Venezuela’s economic crisis deepens as U.S. sticks with sanctions that hit ordinary people hardest

The country is experiencing a critical shortage of medicines and has no way out of dealing with its massive debt under existing sanctions.

A vendor holds the bank notes in a plastic bag, at a market in Caracas, Venezuela. Venezuelans already struggling to find food, medicine and other basic necessities have a new headache to worry about: shortages of cash. Troubling shortfalls of Venezuelan bolivars are forcing many in this distressed South American nation to gather in long lines outside banks to take out what little cash is available.  CREDIT: Fernando Llano/AP Photo.
A vendor holds the bank notes in a plastic bag, at a market in Caracas, Venezuela. Venezuelans already struggling to find food, medicine and other basic necessities have a new headache to worry about: shortages of cash. Troubling shortfalls of Venezuelan bolivars are forcing many in this distressed South American nation to gather in long lines outside banks to take out what little cash is available. CREDIT: Fernando Llano/AP Photo.

Venezuela’s downward spiral — economically and politically — is hitting a critical low point. Low oil prices and currency controls have lead to a major shortage of basic food supplies, as well as medicines; the country’s pharmaceutical association estimates there is an 85 percent shortage of drugs there now.

So far, the U.S. response to the turmoil, which the administrations of presidents Barack Obama and Donald Trump accused of subverting democracy, has been a mix of sanctions and vague military threats. But none of these has derailed Venezuelan President Nicolas Maduro from trying to rewrite the country’s constitution and further consolidate power in a year that has seen him violently quash protests and lock up opponents and activists.

The U.S. embassy in Venezuela is among those that has remained without an ambassador under President Trump, although a new chargé d’affaires is about to be appointed, but that does not mean the State Department has not been active on this front. According to McClatchy’s reporting, it has been involved in on-the-down-low funding of The Atlantic Council — a D.C. think tank — to “train opposition.” Spokespeople for the think tank denied being part of any political negotiation, telling the news agency that its role is to “address the fractures within the opposition.”

ThinkProgress attended one the think tank’s panels on the Venezuelan crisis in July, which largely focused on why the U.S. government ought not to sanction the country’s oil exports, as doing so would only deepen the crisis within the population, which is seeing high rates of troubling indicators, such as infant mortality.

A mural of U.S. President Donald Trump depicting him wearing a Nazi swastika covers a wall along a sidewalk in Caracas, Venezuela, Tuesday, Nov. 14, 2017, along with the Spanish message: "We are those of peace." CREDIT: Ariana Cubillos/ AP Photo.
A mural of U.S. Trump depicting him wearing a Nazi swastika covers a wall along a sidewalk in Caracas, Venezuela, Tuesday, Nov. 14, 2017, along with the Spanish message: “We are those of peace.” CREDIT: Ariana Cubillos/ AP Photo.

So the question remains: Other than issuing sanctions that so far have only hurt ordinary people and failed to bring about change, what can the Trump administration do to turn things around in Venezuela?

Dany Bahar, the David M. Rubenstein Fellow in the Global Economy and Development program at the Brookings Institution, told ThinkProgress that while it is hard to find a way to help the people of Venezuela, the United States still has an option when it comes to helping Venezuela renegotiate its debt — some $60 billion in bonds.

The current constitution requires any sovereign debt issuance to go through the national assembly, meaning that international debters who might want to renegotiate the debt can go through the national assembly, currently in the hands of the embattled opposition.

“The sanctions that the U.S. has imposed are basically banning any American organization from negotiating with the government. So, if the government is willing to negotiate — which is  a big if — this is the only point of leverage. The U.S. could really pressure the Venezuelan government, saying ‘Look, we are willing to work on the sanctions with you if you’re willing to go through the national assembly, but on the condition that you re-do the electoral council, to commit to elections,’ to all these things,” said Bahar.

This, he admits, is highly unlikely.

As it stands, Bahar said there are three likely outcomes, with them hinging on the opposition and the government to manage to negotiate an agreement on next year’s presidential election. A “good outcome” said Bahar, is that negotiations are reached and that next year’s elections will be fair. If talks fall apart and the elections still take place with Maduro winning in a “highly unfair” poll, that would be a “bad outcome.”

“With that, I see things getting worse and worse … I see a scenario in which Venezuela lives with a dictatorship for decades,” said Bahar.

The third possibility, he said, might be a military coup, but at this point, this too is unlikely as the Venezuelan military is so entrenched in the current regime and has more generals than NATO or the United States. Besides, military coups take a long time to plan — previous president Hugo Chavez’s failed 1992 attempted coup took almost a decade to plan.

Meanwhile, the situation has caused medical “flea markets” to pop up in the country, reports Reuters, where birth control, antibiotics, blood pressure pills, and anticonvulsants are sold next to produce and other household goods.

Some of the drugs, it seems, are pilfered by employees in local hospitals. Some of the medicines are expired or have been stored in improper conditions, meaning they could be ineffective at best and possibly harmful, and doctors have warned against using them.

But the origins of all of them can’t be determined, especially given that the market there is also flooded with counterfeit goods from China, as Bloomberg reports. Over the past three months, Venezuela’s inflation rate, notes the news agency, is moving at an annual pace of over 4,000 percent.

As ThinkProgress reported earlier, the government has been struggling to make bond payments and trying to stave off going into total default (it has already defaulted on some debts) at the expense of cutting imports of basic goods for a population that is living with less and less as the months roll on in the crisis triggered by the country’s political problems.A

A plan was announcement this week for oil-rich, cash-poor Venezuela to create its own crypto-currency — the “Petro.” The Miami Herald reports might be part of a plan to skirt U.S. sanctions,  which target Maduro, as well as other top officials, who are unlikely to be facing the same struggles as ordinary Venezuelans.

At this point, the United Nations says the conditions in the country have not yet given way to a humanitarian crisis, but that there are issues with “shortages, scarcity, and distribution delays, etc.,” said Alfred De Zayas, an independent expert on International Democratic and Equitable Order at the United Nations.

Zayas, who returned from a visit to Venezuela on Tuesday, told reporters that he is nonetheless concerned: “What is important is to get to know the causes and take measures against contraband, monopolies, hoarding, corruption, manipulation of the currency and the distortions in the economy caused by an economic and financial war which includes [the effects of international] sanctions and pressure.”