Over the past year, as we already know, the S.S. Chavez, steered by his successor Captain Maduro, has sprung a leak deep below the waterline and begun to sink. Then, perhaps, was it controlled; the pumps were still trying their best to displace the seawater surging into the bowels of the ship and the passengers were calmly and orderly boarding the lifeboats as it began to list to starboard. But now, as if the nation wasn’t already in enough trouble, the power’s gone out on board that ship. The pumps have stopped and the rushing roar of social unrest and civil strife now pours in unabated.
Those pumps were PDVSA, Petroleos de Venezuela, Venezuela’s state-owned oil company. PDVSA became the cornerstone of the government during Chavez’s term as president of the socialist state. It allowed Chavez, with high prices for crude oil, to afford to lavish many of Venezuela’s most economically disadvantaged with millions and millions dollar’s worth in welfare and relief programs. However, once global oil prices tanked in 2014, Chavez’s successor, the sitting president Maduro, was left with a broken system he decided to keep pushing forward. The economic crisis worsened- as he printed more money, the less valuable the bolivar became. The more loans he took on, the more debt piled up on his treasury. Instead of removing these programs or cutting down the size of his government, Maduro stubbornly continued by slashing food and consumer good imports, all bought by the Bolivarian Republic of Venezuela.
Over the past few weeks, and especially this week, things have changed only for the worse. Now, PDVSA, the life-raft of the Maduro regime, is starting to capsize itself. Venezuela’s economic crisis has finally caught up with the company, forcing it to slash wages and benefits for its workers. These same workers now are forced to sell their own uniforms right off their backs just to put food on the table for their families. Gas stations in Venezuela using PDVSA oil are now accepting Colombian pesos and United States dollars because of how inflated the bolivar is. This marks, in my view, the beginning of the end for Maduro and his government. If PDVSA does follow this trend, and goes under within the next year or so, then his government, which relies so predominantly on its revenues, will also go under not too long afterwards.
However, based on Maduro’s previous behavior, it wouldn’t be surprising if he stubbornly resisted as long he could, in the process, unfortunately, inflicting the maximum damage onto the Venezuelan people. In order to keep himself afloat, Maduro might raise harsh taxes and levy new fees and regulations to make up for falling revenues from PDVSA. These will force the Venezuelan economy to stay down in its already-deep recession, at least until he relents. Unfortunately, I think it is unlikely Maduro will step down by his own volition. This marks the beginning of the end for him, but it could be the beginning of the end for a stable Venezuela as well. If things get bad enough, the Venezuelan military may get involved in deposing Maduro, possibly turning into an extremely authoritarian military junta or dictatorship. If the protesters are not answered and a referendum for Maduro to be recalled by his own government is not put into motion, then we could see the people of Venezuela taking up arms against his regime.
For the short term, which is more easily predictable, I believe these developments only reinforce the decline of a socialist government in Venezuela. Once PDVSA crumbles, the Venezuelan government will no longer be able to pay its many outstanding loans, and it will be forced to default on its debt, tarnishing its credit even with its most trusted economic partners, such as China, for the foreseeable future. I predict that we are fast approaching the bottom-out of the Venezuelan government and its horrible mismanagement of the Venezuelan economy. Once Venezuela defaults on its debt, which all began with PDVSA going under, then the struggling country can finally begin to rebuild.