Venezuela’s moribund economy shows a pulse amid US sanctions
By SCOTT SMITH, CARACAS, Venezuela, Aug 12 (AP) — Errol Irausquin is carving out a profitable niche with his burgeoning Fat Panda restaurant business in Venezuela’s capital, despite an economic collapse that has driven millions from their crumbling homeland.
Capitalizing on his success selling from a food truck, Irausquin brought his Asian-influenced menu to a new restaurant featuring spicy sandwiches that drip down customers’ arms in an upscale corner of Caracas. A second location is coming soon — the sign of a little froth amid Venezuela’s otherwise economic nightmare.
“Part of the population decided to stay here in the country,” Irausquin said. “People need things to do. They crave going out and mingling in the open air.”
He’s not alone. In seeming defiance of the doomsday predictions from Washington about the economy’s impending implosion, a number of trendy restaurants and shops packed with imported consumer goods, from Froot Loops to iPhones, have popped up in the last few months across Caracas.
Driving the resurgence is President Nicolas Maduro’s decision in May — little appreciated at the time — to loosen rigid currency controls in place for 16 years. That step allowed banks to buy and sell U.S. dollars at any exchange rate, making it far easier for entrepreneurs to operate in a currency accepted internationally. At the same time, socialist authorities are looking the other way as the greenback has replaced the worthless local currency, the bolivar, as an accepted form of payment for purchasing even a slice of pizza.
Some even posit that with the country increasingly isolated, well-connected businessmen, some of them facing sanctions themselves, are repatriating ill-gotten gains from government contracts and the illicit sale of gold and drugs to fund the construction of new office buildings and businesses.
The result is a rare adrenaline boost for what has been a moribund economy. For the first time in years, what’s still among the world’s highest inflation rates is slowing, supermarkets are filling up and capitalist instincts are being unleashed.
Economists caution that the surprise bounce is very limited and unlikely to last. Sweeping U.S. sanctions, which were tightened last week when the Trump administration threatened to target foreign companies found doing business with Venezuela’s government, are likely to exacerbate an economic fall years in the making.
Nonetheless, for Venezuela’s shrinking elites it’s a reprieve from years of scrounging across empty store shelves and driving past their favorite restaurants only to see they’d closed their doors.
A party-like street fair appeared one recent Sunday when a line of food trucks set up along a small park as the clouds cleared following a tropical downpour. Live music and glowing strings of lights drew a crowd, creating a feeling that life had returned to normal.
Luis Vicente Leon, president of Caracas-based polling firm Datanalisis, says the divide between Venezuela’s haves and have-nots is growing more stark as the crisis grinds on, with the primary fault line being access to U.S. dollars.
While the wealthy one-fifth have long thrived on savings in foreign banks and paychecks from international firms, an increasing number of Venezuelans depend on $4 billion sent annually in remittances from the over 4 million compatriots who’ve fled in recent years.
The return of a few comforts after years of scarcity underscores the limited effectiveness of sanctions in dislodging Maduro from power, said Leon. Protests led by Juan Guaidó, who is recognized as Venezuela’s rightful leader by the U.S. and more than 50 countries, have been fading in the capital, although turnout in the interior, where economic conditions are as desperate as ever, remains high.
“You are going to have a destroyed country and a bubble that manages to survive without the country’s real problems being solved,” Leon said.
The vast majority of Venezuelans live in deepening poverty, without help from abroad. Roughly 80% depend on government-subsidized food and earn a monthly minimum wage in bolivars equal to $3.50, which shrinks each day under inflation that topped 1 million percent last year, according to the International Monetary Fund. The IMF estimates the economy has shrunk to its lowest level in seven decades and will fall another 35% this year.
That’s in a country that once ranked among Latin America’s most prosperous nations, producing wealth from the world’s largest crude reserves. Critics blame two decades of socialist rule for plummeting oil production and a crumbling nation.
Amid the otherwise bleak outlook, entrepreneurs are seizing on the chance to meet the demand of well-off consumers.
One of Caracas’ most exclusive import stores offers valet parking. Inside, personal assistants carry customers’ hand baskets from the moment they enter until they’re ready to pay. They can select from a wide variety of items such as watermelon-flavored beer and low sodium sea salt — all priced in dollars.
Other stores sell vape e-cigarettes, Neutrogena face wash and pods of Keurig Starbucks Caffe Verona — the sort of specialty items that had long been absent in Venezuela.
It’s not all high-priced luxury items. Even once-abundant staples that Venezuela no longer produces in sufficient quantities — like baking flour and cooking oil — are on offer, so even lower-income families sometimes scrape together enough to buy a few things.
Among those cashing in is Daisy Romero. Tired of watching sales slide at her clothing store, she recently converted the small storefront into a bodega supplied with packages of imported goods sent by her son in the U.S. Business is good, she said, adding that customers step into her store giddy with excitement.
“Wow, you have so many cereals that I haven’t seen in years,” she said, repeating a common reaction from customers. “How much is that? Give me one of those.”
Physician Jorge Hoegl wandered into a newly opened import store, finding snacks such as Haagen-Dazs ice cream, once common in Venezuela’s stores before the crisis took hold in the last five years.
While these stores sell some over-the-counter drugs, most people with long-term illnesses, such as diabetes, still struggle to find medicine. Hoegl for one doesn’t see these new businesses as an answer to Venezuela’s deeper troubles.
“All of a sudden, you see these stores and you might think that everything has somehow improved,” he said. “But this isn’t going to improve the situation. This is a chronic problem that will take a long time to fix.”