Falling oil prices put Venezuela’s Nicolás Maduro in a vice

[Bacchus4.0]

http://www.washingtonpost.com/world/falling-oil-prices-put-venezuelas-nicolas-maduro-in-a-vice/2014/11/16/5c157066-6602-11e4-ab86-46000e1d0035_story.html

Stalking Maduro are Venezuela’s long-festering core problems — collapsing productivity and Chávez-era currency controls that have pushed inflation to 63 percent, one of the world’s highest rates.

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His government could sell off valuable assets, particularly the U.S. gasoline retailer Citgo and its affiliated network of refineries and pipelines. He could also further cut subsidized oil shipments to key allies such as Cuba and Nicaragua.


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There’s no painless fix. Adjusting Venezuela’s currency controls to bring the bolivar in line with the black market value of the U.S. dollar could be politically disastrous for Maduro, since it would further slash the wages of Venezuelans who don’t have their savings stockpiled in U.S. bank notes.

A more palatable move may be a long-deferred hike of the world’s lowest gas prices — equivalent to less than a penny per gallon. The giveaway costs the government approximately $7 billion a year, and amounts to a huge subsidy for the wealthier Venezuelans who favor gas-gulping SUVs.

Yet Maduro has shown little inclination to ask his supporters for sacrifices. “With Chávez they were willing to do it because they thought the future would be better,” said Leon, the Datanalisis president. “With Maduro, it’s not clear that’s the case.”

Instead, Maduro is channeling Santa. He announced a new “Happy Holidays” campaign this month, ordering retailers to sell Barbie dolls at huge discounts and set up a military-run appliance sale where shoppers line up for 80 percent markdowns on microwaves, computer tablets and other big-ticket items. Such fire sales have become a magnet for “re-sellers” who can easily flip the goods on the black market.