Venezuela has once again been rocked by opposition-led protests after the process to requisition a recall referendum to oust President Nicolas Maduro was obstructed last week. Local courts in four states issued injunctions to halt the opposition’s collection of signatures from 20 per cent of the registered voters, the second phase of the constitutionally mandated recall process, after allegations that there were irregularities in signatures collected in the first phase. The Supreme Court upheld these injunctions, which means the referendum process in the four states will have to be restarted. The timing of the referendum is important. If the outcome were to go against Mr. Maduro before January 10, 2017, mid-term presidential elections will have to be held. If the referendum is held later, a setback would only mean his replacement by the vice- president till the scheduled elections in 2018. The besieged government has sought talks with the opposition to be mediated by the Vatican, but Mr. Maduro has poor approval ratings and his government has been unable to arrest a slide towards further economic chaos. The opposition has more popular support than it did during Hugo Chavez’s reign and, importantly, it controls the National Assembly.
Mr. Maduro does not wield the kind of charismatic sway that Chavez, his mentor, did, but the problem goes deeper than this. The continued fall in global petroleum prices under Mr. Maduro’s watch has put the country’s social welfare model under severe strain. In Chavez’s heyday, the government leveraged the country’s immense petroleum reserves to fuel a welfare economy and spend heavily on subsidies. This model resulted in several structural flaws in the economy — corruption in state enterprises, heavy dependence on imported consumer goods due to meagre incentives for production in a highly subsidised economy, and artificial price and exchange controls that resulted in a black market for foreign currency and persisting inflation. When oil prices were high and export revenues booming, these flaws did not hurt the economy much. In fact, there was a reduction in poverty levels, increase in literacy and better health indices over the last decade. But falling oil prices exacerbated Venezuela’s economic problems, forcing the government to print money to cover expenses in the face of rising debt, which created a hyperinflationary cycle. Reforms that would stabilise the currency, reduce subsidies and remove artificial price controls will be in order. But it will be difficult for his regime to carry out these reforms without a political compromise of some kind.
