Following months of violent protests, Venezuela is meeting with creditors to discuss ways out of what seems to be inevitable default. Meanwhile, the EU slapped a new set of sanctions on the South American nation.
Image: Reuters/C. Garcia Rawlins
Advertisement
Venezuela on the brink
Venezuela is facing collapse amid multiple crises. DW takes a look at what has brought the oil-rich nation to its knees.
In March 2017, violent protests erupted across the country in response to a Supreme Court decision to strip the legislative branch of its powers. Amid an international outcry, President Nicolas Maduro reversed the decision, but it was too late. Thousands continued to take to the streets, calling for new elections. More than 100 people were killed in clashes with security forces.
Image: Getty Images/AFP/J. Barreto
Hunger, a growing problem
The violence added to the ongoing economic and political crisis in Venezuela. Many Venezuelans spend more than 30 hours a week waiting in lines to shop, and are often confronted with empty shelves when they finally enter a store. President Maduro blames the crisis on US price speculation. The opposition, however, accuses the Socialist government of economic mismanagement.
Image: picture-alliance/AA/C. Becerra
Health care in crisis
The crisis has even affected health care in the oil-rich nation. Venezuelans often head to Colombia to collect medical supplies to send home, as seen in this picture. Hospitals across Venezuela have compared conditions to those seen only in war zones. As patient deaths rise, health officials have sounded the alarm on the rise of malaria and dengue fever.
Image: picture alliance/dpa/M.Duenas Castaneda
Power grab
By July 2017, Venezuela's pro-government Constituent Assembly was established. For observers, it had all the hallmarks of a power grab. The new body adopted the authority to pass legislation on a range of issues, effectively taking away the powers of Venezuela's elected congress, which was under the opposition's control. The move drew wide international condemnation.
Image: picture-alliance/dpa/P. Miraflores
The West sanctions
In response to the political crisis, the United States and European Union imposed a series of sanctions against ruling officials. The US blacklisted members of the Constituent Assembly and froze all of Maduro's assets that are subject to US jurisdiction. The EU banned arms sales to the country.
Image: picture-alliance/dpa/AFP/T. Schwarz
Government victorious in regional elections
In October 2017, Venezuela held two votes: regional elections and elections for governors, which were long overdue. The opposition boycotted the vote, but then split, as some candidates and small parties chose to participate. This caused a deep rift within Maduro's opponents. The government went on to sweep the vote, which detractors say was unfair and heavily favored the regime.
Image: picture-alliance/AP Photo/A. Cubillos
Debt default
In November 2017, the oil-rich, cash-poor nation faced its day of reckoning. Credit ratings agencies declared Venezuela and its state-run oil company in "selective default." But Russia offered to restructure the South American country's debt to ensure Caracas pays its other creditors. US and EU sanctions, however, limited the chance of an agreement.
Image: picture-alliance/AP Photo/A. Cubillos
Presidential elections scheduled
The National Assembly announced in January 2018 that it would grant Maduro's call for snap presidential elections. The electoral authority, CNE, held the elections on May 20. The EU, the US and 14 Latin American nations warned that they would not recognize the results. The mainstream MUD opposition alliance boycotted the vote, leaving only one possible outcome.
Image: Getty Images/AFP/F. Parra
Maduro wins ...
Maduro was re-elected to a second six-year term with about 68 percent of the vote. Turnout was only 46 percent, according to electoral authorities. However, the MUD opposition alliance put turnout at less than 30 percent. The Organization of American States (OAS) called the elections neither free nor fair.
Image: picture-alliance/AP Photo/A. Cubillos
... Guaido assumes power
But weeks into the new year, the situation took a drastic turn. On January 23, 2019, parliament president Juan Guaido declared himself interim president of Venezuela — a move that was quickly recognized by US President Donald Trump. Maduro called it a US-backed "coup." Days later, the US sanctioned Venezuela's state oil firm, while Guaido staked his claim on the country's foreign assets.
Image: Imago/Agencia EFE
10 images1 | 10
Venezuela started meeting a host of its creditors in Caracas to discuss government proposals to restructure at least 60 billion dollars of junk bonds in a bid to ease the country's massive debt burden. Some investors have, however, expressed concern in advance that the meeting was only a ruse for President Nicolas Maduro to seek longer repayment periods for the bonds. This could lead to Venezuela's eventual debt default, with the country's total debt estimated to be at least $150 billion (€130 billion).
Maduro said that 414 investors and representatives of investment banks, which amounted to 91 percent of holders of Venezuelan bonds, would attend the meeting near the presidential palace. However, there had been earlier reports that some of the creditors would not be able to attend the meeting amid concern that the delegation of Venezuelan negotiators could include people who are presently under US sanctions.
Venezuela has been in a massive recession since Maduro succeeded the late president Hugo Chavez in 2013. A drop in oil prices has contributed to a galloping shortage of basic goods in the cash-strapped country, where inflation is expected to reach 1,000 percent this year.
Meanwhile, a default declaration of the PDVSA state oil company is seen as almost inevitable. The committee of the Internal Swaps and Derivatives Association (ISDA), has agreed to reconvene on Tuesday to determine PDVSA's fate.
Months of violent protests over hyperinflation, food shortages and the deterioration of the rule of law have led up to the meeting of international creditorsImage: Reuters/I. Urrutia
Persona non grata
The head of the committee charged with negotiating a deal, Vice President Tareck El Aissami, is one of the politicians targeted by US sanctions, with Washington accusing El Aissami of drug trafficking. To encourage attendance, Venezuela has reportedly said that Vice President El Aissami won't physically attend the meeting — despite being put in charge of the restructuring the country's debt. It was unclear whether Venezuelan Finance Minister Simon Zerpa, another individual targeted by US sanctions for alleged corruption, would be present.
The prospects for reaching any agreement are complicated by the sanctions imposed on Venezuela and on many senior officials, which prohibit any US person or bank from buying the country's debt. About 70 percent of Venezuelan bondholders are North American, according to government figures, while China and Russia also hold a considerable share.
President Nicolas Maduro recently introduced the new 100,000 Bolivar bill - which is valued at about $2.Image: Reuters/Miraflores Palace
During his weekly television speech on Sunday, President Nicolas Maduro insisted his country would "never" default on the country's debt, adding that Venezuela's strategy is to "renegotiate and refinance all the debt."
He highlighted talks with allies China and Russia — Venezuela owes China $28 billion and Russia $8 billion. Russia has already agreed to restructure $3 billion in loans.
EU sanctions
The meeting started just after the European Union adopted its own set of targeted sanctions earlier in the day targeting "those involved in the non-respect of democratic principles or the rule of law."
The sanctions include a ban on arms sales as well as travel restrictions and asset freezes on individuals deemed to be in violation of human rights. Caracas has meanwhile criticized the sanctions as "illegal" and "absurd."
Many Venezuelans have fled to Colombia to seek basic supplies and medical care Image: Alcaldía de Soledad
The EU sanctions came after the bloc declared that it would not recognize Venezuela's Constituent Assembly, a chamber of loyalists appointed by Maduro in August designed to usurp parliamentary powers. The EU said that its creation had "further eroded the democratic and independent institutions."
Amid all the international pressure, thousands of Venezuelans have fled to neighboring countries and more than 120 people have been killed in anti-government protests so far this year.