The Saga of the Venezuelan Crisis

Few pieces of good news about Venezuela have appeared in the news over the last decade, with hyperinflation, high crime rates, bans, and migration dominating the coverage. Mismanagement by the Chavist regimes, paired with global economic changes, created a toxic combination. The crisis, comparable to the Great Depression in 1929 and Zimbabwe in 2008, is one of the most profound socio-political and economic disasters of the 21st century. Millions fled to other countries as the bolivar became worthless overnight and supermarket shelves emptied. While the crisis has been heavily covered by the media, knowledge about the history and course of events remains limited. This is about to change.

From Discovery To Chávez

Christopher Columbus reached the Venezuelan coast in 1498 during his third voyage. Less than 25 years later, Spain established its first permanent settlement in the present-day city of Cumaná. The entire region soon came under Spanish control, making the Iberian country a dominant force in South America. As in most colonized societies, the stratified social hierarchy oppressed the native population.

At the start of the 19th century, the American and French revolutions and their democratic values left a mark in the Americas. Between 1808 and 1826, most of Latin America, except Cuba and Puerto Rico, slipped out of the hands of Portugal and Spain. Spain, in particular, struggled to control its dispersed territories due to the distraction of the Napoleonic Wars.

Rebellions led to the Declaration of Independence of Venezuela on July 5, 1811. Yet, fighting continued for the next ten years as Venezuelan forces faced the remaining Spanish royalists. Simon Bolívar, known as “El Libertador,” became the leading figure of the independence movement in most of South America. After winning a key battle in Carabobo in 1821, Bolívar liberated Caracas and most of Venezuela. Shortly before, he created Gran Colombia, a union that included modern-day Colombia, Ecuador, Panama, and Venezuela.

However, political differences led to the dissolution of Gran Colombia. In 1830, Venezuela separated and became an independent republic with José Antonio Páez as its first president. Centralist power didn’t hold for long, as military leaders, known as ‘caudillos,’ fought for control and divided the country.

After decades of struggle and attempts at centralization, Juan Vicente Gómez seized power through a coup d’état in 1908. Until his death in 1935, his rule was characterized by an iron fist. Yet, his regime saw economic progress due to a discovery that would change Venezuela’s future: crude oil. Discovered in 1914 in Lake Maracaibo, Gómez managed to repay the country’s staggering debt by granting concessions to foreign oil companies.

After Gómez’s death and two successors, the Acción Democrática (AD) party established a democratic governance through a coup d’état in 1945. Democracy didn’t last long, as a military coup ended the democratic dreams three years later. It would take ten more years and a successful coup d’état in 1958 to return to democracy. The major political parties at the time signed a power-sharing agreement named “Puntofijo” to ensure stable democratic governance. The result was a period of political stability and economic growth, known as the “Venezuelan miracle.”

Oil price volatility in the 1980s and 1990s caused a halt in progress and led to economic instability. Corruption worsened the financial problems. Declining living standards and inequality exacerbated discontent. Protests and riots in Caracas in 1989 against austerity measures were violently suppressed by the military. According to the government, 277 people died during the “Caracazo.” Unofficial estimations and the media reported up to 3,000 deaths. The disillusionment set the stage for a charismatic man who would upend Venezuelan politics: Hugo Chávez.

The Rise of Hugo Chávez

The “Caracazo” shattered the image of Venezuela as a harmonious, functional democratic state. After the incident, Chávez attracted new recruits to his clandestine Bolivarian Revolutionary Movement-200. In 1992, he led an unsuccessful coup against President Carlos Andrés Pérez and was arrested and imprisoned. Yet, he gained national recognition as he resonated with the society’s desire for change. In his “For now” speech, he acknowledged the failure but implied that he would continue the struggle.

Chávez was released from prison two years later by President Rafael Caldera and shifted his focus from military insurrection to politics. In 1997, he founded the Fifth Republic Movement (MVR) with a populist and anti-establishment program. The former insurrectionist capitalized on the widespread disillusionment with traditional politics and economic struggles. The Puntofijo pact also came under scrutiny, as it enabled an inflexible two-party system between AD and the Social Christian Party (COPEI).

On his campaign trail, Chávez promised to end corruption, defeat poverty, and scrap the political system by opening political power to independent parties. Between 1990 and the election year 1998, Venezuela experienced five secessions, and the gap between rich and poor widened. Most of the national media were sympathetic to his campaign. Chávez won 56% of the votes and became the President of the Republic of Venezuela.

Populism, Socialism, And Oil

Chávez took no time to alter the country’s political groundwork. In 1999, he called for a referendum to convoke a constitutional assembly to draft a new constitution. The referendum passed with 88% in favor. The draft expanded presidential terms from five to six years and allowed for presidential re-election. It also introduced the possibility of referendums and recalls and established new social and economic rights. Even though major parties rallied against the new constitution, 72% approved it during a referendum in December 1999.

His politics favored the poor by implementing new social programs known as “Misiones Bolivarianas.” The programs expanded access to free education and increased funding for public schools and universities, and granted access to free healthcare services in poor and rural areas. The reforms garnered support among the poor and working classes, and his charismatic leadership style solidified his popularity.

To fund the social policies after his re-election in 2000, Chávez needed money. PDVSA, the state oil company, had been autonomous and was run by technocrats. To fund his programs, Chávez brought PDVSA under tighter government control in 2002. He replaced executives with loyalists to align the company’s operations with government policies.

