Maduro’s crackdown on appliance stores may win key votes, but spurs uncertainty in Venezuela

CARACAS, Venezuela – Even by Venezuela’s volatile standards, it’s been a difficult few days.

Basic staples such as flour and vegetable oil have grown scarce throughout the country, the currency is plunging in a thriving black market and inflation that’s already among the highest in the world is accelerating.

Amid so much unease, President Nicolas Maduro has settled on radical, and some say self-defeating, solutions. In recent days he’s ordered the military to take over appliance stores, which he’s told to slash prices, leading bargain hunters to form block-long lines across the country.

The populist measures seem designed to help Maduro’s party get over the hump of next month’s mayoral vote, its first electoral test since the president narrowly defeated opposition leader Henrique Capriles in April. But while the measures apparently are popular with voters, Maduro runs the risk of cannibalizing an already damaged economy.

Some analysts are now asking whether the late President Hugo Chavez’s socialist revolution has reached a point of no return, where what little private investment is left vanishes completely and Maduro has no choice but to fully embrace a statist model.

“It’s a very high-risk strategy,” said sociologist David Smilde, who has spent part of the past two decades teaching in Venezuela and is now a senior fellow at the U.S. think-tank the Washington Office on Latin America. “If this week, it’s electronic stores, then the automotive sector, and you keep doing this for the four weeks until elections, you could do some real damage to the economy.”

It’s hard to overstate the grim predicament the government and country face.

Although Venezuela claims the world’s biggest proven oil reserves, the nation of 30 million is suffering shortages of everything from electricity to auto parts to medical equipment.

Nearly 73 per cent of Venezuelans say they’re pessimistic about their country’s prospects, 20 points more than when Maduro was elected by a razor-thin margin that the opposition still disputes, according to a poll taken last month by the Venezuelan firm Datanalisis that was reported by local media. Another 67 per cent see the country’s political situation as unstable.

Maduro has responded by appearing daily on TV to announce the confiscation of businesses he accuses of helping wage an “economic war” on Venezuela. Congress is expected to approve a bill as early as this week granting him special decree powers, which would give him authority to expand the crackdown.

Just recently, Maduro had been trying to woo investment.

The government eased investment rules for the oil industry, the source of 95 per cent of export revenue, and rolled out the red carpet for a new factory by Swiss food giant Nestle. Even while avoiding a politically costly devaluation of the country’s fixed-rate currency, Maduro’s government has supplied more dollars to local producers.

Now, analysts say, Maduro is scuttling that attempt at moderation, with the risk that confiscations and price controls will prompt companies in more critical areas such as food and pharmaceuticals to freeze production.

“The biggest risk he faces is that fear becomes widespread,” said Luis Vicente Leon, the Caracas-based pollster for Datanalisis.

Yet the alternative for Maduro would be even worse: His candidates could get trounced in Dec. 8 elections, which would strengthen opposition attempts to force him out of office.

Leon said Maduro’s electoral strategy of slashing appliance prices while blaming unloved merchants for gouging consumers has so far seemed to work, providing a compelling political narrative that for the first time shows him in command.

The question is how long he’ll keep earning those political dividends. Earlier conspiracies floated by Maduro, such as an alleged assassination plot by the opposition and a secret plan to carry out an “electrical coup” with power cuts, barely resonated with voters.

And the economy keeps getting worse by the day. As a result of the emergency measures taken last week, the U.S. dollar shot up past 60 bolivars on the black market, 10 times its official rate, while yields on the nation’s bonds jumped to a near two-year high.

“We know that if we don’t buy now there will be nothing left around Christmas,” said Mariza Bermejo, a 21-year-old housewife who had been standing in line for more than 24 hours outside a JVG appliance store in eastern Caracas to buy a refrigerator at a deep discount.

Another concern is violence. Seared into the minds of most Venezuelans is the memory of the 1989 street riots, known as the Caracazo, that were triggered by an earlier economic crisis.

Although security forces and armed civilian brigades that Maduro called up have so far controlled the long lines, isolated reports of looting have surfaced in several cities, leading Maduro to roll back his earlier calls for Venezuelans to “empty the shelves.”

So far, Maduro still wields one of his biggest assets — the apparent loyalty of the armed forces, which for decades was the ultimate arbiter of political conflicts. Maduro has gone out of his way to court the military by dramatically expanding its role in the government and granting pay increases in excess of inflation.

His candidates’ triumph in the mayoral elections also could pave the way for Maduro to devalue the bolivar early next year and make tough economic decisions he’s avoided because he lacked the political capital and charisma of his mentor Chavez.

Still, nothing in the past week suggests he’ll reverse course, as long as radical policies win elections, said historian Ines Quintero.

“Even Chavez, who had a lot more political muscle than Maduro did, never changed,” said Quintero. “But the politics of polarization eventually exhausts itself. You can’t continue in power forever offering solutions to people’s problems that don’t work.”


Associated Press writer Jorge Rueda contributed from Caracas.


Follow Joshua Goodman on Twitter: @APjoshgoodman