Bellum Bodegonicum: The Bubble Pops

Tony paints the whole picture of the strain the very fragile "Venezuela se arregló" system is going through right now. We could even say the bubble has finally popped

Photo: Sifrizuela

Shortly after the original Hard Rock Café in Caracas closed in 2020, the venue in the Sambil shopping mall was transformed into the second store of Bodegón Actual, one of the first bodegones to sell imported products in dollars back in 2018. Decked with pop decor, and with its own entrance, the mega-bodegón encompassed 900 square meters of stands full of Nutella, a zillion types of Hershey’s syrup, Kellogg’s products and any shiny plastic trinkets brought from Miami: a city that seemed to be the aspiration of that new dollarized Caracas—as shown by the dozens of date palms that were simultaneously planted in rows on the highway behind the Sambil. “If it’s not the first [bodegón], there are still more than enough reasons to place it at the top,” wrote Producto magazine in October 2021, seemingly euphoric for the back-then promising economic turnaround: “For the amounts billed monthly. For the merchandise containers that arrive weekly at your door. For the deposits (a dozen, in total) that it has had to rent to store the products.” 

Two years later, Hard Rock Café is back in Caracas—in a new location—and Sambil’s Bodegón Actual has closed.

The bubble has popped. MoDo, where a year ago young Caraqueños would cluster around its doors every Thursday night to beg bouncers to let them in, now seems half empty. Salvaje—the international restaurant chain’s Caracas location, which hosted a controversial birthday party full of extravagant figures related to Chavismo—has resorted to offering lunch menus. The exorbitant prices of Altum, the hanging restaurant, have dropped. Reports of layoffs from the luxury space abound. 

In fact, consumption is falling in Venezuela. “The recovery of consumption in Venezuela in the last two years in was partial or focused on a limited segment of the population” of around 40%, says Asdrúbal Oliveros, director of consulting and research firm Ecoanalítica, “People with high purchasing power, self-employed workers, workers who received dollarized or dollar-indexed salaries and a part of the informal sector.” In fact, while private consumption grew over 10% in 2022, according to Ecoanalítica, the rate slowed down as the year went on: from 16% in the first semester to around 8-9% in the second semester. 

And in recent months, consumption has actually dropped by around 4% from last year, according to the firm. Oliveros expects that a mild recovery in April could push a rise of 5% in this year’s consumption rate, a positive number but still half of what it was last year. The collapse of consumption—the supermarkets association registered a 26% drop in supermarket consumption between December and January, for example—has been pushed by what has been described as el frenazo económico (an economic sudden stop) caused by an acceleration of inflation in both Bolivars and dollars and a considerable loss of value in the Bolivar since last summer. Interannual inflation in Bolivars went from 150% in early 2022 to around 500% nowadays, says Oliveros, while interannual inflation in dollars went from 40% to 55%. In February alone, says the Venezuelan Observatory of Finances, inflation was around 20%. 

These trends, which broke out last summer and became more aggressive by the end of last year, have resulted in a significant loss of purchasing power. According to Ecoanalítica, the percentage of Venezuelans with wages ranging between 0 and 100 dollars went from 30% in July to 53% in December: an income collapse. 

The loss of purchasing power and the decrease in consumption has affected a commercial economy with more supply than demand.  By the end of last year, more than 200 new restaurants had opened in Caracas according to the president of the National Chamber of Restaurant. Nevertheless, the Chamber now estimates that between 60% and 70% of new restaurants could close in 2023. Thrilled by the rise of consumption in 2022, investors popped up hundreds of new restaurants, bodegones and hypermarkets through Caracas and other big cities. “There was a very strong expansion of supply despite limited growth in demand,” Oliveros says, “with the slowdown, many of those sites probably cannot be sustained over time.”  

The Return of Protests

Rising inflation, the loss of purchasing power and decreasing wages have led to a new series of labor protests—mostly led by public sector teachers, but also including other public sector workers, retirees, and pensioners—since January 9th. Even the workers from the basic industries of Guayana, such as the national steel corporation Sidor, have joined in with strikes and road closures. While the minimum wage has remained static for a year (130 bolivars or around $5 nowadays), the basic food basket stood in January at $486.87 according to data from research center Cendas-FVM. 

