ASSESSMENTS

Venezuela's Problems Run Deep

Dec 4, 2015 | 09:00 GMT

Venezuela's Problems Run Deep
An employee carries toilet paper as he walks toward a pharmacy in Caracas, Venezuela, on Oct. 22.

(JUAN BARRETO/AFP/Getty Images)

Summary

Old strategies are no longer yielding results for Venezuela. Nevertheless, in 2016, the Venezuelan government will continue prioritizing foreign debt payments and reinvestment into the energy sector at the expense of imports. So far, this strategy has allowed it to maintain oil production and avoid a disorderly default on its foreign debt. But challenges will arise as inflation frustrates voters and public funds become depleted.

To make matters worse, the ruling United Socialist Party of Venezuela's (PSUV's) potential loss of its legislative majority in Dec. 6 elections could diminish the government's firm control over the legislative branch. Moreover, renewed protests by the opposition in 2016 are likely to be more threatening than the wave of unrest that occurred in 2014, simply because the economy is in much worse condition. As the economy deteriorates and unrest mounts, the government's unity will be tested, and deeper splits could develop between the major political factions running the country.

Old strategies are no longer yielding results for Venezuela. Nevertheless, in 2016, the Venezuelan government will continue prioritizing foreign debt payments and reinvestment into the energy sector at the expense of imports. So far, this strategy has allowed it to maintain oil production and avoid a disorderly default on its foreign debt, but challenges will arise as inflation frustrates voters and public funds become depleted....

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