Most of the headlines coming out of Venezuela have to do with the country’s precarious situation due to plunging oil prices. But it should be remembered that there is an intense political struggle going on within the country as well — one that has the power to destabilize it entirely.
Here’s a reminder: Opposition leader Maria Corina Machado has been accused of treason, and trying to assassinate Venezuela’s President, Nicolas Maduro. It is a crime punishable by 8-16 years in prison.
A former legislator, Machado rose to prominence as an opposition leader at the beginning of the year, when political strife rocked Venezuela and hundreds of thousands demonstrated in the streets.
At that time, former Mayor Leopoldo Lopez had everyone’s attention. The Harvard educated activist turned himself in to Maduro’s administration in February to cool tensions, and has been in prison ever since. According to reports his prison guards throw excrement against his jail cell.
Lopez’s absence left an opening that Machado and a number of opposition leaders have been trying to fill, but since this spring the government has been better at quelling dissent.
Enter the slide in oil prices. Oil makes up 95% of Venezuela’s exports. It makes up over 60% of the country’s revenue. As the price of the commodity plummeted, traders told Business Insider that default was the only possible ending.
Venezuela lobbied its OPEC peers hard for a slow down in oil production to prop up the price but to no avail. Now it’s burning through cash at an alarming rate — part of which was loaned to Venezuela by the Chinese in exchange for oil.
Something has to give. The country has been spending more money than it brings in for years in an attempt to maintain social programs that date back to the administration of late-President Hugo Chavez. Its fiscal deficit is at 17% of annual economic output.
Another drain is Venezuela’s Petrocaribe program, which “sells” oil to its Caribbean and Latin American allies at stunningly rates. The country’s Foreign Minister has said that the program will continue as is. That said — Venezuela sold some debt the Dominican Republic owes it to Goldman Sachs, according to Bloomberg, so not everything in that relationship is off limits.
What all this means together is simply that Maduro is under an insane amount of pressure. His approval rating is at an all-time low of 24.5%, according to the Wall Street Journal. We can expect more desperate moves — more finger pointing, more scapegoating — to come along with more dissent. And it won’t be pretty.