Venezuelan Crisis Widens as American Firms Flee Impending Election
Venezuelans will be going to the polls Sunday in a disputed presidential election despite calls from a number of countries, including the United States, for the South American country to suspend the election due to perceived irregularities in the election process. The election date was moved up from December to May by Venezuelan president Nicolas Maduro, who controls the legislature, the electoral college, the military and the court system in the beleaguered South American country where he heads the United Socialist Party of Venezuela. The United Socialist Party was created by the late Hugo Chavez during his drive to consolidate his power over the heavily factionalized nation.
Nicholas Maduro Moros, 55, started off as a bus driver, became a union leader, joined Hugo Chavez’s reform movement and succeeded Chavez after Chavez died of colon cancer while in office. As controversial a figure as Chavez was, Maduro has far outstripped with a regime that has been labeled as totalitarian and corrupt.
Maduro’s victory in the polling on Sunday appears to be a foregone conclusion, despite the fact that the country is in a shambles economically while it sits on huge petroleum reserves, a conundrum that can only be explained by the huge consolidation of wealth that has taken place under the Maduro regime.
In 2017, the country had an inflation rate of 2,616%, while its Gross Domestic Product declined by more than 13% according to opposition leaders, despite the fact that Venezuela has the world’s largest oil reserves with 297 billion barrels. Second place Saudi Arabia has 265 billion barrels, according to a published study by British Petroleum (BP).
The Venezuelan economy tanked in 2016 when oil prices dropped in 2016, according to a story published by PBS. Conditions worsened when the Trump administration issued financial sanctions against Venezuela after Venezuelan president Nicolas Maduro convened a special assembly to rewrite the country’s constitution to consolidate the power of the presidency.
Oil prices have since rebounded from the 2016 slump, with U.S. gasoline prices now hovering at around $3 per gallon for regular gasoline, but the economic sanctions imposed by the Trump administration have made it impossible for Venezuela to sell its oil to the American market. This has had the effect of putting even more money into the pockets of Trump’s supporters in the U.S. oil industry.
In retaliation, Venezuela has issued its own cryptocurrency, the petro, in March of this year. Forty four million petros were claimed to be in the cryptocurrency package with a nominal price of US $60 per coin, with a total value of US $2.64. Unlike most cryptocurrencies, which are backed only by the effort required to mine the coins, the petro is allegedly backed by Venezuela’s oil reserves….but $2.6 billion is a drop in the bucket when it comes the amount required to dig Venezuela out of its financial crisis.
The economic crisis in Venezuela continues to escalate, forcing American firms to pick up their products and exit the country, with Kellogg’s being the latest to join the exodus. The situation in Venezuela combines political unrest with fiscal mismanagement.
The American breakfast food giant is following Colgate-Palmolive, General Mills and Kimberly-Clark in the consumer products category. With the departure of Kellogg’s and General Mills, Venezuelans will have to scrounge to find cereals and grains. A recently published Reuters article suggests that Kellogg’s breakfast food products are the most popular and most easily obtain cereals in the country. By shutting down its Venezuelan operation, Kellogg’s has reduced the supplies of breakfast cereals by more than 75%, contributing further to the hyperinflation, which some economists describe as the worst since the Great Depression. The Maduro regime nationalized the Kellogg plants and had them back in operation in 24 hours.
In the manufacturing sector, General Motors shut down its plants in Venezuela last year after one of its factories was seized by the Venezuelan government. Bridgestone Tire has also left the country. In the energy sector. Chevron pulled up stakes last month after two of its employees were arrested.
A dozen nations have filed protests over the election…but no one expects the protests to have any effect. The motivation behind the protests appears to be the fear that a re-elected Maduro regime will spend the next six years nationalizing foreign interests in the country as the members of the ruling party cash in on process.