Gripped by high inflation, chronic shortages and an ever-widening fiscal deficit, Venezuela a year ago was not a pretty picture. But after 12 months that have seen further unrest, currency devaluations, a dramatic slump in oil prices and a bitter stand-off between the government and international airlines, turmoil has taken on a whole new meaning in Venezuela.
‘The economic situation in Venezuela has worsened considerably since measures have not been taken to resolve the main problems affecting the country,’ says former IBA President Fernando Peláez-Pier, a partner at Hoet Peláez Castillo & Duque in Caracas.
Despite indications that Nicolás Maduro’s government was taking action to combat the crisis, ongoing shortages of basic food, medical supplies and foreign currency – not to mention the estimated $12bn a year the government is spending to subsidise domestic gasoline sales – have pushed the economy to breaking point.
The current turmoil in Ukraine continues to dominate the headlines in Europe, but the ripple effect has been felt much further afield. ‘The crisis in Ukraine has once again shown a close correlation between extreme political volatility and energy markets,’ says Pablo Alliani, Chair of the IBA Section on Energy, Environment, Natural Resources and Infrastructure Law and senior partner at Alliani & Bruzzon Abogados in Argentina. ‘Globalisation has interconnected the energy markets in such a manner that a crisis of this sort in any part of the globe will affect the whole world, regardless of any distance.’
For Alliani, there is cause for concern much closer to home: in Venezuela, where civil unrest and political demonstrations continue. ‘Venezuela’s role as one of the region’s leading oil producers means that a crisis in the country would have regional and international ramifications if the oil flow were disrupted,’ he says.
Although protests have been concentrated in the country’s main cities, far away from key production centres such as the Orinoco Belt, Lake Maracaibo and Monagas, the disorder threatens to destabilise the global energy market further. ‘In this respect,’ Alliani adds, ‘even if the oil industry remained insulated, prolonged unrest could severely affect Venezuela’s economy, with major consequences for its key trading partners.’
As the situation in Ukraine grows increasingly complex by the day and draws the world’s attention, thousands of miles away on the other side of the Atlantic,Venezuela endures the worst protests it has seen in more than a decade.
What started as a mere isolated, student-led protest in early February has evolved into a widespread demonstration of discontent, highlighting the government’s failure to provide adequate security measures, basic food supplies and its mishandling of the country’s finances. The protests have drawn comparisons with the unrest that ravaged the country in 2002 and are the most serious challenge yet to the government of Nicolás Maduro, who was elected president in April last year following the death of Hugo Chávez of cancer, after 14 years in office.
Although similar to earlier demonstrations, former IBA President Fernando Peláez-Pier, a partner at Hoet Peláez Castillo & Duque in Caracas, says the scale of these protests has taken the country and the government by surprise. ‘We have not seen governmental repression quite like this in recent years: based on different reports, in 17 days of protests there have been 18 deaths and 1,044 arrests,’ he says.
Following his winning bid for re-election in October 2012 – beating nearest rival Henrique Capriles by a nine per cent margin – Venezuela waited with bated breath to see its President, Hugo Chávez, sworn in for another six-year term last Thursday.
However, on 10 January 2013, or ‘10E’, as it has often been referred to by the press and on social networking sites, Chávez was nowhere to be found in Venezuela. Instead he was reportedly still in Cuba, recovering from complications following a fourth cancer operation which took place on 11 December 2012.
Unlike Chávez’s previous trips to Cuba for medical treatment, no up-to-date images of the President have been released since the operation and a prolonged silence – notably even on his Twitter account – has provoked widespread concern over the President’s health, his succession plan and a rumoured impending power vacuum.
After a record 80 per cent of the population turned out to vote in the Venezuelan national elections last month, on 7 October it was finally revealed that Hugo Chávez, head of the ruling Partido Socialista Unido de Venezuela (PSUV) was to be re-elected, this time winning 55 per cent of the vote, giving him a nine per cent margin over rival Henrique Capriles.
Although this is the fourth time in 14 years that Chávez has been re-elected, his lead in 2012 is considerably smaller than in the 2006 elections, when he gained some 63 per cent of the vote. As the Western media continues to cast doubt on the fairness of the elections, lawyers and analysts have questioned the significance of this year’s election results, and the impact they will have on the rule of law in the country going forward.
‘It’s worth highlighting that around 75 per cent of those that voted for the first time in these elections voted in favour of Capriles, which I think gives out a clear message,’ stresses former IBA President Fernando Peláez-Pier, Partner at Hoet Peláez Castillo & Duque in Caracas.
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