Protesters clash with police in Caracas last month.

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Venezuela In Crisis

With its economy in free fall and a government looking more and more like a dictatorship, Venezuela is on the brink of disaster

Kevin Lara Lugo died last July, on his 16th birthday.

With his mother and her boyfriend out of work and penniless, the teenager had spent the previous day foraging for food in an empty lot near his home in Maturín, Venezuela. The bitter yuca* he found and ate made him gravely ill and sent him to the hospital.

Hours later, Kevin was dead on a gurney, his mother watching helplessly as doctors rolled his lifeless body away. She says the hospital lacked the most basic supplies needed to save her son.

Kevin’s death and his family’s struggle to survive  are symbols of everything that’s gone wrong in Venezuela, a once-prosperous nation that’s now on the brink of collapse. (see “One Family’s Tragic Tale")

The economy has ground to a halt. Crime is out of control. And the former democracy seems to be descending into dictatorship, as President Nicolás Maduro tries to cling to power.

“This goes beyond an economic and political crisis,” says Ian Vásquez, a Venezuela expert at the Cato Institute in Washington, D.C. “This has turned into a humanitarian crisis.”

Venezuela’s turmoil has been a long time in the making. With the world’s largest proven oil reserves, it was once one of Latin America’s richest nations. But there’s also been vast inequality between the rich and the poor. In 1998, those poor people rallied around a controversial socialist politician named Hugo Chávez and helped elect him president.

His mother and her boyfriend were out of work and penniless, so the teenager had spent the previous day foraging for food. At an empty lot near his home in Maturín, Venezuela, he found and ate some bitter yuca. It made him gravely ill and sent him to the hospital.

Hours later, Kevin was dead on a gurney. His mother watched helplessly as doctors rolled his lifeless body away. She says the hospital lacked the most basic supplies needed to save her son.

Kevin’s death and his family’s struggle to survive are symbols of everything that’s gone wrong in Venezuela. It was once a prosperous nation. Now it’s on the brink of collapse.  (see “One Family’s Tragic Tale")

The economy has ground to a halt. Crime is out of control. And the former democracy seems to be descending into dictatorship, as President Nicolás Maduro tries to maintain power.

“This goes beyond an economic and political crisis,” says Ian Vásquez, a Venezuela expert at the Cato Institute in Washington, D.C. “This has turned into a humanitarian crisis.”

Venezuela’s turmoil has been a long time in the making. With the world’s largest proven oil reserves, it was once one of Latin America’s richest nations. But there’s also been vast inequality between the rich and the poor. In 1998, those poor people rallied around a controversial socialist politician named Hugo Chávez. They helped elect him president.

An Anti-American Populist

Chávez was a charismatic populist who vowed to break the grip that the elite had on power and redistribute the country’s wealth. He nationalized many parts of the economy, seizing the assets of American agricultural, oil, and power companies. He used oil revenue to fund health care, education, and food subsidies for the poor. At the same time, Chávez became famous for his anti-American rhetoric. He once called former president George W. Bush “the devil.”

When Chávez died of cancer in 2013, Maduro, his vice president, took over. But Maduro lacked Chávez’s charisma, and the country’s many long-festering problems began to come to a head. For years, Venezuela’s economy had been kept afloat by oil exports. But the price of oil has plummeted in recent years, leaving the Venezuelan government effectively broke.

Even before the price of oil collapsed, Venezuela’s economy was in deep trouble, largely because of a system of government-imposed price controls. The policy was meant to keep Venezuelans happy by requiring that certain basic goods, such as cooking oil and milk, be sold at low prices. The problem is that most importers stopped bringing goods into the country since they couldn’t make a profit, and the price controls left no incentive for local producers to fill the gap either. This means factories haven’t been able to get the raw materials they need and stores have nothing to sell.

Chávez was a charismatic populist. He vowed to break the grip that the elite had on power and redistribute the country’s wealth. He nationalized many parts of the economy. He seized the assets of American agricultural, oil, and power companies. He used oil revenue to fund health care, education, and food subsidies for the poor. At the same time, Chávez became famous for his anti-American rhetoric. He once called former president George W. Bush “the devil.”

Chávez died of cancer in 2013. Maduro, his vice president, took over. But Maduro lacked Chávez’s charisma. And the country’s many problems began to come to a head. For years, Venezuela’s economy had been kept afloat by oil exports. However, the price of oil has plummeted in recent years. That made the Venezuelan government effectively broke.

Even before the price of oil collapsed, Venezuela’s economy was in deep trouble. The main problem has been a system of government-imposed price controls. The policy requires that certain basic goods, such as cooking oil and milk, be sold at low prices. The idea was to keep Venezuelans happy. But most importers couldn’t make a profit, so they stopped bringing goods into the country. The price controls also left no incentive for local producers to fill the gap. This means factories haven’t been able to get the raw materials they need. Also, stores have nothing to sell.

