The 23rd of January. A historic day for Venezuela. On this exact day in 1958, the dictator Marcos Pérez Jiménez was overthrown. Last week, it was on this day that Juan Guaidó, the president of the National Assembly, declared himself president of Venezuela. As Maduro’s second term is considered illegitimate by many, other countries proceeded to recognize Guaidó as Venezuela’s president. At the time of writing many countries have done so. Namely, the United States, Canada, and Brazil. Some EU countries are demanding that new elections take place, saying that they will otherwise recognize Gauidó by February.
The country has been in crisis for a long time now. It has the largest oil reserves in the world, but right now it is a country plagued by hyperinflation and poverty. Hyperinflation has resulted in the inability of many people to access basic necessities like food and medication. As a result, millions of Venezuelans have fled the country.
The country’s economy is very dependent on oil. This means that during the time of the rise in oil prices which started in 2004, then president Hugo Chavez was able to create social welfare programs using money from oil. However, government spending remained too high resulting in a huge debt. The government responded by printing more money, eventually leading to hyperinflation. The excessive spending became a huge problem once oil prices dropped in 2014.
Right now, Guaidó is hoping to be interim president until new, hopefully fair elections, take place in Venezuela. This has not proven to be easy however, Maduro has famously gotten rid of opponents by for example putting them in jail. It is therefore also a realistic probability that Guaidó will be jailed. However, there is mounting international pressure on Maduro to step down.
The top ranks in the military as well as Maduro’s political allies are able to buy foreign currency at a special rate compared to regular Venezuelans. Subsequently, they are able to sell this foreign currency on the black market. Hence, the Venezuelan military is essentially profiting from the crisis. This brings us to a particular challenge for presidential contender Guaidó. To be able to take over the presidency, he unfortunately needs the support of the military. This will be difficult, though some protesters believe in convincing lower ranks of the military to help to overthrow Maduro.
Meanwhile, neighbouring countries are struggling with the influx of Venezuelan refugees. Also, the US is considering imposing more sanctions than it already has. Thus, the Venezuelan crisis has more and more grown to be an international issue. Up until now, the oil market does not seem to be impressed. However, as the conflict escalates, oil production will likely (further) decrease, which could very well affect oil prices.
By Hazel Alberts