Venezuela's Economic Implosion Exacerbates Inequality | KUOW News and Information

Venezuela's Economic Implosion Exacerbates Inequality

Jul 7, 2016
Originally published on July 7, 2016 9:27 am

There are two Venezuelas.

In one, there are food riots and empty supermarket shelves and long lines of people waiting for basic goods. In the other, there are gourmet meals, creamy cappuccinos and rich desserts.

At the Santa Elena supermarket in the poor neighborhood or barrio of Antimano in Caracas, the capital, 72-year-old Nerys Ojeda is looking for detergent to wash her clothes. There isn't any.

"We can't find flour, spaghetti, sugar, butter. You can't find any of the things we really need," she says.

But go across town to the wealthy neighborhood of Las Mercedes, to a café called Franca, and there is a different reality. The menu has brioche and brownies and scrambled eggs.

While many poor Venezuelan women can't find milk for their kids, in this cafe, I'm getting a lovely foam on my cappuccino from a barista.

So what is going on?

Well, that depends on whom you listen to.

President Nicolas Maduro and the supporters of his socialist government say they are the victims of an economic war. Business elites are causing the problems, they say, by cutting supplies to pressure the government, which is facing the threat of a recall referendum.

The political opposition, including lawmaker and economist Jose Guerra, says there is no economic war. There are only years of socialist mismanagement and failed policies benefiting political elites, who are taking advantage of a country that is drowning in oil.

At an upscale restaurant in an area called Las Mercedes, there are pasta dishes that cost anywhere from 4,000 to 9,000 bolivars. A worker earning the minimum wage in Venezuela would have to spend more than half his monthly salary to eat here.

But, says Tulane University sociologist David Smilde, an expert on Venezuela who joins me at the restaurant, if you have access to U.S. dollars, the cost of a meal would be $8 or $9 — "quite a deal for a gourmet pasta."

So those who are paid in petrodollars — opposition business people or political elites from the ruling socialist party — can afford to eat here.

"There are people for whom this is the best of times, because things are very cheap and people can go out to dinner every night," Smilde says. "The rest of the country has no chance of affording a place like this."

And the restaurants catering to the dollared class can afford the high black market rates to get the things they need, which is why they can offer pasta and milk for coffee. Ordinary people — most of whom live in poverty — don't have the money for scarce goods, which is why they wait in long lines for subsidized staples.

Which brings us back to those empty supermarket shelves.

I ask Smilde why so many things are scarce in Venezuela right now. He blames years of price controls, subsidies and artificial currency controls.

When oil prices were high, the government could afford to keep the cost of basic foodstuffs low. The problem is that most of what Venezuela consumes is produced and imported from abroad.

After oil prices crashed, Venezuela could no longer pay for everything it needed while servicing its billions in foreign debt.

"Imports this year have been reduced 40 percent from last year," says Smilde. "There's less than half the goods on the market now than in 2012. You can imagine how that impacts people's well-being."

The currency is also extremely distorted, with official and black market rates far apart. Meanwhile, inflation is rising. Estimates put it at 400 percent to upwards of 700 percent this year.

The result, Smilde says, is the worst crisis in Venezuela's modern history.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

DAVID GREENE, HOST:

All right. Let's turn now to Venezuela. Food, riots and bare supermarket shelves have been making headlines in that country. But there is another Venezuela that has not been in the news. NPR's Lulu Garcia-Navarro explains.

LOURDES GARCIA-NAVARRO, BYLINE: There are two Venezuelas. There is this one.

So I'm walking into a supermarket in the poor neighborhood or barrio of Antimano. And the basics, the staples, people are saying, you just can't find them anywhere.

NERYS OJEDA: (Speaking Spanish).

GARCIA-NAVARRO: "We can't find flour, spaghetti, sugar, butter. You can't find any of the things we really need," says 72-year-old shopper Nerys Ojeda. But go across town to the wealthy neighborhood of Las Mercedes to a cafe called Franca, and there's a different reality with specialty breads.

And I'm looking at the menu here, and they have brioche and focaccia.

UNIDENTIFIED MAN: (Speaking Spanish).

GARCIA-NAVARRO: And while many poor women can't find milk for their kids, here I'm getting a lovely foam on my cappuccino from a barista. So what's going on. Well, that depends on who you listen to. This is Nicolas Maduro, the current president of Venezuela.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT NICOLAS MADURO: (Speaking Spanish).

GARCIA-NAVARRO: He and his socialist government say they are the victims of an economic war. They say the business elites are causing the problems by cutting supplies to pressure the government.

(SOUNDBITE OF ARCHIVED RECORDING)

JOSE GUERRA: (Speaking Spanish).

GARCIA-NAVARRO: The political opposition, like lawmaker Jose Guerra, interviewed here on CNN Spanish, say there is no economic war. There's only years of socialist mismanagement by political elites benefiting from a country that is drowning in oil. I went to meet David Smilde, one of the leading experts on Venezuela, to get a reality check. He's a sociologist who teaches at Tulane University, and he spends a lot of the year in Caracas.

We're at this restaurant called Focaccia. And yet, all the headlines are about food shortages, but that doesn't seem to be the case in a place like this.

DAVID SMILDE: Yeah. Well, there's a nice selection of pastas between 4,000 and 9,000 bolivares, which is the local currency. That would be $4 to $8 or $9 in the international price, which would be quite a deal for really a gourmet pasta.

GARCIA-NAVARRO: But for a worker earning minimum wage, a meal here could cost two weeks' salary.

SMILDE: So how does a place like this survive? Venezuela is an oil country, so it still has - it basically lives on importing and exporting.

GARCIA-NAVARRO: Meaning only people who are paid in petrodollars can really afford to eat here. So that could mean opposition business people or political elites from the ruling socialist party.

SMILDE: There are definitely people for whom this is actually the best of times, you know, because things are very cheap and people can go out to dinner every night if the rest the country has no chance whatsoever affording a place like this.

GARCIA-NAVARRO: So this is the official exchange rate - $1 will get you 10 in the local currency. But on the black market, $1 will get you 1,000. And inflation is rising. It stands at 400 percent and Smilde says inequality is also going up, which brings us back to those empty shelves and shortages that we're seeing right now in Venezuela. When oil prices were high, the socialist government subsidized basic food stuffs, a lot of which was brought in from abroad.

SMILDE: Venezuela just doesn't have the production that it could live. It has to import, you know, most of what it consumes.

GARCIA-NAVARRO: Then oil prices crashed, so now...

SMILDE: There is less than half the goods on the market. You can imagine how that impacts people's well-being.

GARCIA-NAVARRO: Venezuela just doesn't have the money to pay for all those imports anymore, and that is now affecting even people with access to dollars, like Professor Smilde. He says every time he travels abroad...

SMILDE: I bring all of our toilet paper. I bring all of the soap we use in our house.

GARCIA-NAVARRO: He says this is the worst crisis in Venezuela's modern history. Lulu Garcia-Navarro NPR News, Caracas. Transcript provided by NPR, Copyright NPR.