Jim Mcmahon/Mapman®

Hyperinflation has made the country’s currency, the bolivar, virtually worthless. The International Monetary Fund estimates that by the end of 2017, Venezuela’s annual inflation rate (the rate at which prices increase) will be 1600 percent. A decade ago, the 100-bolivar note was the highest denomination; the government recently discontinued it because it had so little value and introduced new, higher denominations, including a 20,000-bolivar note that’s worth less than $5. All this has wiped out people’s savings and prevented many middle-class Venezuelans from being able to purchase basic necessities like food. Things have gotten so bad that some office workers have abandoned their jobs in cities to pan for gold in illegal mines in the jungle. The nation’s economic crisis has only worsened Venezuela’s already sky-high crime rate. Murders rose to more than 28,000 in 2016, the highest number ever recorded in the country, according to the Venezuelan Violence Observatory, a group that tracks violence. As the country has veered toward chaos, Maduro has become increasingly authoritarian, jailing opposition politicians and ordinary citizens who protest. In March, a court ruling by pro-Maduro judges effectively dissolved the elected legislature, which had been led by Maduro’s political opponents. “They have kidnapped the constitution, they have kidnapped our rights, they have kidnapped our liberty,” says Julio Borges, an opposition lawmaker. Hyperinflation has made the country’s currency, the bolivar, virtually worthless. The International Monetary Fund estimates that by the end of 2017, Venezuela’s inflation rate (the rate at which prices increase) will be 1600 percent. A decade ago, the 100-bolivar note was the highest denomination. But the government recently discontinued it because it had so little value. New, higher denominations were introduced. They include a 20,000-bolivar note that’s worth less than$5.

All this has wiped out people’s savings. It’s also prevented many middle-class Venezuelans from being able to purchase basic necessities like food. Things have gotten so bad that some office workers have abandoned their jobs in cities. They’ve gone to the jungle to pan for gold in illegal mines.

The nation’s economic crisis has only worsened Venezuela’s already high crime rate. Murders rose to more than 28,000 in 2016. That’s the highest number ever recorded in the country, according to the Venezuelan Violence Observatory, a group that tracks violence. As the country has slid into chaos, Maduro has become increasingly authoritarian. He has jailed opposition politicians and ordinary citizens who protest. In March, a court ruling by pro-Maduro judges effectively dissolved the elected legislature. The legislature had been led by Maduro’s political opponents.

“They have kidnapped the constitution, they have kidnapped our rights, they have kidnapped our liberty,” says Julio Borges, an opposition lawmaker.

Meridith Kohut/The New York Times

Nearly 75 percent of Venezuelans lost at least 19 pounds last year due to food shortages; empty store shelves in La Vela, Venezuela, in September 2016.

17-Year-Old Protester Killed

Juan Barreto/AFP/Getty Images; SOURCE: The Economist

Last month, at least seven people, including a 17-year-old boy, died in a series of increasingly volatile clashes between protesters and security forces in Caracas and other cities. Protesters demanded elections and accused Maduro of trying to establish one-man rule.

“The people are hungry!” Arquímedes Orcé, a 41-year-old vendor, shouted at the security forces. “You are against the people!”

Despite all the misery in Venezuela, experts aren’t optimistic about forcing Maduro out.

“Right now Maduro’s hold on power is very strong,” says Matthew Taylor of the Council on Foreign Relations in Washington, D.C.

And even if Maduro did step down, Taylor adds, the opposition is so divided that it’s likely someone even more hard-line would take his place. There’s also very little the United States can do to influence things.

Many Venezuelans aren’t waiting to see what happens next; faced with starvation, they’re leaving the country by whatever means necessary, including piling into rickety boats headed to nearby Caribbean islands like Curaçao and Aruba.

The country’s biggest neighbors, Brazil and Colombia, have already seen a huge influx of refugees, and numbers are growing in other South American countries as well. The region isn’t prepared for this, experts say, and the situation could blossom into a full-blown crisis as things continue to deteriorate in Venezuela.

“When you think that Venezuela hits bottom,” says Vásquez, “it keeps going further and further down.”

Last month, at least seven people died in a series of increasingly volatile clashes between protesters and security forces in Caracas and other cities. Among those who died was a 17-year-old boy. Protesters demanded elections.

“The people are hungry!” Arquímedes Orcé, a 41-year-old vendor, shouted at the security forces. “You are against the people!”

Despite all the misery in Venezuela, experts aren’t optimistic about forcing Maduro out. “Right now Maduro’s hold on power is very strong,” says Matthew Taylor of the Council on Foreign Relations.

And even if Maduro were to step down, Taylor adds, the opposition is so divided that it’s likely someone even more extreme would take his place.

Many Venezuelans aren’t waiting to see what happens next. Faced with starvation, they’re leaving the country. Some are even piling into rickety boats headed to nearby Caribbean islands such as Curaçao and Aruba.

The country’s biggest neighbors, Brazil and Colombia, have already seen a huge influx of refugees. The numbers are growing in other South American countries as well. The region isn’t prepared for this, experts say. The situation could blossom into a full-blown crisis as things continue to go downhill in Venezuela.

“When you think that Venezuela hits bottom, it keeps going further and further down,” says Vásquez. “And I’m afraid that’s what’s going to continue to happen in Venezuela for the foreseeable future.”

## Soaring Prices

Venezuela has the world's highest annual rate of inflation. Compare it with the 2016 U.S. inflation rate of 2.1 percent

Source: World Factbook (CIA)/Central Bank of Venezuela
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