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Oil-rich Venezuela suffers as global prices plummet

Falling oil prices around the world are usually considered a good thing. But for countries whose economies depend on oil exports, the price drop means impending catastrophe. Scott Tong of Marketplace recently traveled to Venezuela, where 96 percent of all export revenue comes from oil and import prices are skyrocketing. Tong joins Jeffrey Brown to discuss the country’s economic freefall.

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  • JUDY WOODRUFF:

    Now to Venezuela.

    The oil-rich South American nation is in the throes of a deep economic crisis, as its version of socialism faces the crash in global oil prices and political turmoil.

    Jeffrey Brown has our look.

  • JEFFREY BROWN:

    A symbolic burning of the Judas, something of an Easter tradition in some Catholic countries. Effigies of unpopular figures are set ablaze.

    This year in Venezuela, those figures were politicians, including President Nicolas Maduro and a local mayor. But President Obama wasn't spared. The U.S. has long been a favorite target of Venezuelan anger.

    And Venezuelans have much to enrage them right now. The global price of oil, the country's main commodity, has fallen dramatically, crushing the government's bottom line. Meanwhile, the Venezuelan Central Bank began printing money at record levels, the result, massive inflation in this socialist country.

    The cost of consumer goods increased 275 percent last year, according to the International Monetary Fund. And that number is expected to double in 2016. Long lines and empty shelves have come to define life for many, as well as anger at the Maduro government.

    In elections last year, the opposition party won a majority of seats in the national Parliament. Earlier this month, after weeks without water, protests erupted in this San Cristobal neighborhood. Meanwhile, in Caracas, nurses protested a lack of medicines and equipment, while, across town, demonstrators called for the president's resignation.

    And for a look at the crisis facing Venezuela, we welcome Scott Tong of public radio's Marketplace. He recently returned from a reporting trip there.

    And Scott, I should say, was formerly a colleague of ours here at the "NewsHour."

    So, first, welcome to you, Scott.

  • SCOTT TONG, Marketplace:

    Thanks, Jeff.

  • JEFFREY BROWN:

    Alright, so Venezuela.

    We hear about the impact of low oil prices on certain countries out there. You saw it up close. You describe a country in economic freefall. What does that look like?

  • SCOTT TONG:

    Oil is everything there; 96 percent of their export revenue comes from oil.

    They hardly do anything else there. And that's one level of the problem there. Since they got oil 100 years ago, the gusher came, and it pushed out a lot of other sectors, so they don't make much domestically, so everything has to be imported now.

    And so now the price of oil has fallen. Two years ago, it was over $110. It's around $40 now. And so they don't have dollars to import the things. And so when you fly there and you get there you, you just see lines.

  • JEFFREY BROWN:

    So, give me an example.

  • SCOTT TONG:

    Everybody's in line.

  • JEFFREY BROWN:

    Yes, everybody's in line for everything.

  • SCOTT TONG:

    For everything.

  • JEFFREY BROWN:

    Yes.

  • SCOTT TONG:

    So, I traveled to the Western city of Maracaibo, which is the original oil city in Venezuela.

    And there, I got there around 8:30 into a line, and I ran into two sisters. It was 8:30 in the morning, and they were already in the back. And they said, well, if you want to get in front, you're probably there at 1:00 in the morning sleeping in line.

    What they told me was, they make minimum wage. They sell empanadas in the street and make 10,000 bolivars, which is 10 U.S. dollars right now, per month. And they didn't have anything for lunch, so they had to try to find whatever they could at the store. There was no guarantee there was going to be anything on the shelves when they got there, but they were just going to see.

    So, I went and I bought a hot dog on the streets of Caracas. It's called a pepito. It's this big gastronomic, coronary event, right, with all these things on top of it. And the first time I went, it was 900 bolivars. And I said, I wanted to go back and get another one. Three days later, it was a 1,050.

    So the prices just go up like that. And I talked the seller, and he said well, the import prices are going up like crazy. Either he has to stand in line like everybody else does to buy the ketchup and the other things, or he goes to the black market.

    (CROSSTALK)

  • JEFFREY BROWN:

    Well, that's where I wanted to go next.

  • SCOTT TONG:

    Yes.

  • JEFFREY BROWN:

    Because when — in many countries, when you have these kinds of shortages, it means the black market flourishes.

    And you have been writing. I have been reading some of your blog posts about that experience. Right.

  • SCOTT TONG:

    In city of Maracaibo, it's an actual physical place. It's a physical black market.

    So, you go behind the plantains and the other produce, and you see the illegal things kind of sitting on these little tables. And people are a little careful to sell them, but it's everything that you and I find in aisle three of the Safeway.

  • JEFFREY BROWN:

    Right.

  • SCOTT TONG:

    Toilet paper, Pampers, kilo sack of rice, corn flour for breakfast. It's the most basic things.

    So we did a little math, my translator and I, and we found the average markup was about 17 times the government-set price. So, going back to the people in line who are making minimum wage, to buy a big can of milk, that's a week of your salary.

  • JEFFREY BROWN:

    So, what kind of response is there from the government at this point? What are they able to do? What are they doing?

  • SCOTT TONG:

    Well, the government is split right now.

    The presidency — the Socialist Party is the ruling party. It controls the presidency. The opposition won the Parliament and won the Congress. And so the opposition wants to get rid of President Maduro. That's what they keep talking about now.

    When I was there, President Maduro gave a speech, a five-hour speech, where he said, OK, we're going to solve some of our problems by increasing the price of gasoline, which is almost free. And we're going to modify…

    (CROSSTALK)

  • JEFFREY BROWN:

    Yes, almost free. It is truly as cheap — probably the cheapest in the world. Right?

  • SCOTT TONG:

    It is. Here's the math.

    So, under the new, more expensive gasoline price — I did the math with my translator — two tanks of gasoline is one bottle of water. It's free. And so these reforms, to most people, are meaningless, because inflation, by one estimate, the official estimate is 180 percent. It could be 400. The IMF says it could be 700 this year.

    Your money just isn't worth anything right now.

  • JEFFREY BROWN:

    And were you able to — how much were you able to tell about the impact of what's happening economically on the politics there? Will the president — how much pressure is he under? Will he survive?

  • SCOTT TONG:

    So, the people I asked this question to, they said, look, there are two big questions for 2016. Can the country pay off its debt? And, if it does, then it will have hardly any money left to import food and medicine. So, that's question one.

    The other question is, what happens to President Maduro? His predecessor, Hugo Chavez, was beloved. He was charismatic. The people in the barrios, the slums, tears come to their eyes sometimes when they talk about him. He was truly a beloved figure.

    Nicolas Maduro is charisma-less. He doesn't speak well, and now the economy has just collapsed. The question is, can the opposition push through the mechanisms in Congress and get the signatures to try to force him from power? But that seems to be their number one priority now.

  • JEFFREY BROWN:

    Scott Tong of "Marketplace," thanks so much.

  • SCOTT TONG:

    Thanks, Jeff.

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