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A look inside socialist Venezuela's chaotic embrace of the free market

A look inside socialist Venezuela's chaotic embrace of the free market

WEDNESDAY, December 25, 2019
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CARACAS, Venezuela - Last Christmas, devastated Venezuela saw shortages of everything from tinsel to toilet paper. This year, the socialist government has given a weary nation an unexpected holiday gift.

A dose of the free market.

President Nicolás Maduro is making tentative moves away from the socialist policies that once regulated the prices of basic goods, heavily taxed imports and restricted the use of the U.S. dollar. As a result, the South American nation's economic free fall is beginning to decelerate. The national inflation rate - still the world's highest - has slowed from a blistering 1.5 million last year to a relatively breezy annualized rate of 15,000%. 

A woman checks out a shop window in a mall in Caracas, Venezuela, on Dec. 18, 2019.MUST CREDIT: Photo for The Washington Post by Andrea Hernandez Briceno

The changes might be temporary, and amount largely to an economic Band-Aid. There are no signs, for instance, of a larger strategy to reverse the agricultural land grabs and company seizures that helped lay the groundwork for one of the worst economic implosions of modern times.

But as the new measures take hold, once-empty store shelves have overflowed this holiday season with beef, chicken, milk and bread - albeit at prices so high that a significant segment of the population is actually worse off. More moneyed Venezuelans, however, are flocking to dozens of newly opened specialty stores - including at least one fake Walmart - brimming with stacks of Cheerios, slabs of Italian ham, and crates of Kirkland Signature Olive Oils, much of it bought and shipped in containers to Venezuela from Costco and other bulk retailers in Miami.

Mannequins modeling Santeria Iyawo attires tower over a child sized mannequin at El Cementerio market in Caracas, Venezuela, on Dec. 19, 2019. MUST CREDIT: Photo for The Washington Post by Andrea Hernandez Briceno

Maduro remains deadlocked in a political standoff with opposition leader Juan Guaidó and his backers in Washington, who have ratcheted up pressure to force his ouster. But U.S. sanctions against Venezuela do not appear to have crimped surging imports - mostly because they prevent Americans from doing business only with the government, not private Venezuelans. 

"The government had been unable to restart the economy any other way, so it's doing what the people want" by giving in to the free market, said Ricardo Cusano, president of Fedecamaras, Venezuela's chamber of commerce. The socialists are still in power, he said, but "they have lost the ideological war."

Plagued by hyperinflation and economic collapse, depressed Venezuelans dubbed last Dec. 25 the "Christmas without lights" - a day largely bereft of the traditional holiday bunting and toys for children. But as the economy begins to show modest signs of life - particularly in the relative bubble of Caracas, the capital - there have been visible changes on the streets.

Meager Christmas markets opened to peddle baubles to a slightly more optimistic populace. More holiday decorations popped up inside stores, along with, proprietors say, more parents buying toys and clothing for children. The capital is suffering its worst traffic jams in years as car owners with greater access to imported spare parts drag long out-of-commission vehicles back onto clogged roads.

The eased restrictions have made the holiday season merrier for a small minority of rich Venezuelans, many of whom live in mansions behind high walls in Eastern Caracas.

"There were things you just couldn't get - dishes you just couldn't make," said Pablo Gianni, manager of Anonimo, a lavish new Caracas eatery that opened this month complete with a glass-walled wine cellar stocked with shelves of four-figure vintages of Dom Pérignon. 

"But now, it's like legal contraband," he said. "They're letting everything in."

The changes taking shape here are the product of a combination of factors. For years, the government strictly limited the use of the U.S. dollar, long portrayed as an instrument of Yanqui imperialism. But last year, the government freed the exchange rate and more broadly legalized dollar transactions. It also eliminated massive import taxes on a host of goods.

But those measures have begun to work through the economy really only in recent months, as the government has taken the further step of abandoning attempts to control retail prices. Stocks of bread, chicken and beef that once sold for nearly nothing are now being sold at market rates, at least partly normalizing farm production and sales through supply chains.

Just as importantly, there are simply far more dollars in the Venezuelan economy now. About 4.5 million Venezuelans have fled starvation and poverty in recent years, creating a global diaspora that collectively sent $3.5 billion in remittances this year - more than triple the amount two years ago, according to Ecoanalitica, a Caracas-based economic analysis firm. In addition, economists say, the economy is awash in dollars from illegal mining, drug trafficking and other illicit activities.

By some estimates, there are three times as many dollars in circulation as bolivars, creating a de facto dollarization of the economy that is stabilizing inflation. Last month, even Maduro seemed to hail the almighty dollar.

"I don't see the process they call dollarization as bad," he said in nationally televised comments. "It can aid the recovery of the productive areas of the country and the functioning of the economy."

Across Venezuela, mechanics and electricians, engineers and architects are increasingly charging in greenbacks. More companies are supplementing their employees' salaries with U.S. currency. Collectively, economists say, 60 to 70% of families here are now regularly receiving some dollars - buying even some Venezuelans of more modest means a merrier Christmas this year.

"Last year was very hard for us. There was practically no Christmas," Yelitza Mineros, 33, said as she eyed the prices in dollars at a Caracas toy store with her 7-year old son and 3-year old daughter.

Her husband, a mechanic, began earning in dollars a few months ago, she said, giving them the extra money they needed to buy new clothes for their children.

Her son, Rodrigo, held up a Spider-Man action figure with a big grin as she spoke.

"This year, we're doing better, and we can get them their toys," she said. "That gives me a lot of joy."

Venezuela remains deeply mired in the worst economic crisis in modern Latin American history. Years of chronic mismanagement and, to a lesser extent, U.S. sanctions including an oil embargo have severely damaged the lifeblood of the economy: petroleum production. Venezuelans, including residents of the relatively shielded capital, are struggling with worsening gasoline shortages, lingering blackouts and broken state hospitals.

And more food on store shelves doesn't mean everyone can eat. In western Caracas, for instance, a grocery store that last year sold price-controlled products and suffered from shortages was now well now stocked with goods ranging from imported motorcycle helmets to Diet Coke. But with two chicken thighs at $1.70 and butter at $2 in a nation with a minimum wage of $6 a month, the aisles were mostly devoid of shoppers.

For the poorest Venezuelans with no access to dollars, life is harder. Mariutka Oropeza, a 54-year-old woman who lives with her three adult children in a small apartment in eastern Caracas, has struggled to afford medicines and treatment for her arthritis, hypertension and uterine cancer. She was shocked recently to discover that one of her new prescriptions was going for $70 a box - well out of reach for a family with a household income of $30 a month.

Her family once survived by waiting in hours-long lines for regulated goods. But now that the government has stopped enforcing fixed prices, a bag of cornmeal that once cost her 25 cents now costs four times that amount.

"It's painful," Oropeza said. "People say, 'Oh, we are doing a little better' because many of them receive remittances from their families abroad. But oh, my God, we are not doing better at all."

"I remember when this government started ruling, and called the dollar the big enemy. Look where they have brought us now," she said. "The dollarization of the country.

"What they're really doing is killing us."