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Venezuela’s increasing inflation, shortages leave poor doubting Maduro

Venezuela's President Nicolas Maduro talks to the media during a press conference after a bilateral meeting with Colombia's President Juan Manuel Santos, in Cartagena, Colombia, Friday, August 1, 2014. Maduro is in Colombia to discuss binational issues.(AP Photo)

Venezuela's President Nicolas Maduro talks to the media during a press conference after a bilateral meeting with Colombia's President Juan Manuel Santos, in Cartagena, Colombia, Friday, August 1, 2014. Maduro is in Colombia to discuss binational issues.(AP Photo)

Geraldine is tired of hearing that she should be grateful for the apartment the Venezuelan government gave her last year. With the elevator out of action, water leaking through the ceiling and no gas supplies, she wishes she had never moved in.

The 31-year-old mother of two said she was given keys, but not ownership papers, for the apartment after spending three years in a government shelter for those left homeless by torrential rains in 2010. She now spends much of her day lining up for the few subsidized goods left in the shops, before climbing the eight floors to her flat and cooking on a small electric stove.

“I feel that for the past year, all we have done is survive,” Geraldine said during an interview in the apartment, asking that her last name not be published for fear of government reprisal. “Conditions were better in the shelter, even when we had to share a bathroom.”

A government spending boom in the two years to April 2013 provided Geraldine with her new home and secured election victories for then-President Hugo Chavez and, after his death last year, for President Nicolas Maduro. Since then, government spending has stalled, inflation has tripled to more than 60 percent, and a lack of dollars has led to shortages of everything from toilet paper to drinking water. As poverty levels rise, people like Geraldine say they are losing faith in Maduro.

Venezuela’s poverty rate rose to 32 percent at the end of last year from a record low 25 percent in 2012, according to the National Statistics Institute. That represents an additional 1.8 million people who live in families with less in income than 6,648 bolivars ($87 at the black market rate) a month.

Maduro said those figures exaggerate poverty by focusing purely on income, without taking into account government assistance.

Central to rising poverty is inflation. After the fiscal deficit widened to 11 percent of gross domestic product in 2012 on a surge in spending, Maduro has seen annual inflation accelerate to 61 percent from 29 percent.

Poverty is set to increase further as Maduro reduces the supply of dollars and in March devalued the currency by 88 percent with the introduction of a secondary exchange system, said Ronald Balza, an economist and professor.

Imports tumbled 23 percent in the first quarter of this year.

“Chavez’s social achievements were lost a year after his last campaign,” Balza said in a telephone interview. “With Maduro’s inevitable economic adjustments, it was impossible to avoid an increase in poverty that will continue.”

It wasn’t just the government’s spending spree that was unsustainable. Geraldine said her new apartment was constructed with faulty materials and that leaks appeared within months of her moving in. The building hasn’t been connected to the main gas supply.

“It wasn’t so hard two years ago,” said Geraldine, citing the cost of a refrigerator that has risen to 22,000 bolivars from 1,700. “This all happened because Chavez died. He left us a president who doesn’t know anything. Chavez knew how to get things done.”

Geraldine said her husband’s monthly salary as a construction worker of 10,000 bolivars barely covers the family’s food purchases.

“It’s been 12 months since I’ve been able to buy anything else for the family,” she said. “Not even a piece of clothing for my kids or myself.”

The percentage of Venezuelans who consider themselves pro-government fell to 38.2 percent in April from 52.6 percent the year earlier, according to a survey by polling company IVAD, cited by Edgar Gutierrez, head of the Caracas-based Venebarometro consulting firm that paid for the poll. The survey of 1,200 people had a margin of error of 2.37 percentage points.

Maduro said July 23 that the “revolution” needed the backing of 60 percent of the population.

“We have to think we are a family that has to unify in difficult times,” Maduro told state TV from the presidential palace. The Information Ministry didn’t reply to phone calls and an email seeking comment on rising poverty levels and the possibility of renewed protests.

