Emerging Markets, Frontier Markets

Colombian Government Considers Granting Asylum To Venezuelan President Maduro

Maduro2 - Flickr - OEA - OASColombian lawmaker Maria Fernanda Cabal has said that the Colombian government is considering the possibility of granting asylum to Venezuelan President Nicolás Maduro and his family, Venezuela’s El Nacional reports.

According to Cabal, the Union of South American Nations (UNASUR) is trying to find a safe place for Maduro should he get pushed out of office.

Maduro is being challenged by the opposition-run National Assembly and members of the ruling party who recently announced plans to accelerate efforts to develop a legal mechanism to depose Maduro.

Last month Maduro declared a nationwide “economic emergency”, under which he would be temporarily given increased authority over politics and the economy. However his decree faced a roadblock as Venezuela’s opposition refused to approve such measures in Congress, saying that it didn’t offer solutions for the nation’s increasingly disastrous recession.

Several weeks later the nation’s Supreme Court approved Maduro’s request for an emergency economic due to the fact that congress had not followed the necessary procedures required by law to reject the legislation.

This week, on Wednesday, Maduro sharply hiked Venezuela’s gasoline prices for the first time in almost two decades and devalued its currency.

On February 18, the price of premium gasoline rose from 0.1 bolivars (less than 2 cents) a liter to 6 bolivars (87 cents) per liter; an increase of over 6,000 percent.

The nation’s previous gas price increases in 1989 and 1996 triggered popular unrest.

A gas price hike in 1989 led to the “Caracazo” massacre where a wave of protests, riots, and looting took place in the Venezuelan capital of Caracas and surrounding towns. Independent researchers estimate the week-long clashes resulted in the death of 2,000 people as police and soldiers shot into crowds, thus creating a wave of fury that ultimately helped sweep Hugo Chavez into power a decade later.

The primary exchange rate in Venezuela, which is used for essential imports, such as food and medicine, has now been weaken to 10 bolivars per dollar from 6.3; a devaluation of 37 percent.

Since Maduro took office the bolivar has lost 98 percent of its value on the black market, according to Bloomberg.

The devaluation of the bolivar is seen easing the drain on government coffers by giving state oil firm Petroleos de Venezuela SA (PDVSA) more bolivars for each dollar of oil revenue, while higher gasoline prices will reduce expenditure on subsidies. However, at the same time, the devaluation will likely force the government to hike the cost of staple foods such as rice and bread that the country depends on to eat.

Venezuela has seen its economy pushed to the brink of collapse as crude exports account for 95 percent of Venezuela’s revenues. Since mid-2014 oil prices have fallen over 75 percent, slashing the nation’s income dramatically.

Following Maduro’s announcement, the nation’s Central Bank unexpectedly released inflation and growth data for 2015, showing the extent of the economic crisis.

In 2015, Venezuela’s inflation surged to 180.9 percent and its economy contracted 5.7 percent.

The International Monetary Fund estimates that inflation in Venezuela — the world’s highest — will rocket to 720 percent and that its economy will contract for the third straight year in 2016.

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