolivares before devaluation and inflation spiral out of control (again). It’s a delicate balancing act.
They need to produce more oil but the Chavistas have proven themselves incapable of doing that (due to self-inflicted wounds). Oil production is down 28% since it’s recent high in December,2021.
Another option is privatization of the many businesses the Chavistas have expropriated which Maduro is trying to do, hence all the “Madurismo” public/ private engagement and the more consumerist advertising that’s seen everywhere. This is a risky move as it’s angering the hardcore Chavistas that see it as a betrayal of the legacy of Hugo Chavez despite the reality that 21st Century Bolivarian Socialism is an abject failure.
Where else might the government get some desperately needed revenue? Well, there’s always foreign investment which is why we’ve seen the Maduro regime hyping ZEEs, Special Economic Zones. The only problem there is (again) a lack of credibility. The only foreign investors that will put money to work in Venezuela are those with a high risk tolerance as Maduro (being a dictator, despite protestations to the contrary) can change his mind at any time, about anything, nullifying any guarantees and without an independent judiciary there is no legal recourse.
So where does that leave us? Well, the government must see this ongoing protest situation with teachers and pensioners as a threat since the Education Ministry announced it would pay teachers their vacation bonuses at once, but in typical Chavista fashion didn’t change the ONAPRE (government budget office) rules that caused the problem. It’s a Band-Aid.
They also announced BCV will resume it’s intervention in the exchange markets buying bolivars, again another Band-Aid since they don’t have the money to keep it up so the bolivar, after a brief respite, should resume it’s fall having already lost 40% of it’s value in 4 weeks.
Venezuela has the worst “Food Coverage” rating (wages versus the cost of the basic food basket) in Latin America. You also have that new tax on the use of foreign currency/ cryptocurrency out there complicating things…and the government still needs money so this probably doesn’t bode well for the country’s gold reserves, already critically low, approaching $4 billion, down from over $30 billion.
The Maduro regime has already reverted to it’s old habits of criticizing retailers and “speculators” as responsible for the bolivar’s problems and SUNDDE (government price control and regulatory agency) just visited over 3,000 businesses, closing some, to remind them who is in charge. (It’s an ideological knee-jerk reaction to any problem faced by the Chavistas)
If we see any fracturing on the political side of things, combined with the economic uncertainty (starvation) the Maduro regime may resort to what it does best… repression…2014 and 2017 style (hundreds killed, thousands wounded, and many more jailed). It’s a very fragile balancing act for “Pax Bodegonica”.
Then we have Law 360 reporting that a Texas federal judge has denied a discovery bid by a former Venezuela dealer for construction equipment manufacturer, Caterpillar, Inc. that is seeking a judgement in Swiss courts. We have no details on how much money is involved but we’ll add it to the list of court cases we’re following pertaining to Venezuela…it gets longer every day.
Then we have Rio Times reporting the Nicolas Maduro says Russia is interested in importing Venezuela buffalo meat. According to Venezuela government figures (as unreliable as they may be) Venezuela has the largest buffalo herds in Latin America. Maduro reiterated that his government is working to make Venezuela a food- producing and exporting power. With 95% of his citizens living in poverty, 75% in extreme poverty, and people starving to death maybe he should be working to make Venezuela capable of feeding it’s own people.
And we also have Rio Times telling us that the Venezuela government announced through official communique that it’s suspending the requirement for travelers to Venezuela to obtain a “Bio-safety Passport” from the government’s Bio-check Automated System, which was introduced just a month ago. Was it because it threatened Maduro’s tourism push…or because it was deemed unnecessary… or because the Chavistas couldn’t make the system work?
Then we have CGTN telling us that many Venezuelans are turning to private tutoring as an alternative to Venezuela’s crumbling public school system. We’ve previously detailed all the teacher protests, not just for a salary that would enable them to feed their families, but for unsafe health conditions like standing water that breeds mosquito- borne diseases like malaria and lack of Covid-19 protocols, not to mention the constant blackouts and lack of fresh water. Many Venezuelans used to send their children to public school, if for no other reason than to get them at least a decent meal, but the government no longer provides that.
The government ordered the military to fix the education infrastructure in June but the effort has so far been ineffective. This leaves those who can afford the $5 a week little choice if they want their children to learn to read and write. To those who can’t afford the $5 a week, and with the minimum wage being under $14 a month there are many, my condolences…more dreams stolen by 21st Century Bolivarian Socialism.
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