The appointments led to widespread protests, with up to one million Venezuelans marching on the streets. Chávez was overthrown by high-ranking military officials, but the pro-Chávez Presidential Guard seized the palace and reinstalled him two days later. In December of 2002, PDVSA went on strike to force the President out of office. Chávez responded by firing top managers as well as eighteen thousand employees. For the duration of the strike, none of the usual 2.8 million barrels of oil per day were exported. The result was a significant decline in GDP in 2002 and 2003.

While the high oil prices in the early 2000s provided substantial revenue for the country with the largest oil reserves (18.2% of the world’s share in 2024), the economy remained reliant on the black gold. Investments in other sectors were persistently low and further increased the dependence. However, the short-term gains were huge. Millions saw improvements in their living standards and poverty was reduced. Yet, this economic structure would cause havoc in the future, as the high level of public spending was unsustainable without consistent oil revenue.

Venezuela’s international relations pivoted towards anti-imperialist alliances and regional solidarity. Chávez fostered close ties with Cuba, trading oil for medical services, and promoted Latin American unity through partner programs. Relations with the U.S. were strained due to his outspoken criticism of American policies. To counter U.S. influence, Chávez strengthened partnerships with Russia and China, securing crucial loans and investments. Relations with the European Union also worsened.

Throughout his third term, Chávez continued the nationalization of key industries, including telecommunications, electricity, and steel. These expropriations disrupted private investment and created an atmosphere of uncertainty. This feeling was further spurred by the judicial and legislative branches increasingly aligning with Chávez as well as media control and intimidation of political opponents. Allegations of manipulation of electoral processes emerged. Inefficiencies in the state-run enterprises contributed to economic decline, and the reduced oil prices in 2008 augmented the debt. The first cracks in the Chavist facade appeared.

Doctors diagnosed Chávez with cancer in 2011, which led to absences and uncertainty about succession. With a frail appearance, he still was able to secure a fourth term with 54% of the vote. He delegated powers to Vice President Nicolás Maduro, as his health continued to deteriorate. With growing polarization due to the slowing economy, he urged his supporters to back Maduro if he became unable to continue as leader. On March 5, 2013, Vice President Nicolás Maduro announced that Chávez had died.

The following election, held on April 14, would become one for the history books. Facing opposition leader Henrique Capriles, Maduro won the election with 50.6% of the vote to Capriles’s 49.1%. The opposition contested the results, alleging irregularities, but the outcome was upheld by Venezuela’s electoral authorities. Maduro inherited a divided country with an ailing economy. However, the challenges he faced would soon escalate.

Maduro: Crisis and Dictatorship

The fragility of Venezuela’s economic structure became evident when global oil prices plummeted in 2014. The price drop from over $100 per barrel to under $50 within a year reduced government income and exposed the unsustainable economic structure.

The economic consequences were damning. Inflation skyrocketed, and by 2015, it had reached triple digits. The response was to print more money to cover the deficits but led to hyperinflation. According to the anti-Chavist National Assembly, inflation rose to 1.698.844,2% in 2018, while the Central Bank reported 130.060,2%.

In an attempt to curb hyperinflation, the government introduced a new currency, the “Bolívar Soberano”, cutting five zeros off the old bolívar. However, this move failed to stabilize the economy, and inflation continued to ravage the country. Inflation remained high with over 9.500% in 2019 and 2.968% in 2020. Venezuela’s GDP shrank from $372 billion in 2012 to $73 billion in 2019.

The crisis manifested in severe shortages of food, medicine, and basic goods. Venezuela, which had become dependent on imports, struggled to pay for essential items as foreign currency reserves dwindled. Long queues were common, as supermarkets were often empty. In 2017, the rate of households in poverty and extreme poverty surpassed 90%. The healthcare system collapsed under the strain, with hospitals lacking essential supplies and medicines. Preventable diseases like malaria, measles, and diphtheria re-emerged, highlighting the system’s breakdown.

Maduro’s government responded to the growing discontent with repression. Protests erupted across the country, as citizens demanded better living conditions and political change. The government’s crackdowns were brutal, drawing international condemnation. Key opposition figures, such as Leopoldo López and Juan Guaidó, emerged, leading movements against the Chavist regime. Guaidó declared himself interim president in January 2019 after a presidential election won by Maduro but considered fraudulent. His proclamation was recognized by many countries, including the United States and many European and Latin American nations.

Internationally, the Maduro regime faced isolation and sanctions. The United States, the European Union, and other nations imposed economic sanctions targeting Venezuelan officials and key sectors like oil and gold. The sanctions aimed to pressure the government into restoring democracy but also limited Venezuela to emerge from the economic crisis. In response, Maduro sought support from allies like Russia, China, and Turkey, securing loans and investments in exchange for future oil deliveries.

According to the United Nations High Commissioner for Refugees (UNHCR), over 7.7 million Venezuelans fled the country as of November 2023, creating a refugee crisis in neighboring countries. These countries struggled to accommodate the influx of refugees, as 6.5 million displaced Venezuelans are currently residing in Latin America and the Caribbean. Within Venezuela, the situation remained dire, with the government even blocking international humanitarian aid in 2019, claiming it was a cover for foreign intervention.

While some economic indicators have shown improvement in the last years, the situation remains critical. Maduro has control over most of the political system. In the months before the 2024 Venezuelan presidential election, the Supreme Court upheld a ban on opposition leader María Corina Machado, citing her ties to exiled Juan Guaidó. Machado’s chosen successor, Corina Yoris Villasana, was also disqualified as she couldn’t register in time due to “technical” errors, leaving the opposition without a viable candidate.