Venezuelan dollar bonds have returned 24 percent this year, second only to Argentina in emerging markets tracked by JPMorgan Chase & Co.’s EMBIG index, as investors anticipate Maduro will be forced to make changes. The country is likely to unify its foreign exchange rates before the end of the year, as pragmatists gain power in the government, Bank of America said in a June 26 note to investors.

Jorge Graterol, 34, makes his living cutting eucalyptus for packages used in floral displays in Culebrilla, a village 12.4 miles from Caracas. While getting by has always been difficult, he says, it’s become harder than ever in the past 1½ years.

Food and beverage prices rose 75 percent in the year through May, according to central bank statistics, and Graterol’s family no longer gets the help from the state that they used to.

At the kitchen, Graterol’s wife Marlene shows a can of powdered milk that she bought from a subsidized state market known as Mercal. That’s the only government-run social program the family says it benefits from now.

“A few years ago we could get more products, but now you see a lot less food than before. And it is hard to find it at regulated prices,” she said.

After traveling to Caracas and standing in a line for three hours, she said, she was allowed to buy only two cans of powdered milk.

The percentage of Venezuelans who perceive the country’s situation as negative rose to 69.4 percent in April from 52 percent in the same period last year, according to the latest survey by IVAD for Venebarometro,

“Venezuela’s poor don’t believe that the government is going to reduce poverty anymore,” Luis Pedro Espana, a sociologist at Catholic University Economic Institute, said in a telephone interview. “They believed Chavez because they saw their consumption rise, but now they can’t buy more than before and can’t find milk.”

Alejandro Moreno, a Salesian Catholic priest and researcher, said the topics of conversation among his neighbors in a slum on the eastern outskirts of Caracas where he lives have changed.

“Before they would talk to me about thugs. Now they ask each other what they got and how much it cost,” Moreno, 76, said at his office in the Poverty Research Center in Caracas. “Scarcity is the new issue. In these slum shops, you can find all the food you need, but it costs three times more.”

The central bank hasn’t provided data on product scarcity since January, when it said 28 percent of basic goods were out of stock at any given time. Venezuelans reduced daily consumption of meat, chicken, rice, corn flavor and powered milk by seven percent in the second half of 2013 from a year earlier, according to data published by the INE on its website.

Maduro said on June 13 that the INE statistics that showed the increase in poverty were “not official.” He says that the country’s poverty rate fell to 19.6 percent in 2013.

“Venezuela has been highly successful in its struggle against poverty and misery; and to guarantee free education and health services in good quality,” Maduro told Telesur TV on July 24.

Venezuela was swept by a wave of demonstrations earlier this year as people in wealthier neighborhoods protested against rising crime, shortages and inflation. The country saw 6,369 protests in the first half, Venezuela’s Unrest Observatory, a Caracas-based group that tracks protests nationwide, reported on its website. That was the highest number in at least 10 years, the group said.

The demonstrations have calmed down in the past few months, with no protest-related deaths reported since May. As poverty rises though, the government is wary of a revival in the protest movement, Venebarometro’s Gutierrez said.

“If the poor join the protests, the popular myth of Chavez and his revolution will break down,” Gutierrez said. “Maduro fears that his own followers will tell him to leave.”

Alejandro Velasco, an assistant professor of Latin American studies at New York University, has been visiting the 23 de Enero slum in Caracas famous for its support of Chavez every year since 2002.

“This is the first time I am seeing people so angry,” he said in an interview on June 17. “All of the complaints about shortages, government inefficiencies and corruption are similar to what was being discussed in the months before the Caracazo,” he said, referring to street riots in 1989 that left hundreds dead after then-President Carlos Andres Perez increased gasoline prices and tried to implement other austerity measures.

Geraldine says that people at the shelter were told to vote for Chavez and Maduro if they wanted to get a house. Now, after investing so many hopes in Chavez’s “21st century revolution,” they are still unwilling to protest, she says.

“I’ve invited people to go out and protest, but no one seems interested,” Geraldine said. “I don’t think people are afraid, but rather discouraged. They’ve also lost confidence in the opposition because there’s no clear leader, and they fight amongst themselves.”

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