“Life has been tough for many years now. It is true that food prices have dropped recently, but they are still too high,” says Rodrigo, a private security guard working in Caracas, the capital of Venezuela. He prefers not to disclose his last name. Amid the ongoing economic crisis, Rodrigo believes that “people are ready for a change.” On Sunday, he will participate in the election for the country’s next president, where 21 million people are eligible to vote. The general election coincides with the birthday of Hugo Chavez. Although Chavez had a problematic human rights record, the charismatic leftist leader, who governed Venezuela from 1999 until his death in 2013, was celebrated as a champion for the poor. His less popular successor, Nicolas Maduro, is now facing opposition candidate Edmundo Gonzalez Urrutia, a retired diplomat. However, polls show that Gonzalez is leading by a wide margin.
Maduro has demonstrated a remarkable ability to cling to power. Most opposition parties boycotted his reelection bid in 2018, claiming that the election was neither free nor fair. In January, Maduro barred his main rival, Maria Corina Machado, from running. Although allegations of government interference have characterized Venezuela’s electoral processes for decades, Maduro has stated that he will respect the outcome of Sunday’s votes.
Rodrigo acknowledges, “I am not sure what will happen on Monday. There are talks of violence. But even if Gonzalez wins, I’m not sure he can transform the country like Chavez did.” During his time in office, Chavez managed to double Venezuela’s GDP per capita thanks to high oil prices. Welfare programs were expanded, and poverty and unemployment fell.
Maduro has not experienced the same success. In his 11th year as president, he has overseen an economic collapse. Since 2014, production has declined by 70 percent, more than double the rate experienced by the United States during the Great Depression. During this same period, around 7.7 million Venezuelans—a quarter of the population—have left the country in search of work.
In 2022, the International Monetary Fund (IMF) described Venezuela’s condition as “the largest economic collapse of a non-conflict country in half a century.” Critics accuse the government of corruption, while Maduro believes the country’s problems stem from crippling sanctions imposed by the United States since 2005. Commentators have criticized the sanctions as illegal and harsh.
Caracas is prevented from accessing international capital markets, which hampers import and debt financing. In 2019, Donald Trump additionally prohibited Venezuela from exporting crude oil to the U.S. and from importing essential chemicals needed to process its own heavy crude oil. Venezuela possesses the largest known oil reserves in the world, but the sanctions and years of mismanagement have reduced production to below one million barrels per day.
“The sanctions have restricted Venezuela’s oil and gas sector, but it is also related to administrative neglect,” says Tim Hunter, a Latin America analyst. He refers to decades of underinvestment in PDVSA (Petróleos de Venezuela, S.A.), the state-owned energy company that is the cornerstone of Venezuela’s economy. In 2017, Maduro announced a controversial reshuffle appointing loyal military officials to leading positions in PDVSA.
Despite the low production, fossil fuels still account for nearly half of Venezuela’s official exports. When sales decline, the economy suffers from low prices and production issues. The economy has been plagued by hyperinflation. In 2018, inflation exceeded one million percent, leading supermarkets and pharmacies to be understocked for years. This has prompted many Venezuelans to emigrate, further undermining growth.
“Regardless of who wins on Sunday, the next government will need to move away from its dependence on oil towards other productive activities. They should also strive to correct inefficiencies in the oil sector,” adds Hunter. Venezuela defaulted on its commercial debt in 2017, and the total debt to the government is estimated to be around $149 billion. Reports indicate that Venezuela has hired advisors to help find solutions to its complex debt issues. “The appointment of advisors is a sign that Maduro is willing to engage with creditors,” says Luis Salas, former vice president of the economy.
However, there are concerns about the accompanying austerity following a debt restructuring, as governments often cut public spending to generate sufficient revenue. “Many hope we can use oil instead of spending on education and healthcare for a deal. But in practice, this cannot happen as long as sanctions are in place,” points out Salas.
President Joe Biden’s administration inherited a maximum pressure strategy from Trump, but the sanctions have yet to unseat Maduro. According to the 2023 Barbados Agreement, Biden eased some sanctions, but after Maduro barred Machado and resumed a territorial dispute with Guyana, Biden reinstated sanctions in April.
“It is clear that U.S. restrictions have an extremely negative impact,” says Mark Weisbrot from the Center for Economic and Policy Research. “Nauseating sanctions have harmed Venezuela’s economy far more than any domestic political mistakes.” However, according to Weisbrot, there is potential for progress under pressure. “But a full recovery cannot take place under sanctions. If Gonzalez wins, they could likely be lifted quickly. If Maduro wins, I do not expect a change in the U.S. position, regardless of who becomes president in November.”