Venezuelan President Declares Economic State of Emergency

The Venezuelan situation degrades rapidly as President Nicolas Maduro declared a state of emergency, but this new power is subject to rejection or approval from Congress, according to Reuters. Venezuela struggles from lethal combinations of low oil prices and a staggeringly high inflation rate of 141.5 percent, the world’s worst inflation level. According to analysts, the Venezuelan economy will fail to improve in 2016, and many suspect that the South American country will undergo default this year.

The Venezuelan situation degrades rapidly as President Nicolas Maduro declared a state of emergency, but this new power is subject to rejection or approval from Congress, according to Reuters. Venezuela struggles from lethal combinations of low oil prices and a staggeringly high inflation rate of 141.5 percent, the world’s worst inflation level. According to analysts, the Venezuelan economy will fail to improve in 2016, and many suspect that the South American country will undergo default this year.

The president’s new authority grants him the ability to enact emergency reforms within a 60-day time span, but the world is witnessing the unraveling of the Maduro administration as he fends off criticism from all sides. He not only faces heat from a populace contending with a shortage of necessities and higher prices, but an opposition that scolds his effectiveness as a leader, and the finance community loses faith in the government’s credibility.

Wall Street in particular predicts the downfall of Venezuela this year, but Maduro intends to honor foreign debt regardless of rapidly dwindling international reserves. He intends to raise fuel prices to strengthen foreign reserves, but such a move would pose a vast political risk to Maduro’s political future as the opposition makes moves against him.

The president faced scathing criticism from a newly elected Congress after his presidential address on Friday — a rare occurrence in Venezuelan politics. National Assembly President Henry Ramos gave a rare rebuttal to the president, which constitutes a sign that political foes no longer fear the office of the presidency.

The Congress mandated a six-month timeline in conducting a recall election and the president can do little but stand by and leave his fate to his enemies. Even worse, the president had to address new information from the country’s central bank about the nation’s soaring inflation rate and severe lack of growth.

Maduro blames Venezuela’s problems on the world economy and alleged sabotage from political opponents and the business community, but the sole fault lies with a government that failed to adjust to economic realities on the ground. Maduro replaced deceased predecessor Hugo Chavez, but he maintained the same tired policies of currency and price controls, despite the urgent need to shift course.

In addition, the government never diversified the economy when times were booming, and the economy remains overly reliant on the energy sector, with 96 percent of exports comprised of crude. Venezuela’s heavy crude dipped $24 a barrel, inching the country closer to an inevitable default as no other major revenue source will become available, notes the Washington Post. Venezuela would be in major trouble because state-run oil giant PDVSA produces oil at $20 a barrel, and any figure below that benchmark eliminates lingering export income that the country needs.