What has gone wrong in Venezuela?

Members of the opposition of Venezuelan President Nicolas Maduro clash with riot police during a demonstration in Caracas on May 11, 2016.Image copyright

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Opposition protesters have taken to the streets in recent weeks to demand that President Maduro leave office

Venezuela’s President Nicolas Maduro has declared a state of emergency to combat the economic war he says foreign powers and right-wing forces in Venezuela are waging against the Latin American country.

Venezuela has the world’s highest inflation rate at 180% and there are shortages of basic goods as well as power shortages.

Opposition politicians have handed in a petition with 1.85 million signatures asking for a recall referendum to oust President Maduro from power.

Here, we look at some of the factors which have led to the oil-rich country to the current crisis.

Why low oil prices are bad for Venezuela

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Low oil prices have hit Venezuela particularly hard

There is no question that Venezuela is heavily dependent on oil, of which it has the world’s largest proven resources.

Oil accounts for about 95% of Venezuela’s export revenues and was used to finance some of the government’s generous social programmes which, according to official figures, have provided more than one million poor Venezuelans with homes.

But prices for Venezuelan oil have plummeted. They almost halved from an average of $88 per barrel in 2014 to $45 in 2015.

By 13 May 2016, they had fallen to $35 per barrel.

The low oil price means that the government does not have the amount of dollars in its coffers it once had.

This in turn is a problem because Venezuela’s economy is not at all diverse.

The country grows and produces very little except oil and has historically relied on imports to feed its people.

A lack of dollars means it is struggling to import all the goods its people need and want.

What’s behind the shortages?

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A sign in a Caracas bakery informs customers that there is no bread (February 2016)

The fact that the government has fewer dollars at its disposal to import goods is a large part of the problem.

But there are also other factors.

President Hugo Chavez, who governed Venezuela from 2002 to 2013, introduced price controls on some basic goods in 2003.

The idea was to make essential goods affordable for Venezuela’s poor. The prices of items such as sugar, coffee, milk, rice, flour and corn oil were capped.

Producers complained that the new regulations forced them to operate at a loss.

Some refused to provide goods for the government-run stores where the price-controlled goods were sold; others decided to stop producing these goods altogether.

The result was that the country became even more reliant on imports.

What’s with the long queues?

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Venezuelans have grown accustomed to having to queue for hours to get some of their daily staples

With subsidised goods becoming increasingly scarce, many Venezuelans have been forced to queue for hours to get the essentials.

When a sought-after staple such as cornflour arrives at a supermarket, the word will spread quickly over social media and hundreds of people will queue to get it.

The government says the shortages are being made worse by an “economic war” being waged against it.

It says that some people are hoarding goods while other buy more than they need to sell them on at a profit.

To cut down on such behaviour, President Maduro announced in 2014 that he would introduce fingerprinting for shoppers.

He has also accused merchants of holding back goods to drive up prices.

The government says that up to 40% of all subsidised goods are being smuggled into neighbouring Colombia, where they are sold at a massive profit.

In August 2015, Mr Maduro ordered the partial closing of the border with Colombia.

Despite these measures, the shortages have become chronic and the queues continue.

Some Venezuelans are even reporting going hungry because they struggle to get the food they need.

Why is inflation so high?

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Inflation has skyrocketed

With so many goods hard to get hold of, prices have shot up. There is a black market for everything from staple goods to dollars.

Shoppers report that bags of cornflour, used to make typical Venezuelan corn cakes or arepas, are going for 100 times the price set by the government.

Analysts say the inflation is made worse by Venezuela’s complicated exchange rate system.

There are different tiers for people buying dollars depending on what they are using the money for, with preferential rates for those importing essential goods and food.

There are also limits on how many dollars Venezuelans can legally buy, driving those who want more to the black market, which in turn further drives up the value of the dollar against the local currency.

Why are the National Assembly and the president at odds?

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President Maduro has called the president of the National Assembly, Henry Ramos, “crazy”

In parliamentary elections in December, opposition parties won a majority of seats in Venezuela’s legislative, the National Assembly.

They campaigned on a promise to remove President Maduro form office before his term ends in 2019.

Since their election victory they have tried to do this by a number of means.

They proposed a constitutional amendment aimed at shortening his term from six to four years, but it was rejected by the Supreme Court.

They have also handed in a petition with 1.85 million signatures requesting a recall referendum be held.

What are the latest street protests about?

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There have been anti-government protests demanding that President Maduro “leave already”

Opposition groups have called on people to march to the headquarters of the National Electoral Council (CNE) to demand that it start the process of verifying the signatures on the petition for a recall referendum.

The petition was handed in on 2 May and the opposition fears the the CNE is sitting on it in order to delay a potential recall referendum.

The timing of the referendum is key.

Under Venezuela’s constitution, if a president is recalled in the last two years of his term, the vice-president takes over.

For new elections to be triggered, a recall referendum would have to be held before 10 January 2017.

The opposition is keen on fresh elections as Vice-President Aristobulo Isturiz is a loyal member of President Maduro’s Socialist Unity Party.

What will happen next?

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Nicolas Maduro (left) and Vice-President Aristobulo Isturiz have both said there will not be a recall referendum

Vice-President Isturiz has ruled out a recall referendum, alleging the signatures collected by the opposition were fraudulent.

In a news conference on 17 May, Mr Maduro was even more belligerent towards the National Assembly than usual.

He said it had “lost political validity”. “It’s a matter of time before it disappears,” he added.

The National Assembly for its part has rejected the decree Mr Maduro issued declaring a 60-day state of emergency.

It is hard to see how the two sides can reach a compromise at this stage.

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