When a frustrated mother threw a mango at Nicolas Maduro in April, hitting him on the head, she could never have guessed the outcome: the Venezuelan president promised his homeless attacker a new apartment.
Others are not so lucky. Lolimar Gelis and her family lost their home in 2010 when a mudslide destroyed their shanty town, forcing them to take shelter at a military garrison in the west of the capital, Caracas. Despite appeals to the country’s leaders, the family is still waiting to be re-housed via a scheme launched by Maduro’s predecessor, Hugo Chavez, Yahoo reported.
The Gran Mision Vivienda Venezuela was originally designed to help the families affected by the disaster. But its scale—to erect 3 million homes by 2019—transformed it into a grand project. One that supporters say will meet the country’s soaring housing needs and critics deride as an expensive act of electoral politics that the country—which holds the world’s largest oil reserves—can no longer afford.
Amid lower oil prices, Venezuela is struggling to maintain the social spending that characterized the Chavez era. Crude accounts for 96% of export revenues: a halving in the oil price over the past 14 months means revenues have slumped by about $36 billion compared with the average of the previous two years, when the government raked in almost $79 billion.
Running on Fumes
The fall in oil prices has inflicted massive pain on exporting countries, widening budget deficits and weakening currencies around the world. Energy companies have been forced to lay-off thousands of workers and scrapped multibillion-dollar projects. But Venezuela is facing the greatest economic threat of any of the world’s major producers. With shortages of basic goods—from milk to nappies—becoming more acute each day as imports shrink, it is not only populist housing projects that are likely to be shelved, warn observers.
“Venezuela is running on fumes,” says Russ Dallen, who heads investment bank, Latinvest. “The current oil income is insufficient to allow the country to pay its debts, fund its imports and service its foreign bonds.”
The debt—issued by the government and a handful of state-run companies including the oil group PDVSA—adds up to a total of $128 billion to be paid back over the next 24 years. But $6.3 billion of that falls due before the end of the year, according to Bank of America.
So far Caracas has been able to keep paying its foreign bond creditors by selling assets, securitizing oil debts and raiding its foreign reserves, burning through more than $7 billion since late February. They now stand at $16.9 billion, one of their lowest levels in the past decade, according to central bank data amid fears that the coffers could run empty in the first quarter of 2016, triggering a possible balance of payments crisis and knock-on implications for heavily exposed bondholders, such as Ashmore, Pimco, and BlackRock.
Production has stagnated at about 2.8 million barrels per day from a peak of 3.3 million b/d before Chavez was elected in 1998.
