Note of the Month January 2019

The future of Venezuela and its relations with US and Turkey

 

It is now a well known fact that during the Chavez period (2002-2013) together with the high oil prices around the world, Venezuela found a momentum in its economy. During the same period Chavez acted as the number one rival of the US and supported by a big percentage of the Venezuelan people. Although corruption was always a major issue in Venezuelan political life and bureaucracy, Chavez tried to reflect a big portion of the nation’s oil income to the public.

During that period most of the fundamental needs were supplied to the public by a heavy subvention of the state. Gasoline was much cheaper than water, meat, butter, sugar; all types of fruits and vegetables were really cheap and could be bought easily by most of the people. Alcohol was also very cheap and Venezuelans were spending their time at the beaches at weekends. Roads to the beaches were under heavy traffic for the most of the weekends. In short, most of the Venezuelan people were happy.

Unfortunately that cheap supply of goods and the easy way of living made the Venezuelans lazier and production at all sectors began to decrease. Following the decrease of world oil prices and the death of Chavez, Venezuela became a very problematic country. Today a substantial percentage of Venezuelans have left the country hoping to find jobs at neighboring countries, the crime rate is number one in the world and people feel very unhappy as they have difficulties to find goods at markets and they live with a fear of staying hungry.

The solution for that crisis might be to send the Maduro from the office and bring Guaido to the power. If that happens the first task of Guaido seems very clear; to invite the US to invest in Venezuela. Of course this is the thing what US want and tries to achieve for a very long time. Chavez and Maduro could be considered as a failure but one thing they have succeeded during that period is not giving their oil fields under the control of US. The people of Venezuela know that too and half of the population hates US and support Maduro in this respect. Besides, directly intervening to other nation’s internal matters can be problematic for the people of that nation.

Current situation shows that the western world gives support to Guaido and wants Maduro to leave the office. However, Russia, China, Turkey and some other countries support Maduro. All have their reasons to support him. During the Chavez period Venezuela has started several projects for the good of the people. One of those projects was the living houses project – mision de vivienda – and the projects were given to the four socialist countries, namely; Russia, China, Iran and Belarus. All those countries were actively constructing tens of thousands of living houses until very recently and they were paid by oil by Venezuelan government. During this period US could not get anything from Venezuela and for a country who claims to be the leader of the world, this was an unacceptable situation. Now the US has found the opportunity to reverse the situation and it seems it will get what it wants; the rich oil fields of Venezuela. One can only hope that there will not be big fights and serious tragedies in coming days.

Turkey on the other hand has somehow involved with the situation and became a party at this conflict. Until 2018, trade volume between Turkey and Venezuela was around 100 million USD and just a couple of Turkish construction companies were doing business in Venezuela. However, in 2018 Maduro decided to use Turkey to process and sell some of its gold production. Turkey has accepted this offer and in 2018 the trade volume suddenly boosted to over 1 billion USD.

It seems Venezuela will stay in conflict and in difficult economic situation until Maduro leaves his office and it is clear that he will use all his power not to leave the office and not let the US control the country.

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SITUATION IN VENEZUELA

Venezuela was the gem of Latin America approximately 40 years ago. It was one of the most modern country of the region in every aspect. The country is a natural beauty with mountains at the noth before reaching to the Atlantic Ocean and jungles at the south having one of the best climates in the world. Venezuela still owns the world’s biggest oil reserves and that means a lot of power in our current energy hungry world. However things do not go well for Venezuelans for the last decade. After serious internal conflicts and serious number of deaths Hugo Chavez ruled the country from 1999 until his death in 2013. During the initial years of his Presidency, the world had the perception that Venezuela was again in good track after so many years. The economy was stable, people were happy and Chaevez was one of the few world leaders who could oppose United States in all of his speeches.

The government was supplying most of the basic goods to the public at very cheap prices and had projects for free homes to the poor citizens. However it has been understood that, this heaven like situation was mainly due to the very high oil prices during that period. That same period helped Russian Federation too and with its vast natural sources Russia also leapt forward with respect to its economy. But Chavez was only giving to the people and in respect was asking too little and the production was very low in Venezuela. People became very lazy thinking that the government shall supply everything they need free of charge.

Good days were over around 2010s. The oil price per barrel began to decline from 150USD per barrel to 30USD and that situation affected Venezuelan economy very heavily. The inflation sky rocketed and reached to unbelievable and unmanagable numbers. Exchange rate was another story it was 5-10 times of the inflation rate during that period. That situation established a big gap between rich and poor. The people who can find dollars and euros became relatively very rich while others have completely lost their purchasing power. Naturally the crime rates went very high and once beautiful and  safe Venezuela became the most dangerous country of the world. Currently there are 15.000 murders per year in Venezuela which is a very high number.

Following the death of Chavez, his long time friend Maduro became the president. The problem with the Maduro was the lack of charisma which Chavez naturally had. Maduro has followed the footsteps of Chavez since 2013 and managed to win several elections although the opposition always claimed that various cheating methods have been used at those elections.

Current economic situation of Venezuela is still terrible. Black market exchange rates are multiple times of the legal rates and finding goods at the shelves are getting very difficult. Although it is still managable, people are in danger of mass starvation. It may happen in a close future.

The solution of the problem is not easy. Opposition wishes more open economy towards US but half of the people see the US as number one enemy of the Venezuela. However it is clear that if current regime changes and a US friendly govenments goes into power, US shall want a big stake from the Venezuelan oil reserves.

Maduro regime is trying to solve the situation by inventing new economic tools and one wishes that with such oil reserves they will success that, otherwise it will be more pain for Venezuelans.

 

Reinaldo Herrera

February 2018

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