“They [the government] are scoundrels who ride in 50-thousand-dollar cars while one walks with broken shoes. [Public transportation] drivers, housewives: take to the streets!” said a trade unionist in a recent protest outside the Ministry of Labor, where a fake coffin that read “RIP minimum wage” was paraded and old bolivar bills were thrown into the air. 

According to the Venezuelan Observatory of Social Conflict, January saw 1262 protests nationwide: a 136% increase when compared to January 2022.

February only saw 762 protests, almost completely focused on labor issues, which still represents a 19% increase when compared to February 2022. While protests began a steadily decline after 2019, reaching half that year’s rate, the annual number has slowly started to rise again since last year: when, midyear, Venezuela experienced a first wave of teachers-led labor protests. Similarly, according to polls by More Consulting, the percentage of Venezuelans who perceive their economic situation as better than the year before went from 52,2% in May 2022 to 35,7% in January 2023: when 64,3% said they are worse off. The social stability of the pax bodégonica—a term dubbed by political scientist Guillermo T. Aveledo to describe the relative peace that imports and dollarization have built in Venezuela—is tumbling.

While the protests are challenging the conditions through which the government establishes its power, says Aveledo, they are rather seeking “revindications within the current distributive scheme of the state,” rather than questioning the legitimacy or economic fundamentals of the system. Unlike previous waves of protests—such as those of 2014 or 2017—which demanded political and civil rights or outright called for an end of Chavista rule, these protests are focused on demanding better labor and salary conditions: a sign of both political exhaustion and economic desperation. 

According to political consultant Pablo Quintero, for the government “protests will always represent some type of pressure on the social board; a hindrance that challenges power, because it raises the political costs of how the government manages the protest.” For example, if it responds or represses. In fact, while some union leaders have been detained and others have been harassed, the Maduro government has been careful to not respond with the violent repression it used against the political protests of the last decade. “We don’t want to listen to the people, are we going to wait for them to kick us in the ass?” a substitute Chavista congresswoman even asked before calling out Chavista lawmakers for the luxurious SUVs they drive.

Despite the striking visuals—for example, a group of teachers with beauty queen sashes that read “Miss Living Wage” and “Miss Gasoline Shortage” just days after the Miss Universe contest—and the proliferation of teachers’ protests, the political opposition hasn’t seized the moment. “While the public sector protest in the streets, the opposition loses another chance in a Zoom meeting,” Luis González wrote in his Substack, “It is almost incomprehensible to see how little they [opposition politicians and parties] have done to integrate themselves into existing popular movements and take advantage of the widespread discontent of the moment.”

But the protests—while unrelated to the political opposition, which is competing against itself as the primaries approach, and not calling for an outright end of Chavista rule—are causing discomfort to the ruling party. For example, the Minister of Education recently said she wouldn’t sign “leonine [collective bargaining] agreements” and that the government “right now” didn’t have money to pay higher salaries for teachers and other public workers. In fact, the new bonus “against the economic war”, for example, barely covers eight or nine products from the 88 that make up the basic food basket. Now, some union leaders have called for a “radicalization” of the protests.

And the Minister could be right. According to Oliveros, the Venezuelan state has lost its capacity to implement public policies—as public spending falls from 50% of the GDP in 2012 to 13-15% ten years later, according to Ecoanalítica—and has rather become an entity limited to “repression and social control, rather than focused on multiplicating growth,” which it could actually hinder through its policies and public services management. Even its voracious fiscal appetite isn’t enough: according to estimates by Ecoanalítica, fiscal revenue represented only between 6% and 7% of the GDP last year. Paying $500 a month to the 5 million and a half public employees would represent a cost of $33 billion dollars per year, IESA professor and economist Andrés F. Guevara recently told Voice of America. To put it in perspective: Venezuela’s current GDP is estimated at around 60 billion.

Such dire financial conditions have led to the state “losing the capacity or disposition” to pay public workers better wages. For Oliveros, the state could increase public sector wages to around 40 or 50 dollars per month if there’s an economic rebound in April, which could calm down the protests. “But as soon as you have aggressive episodes of inflation and devaluation, that salary will be diluted, public employees will protest again and there will be a vicious circle,” he says. “Until you carry out a profound reform of the Venezuelan state, which also means a new model for the economy, I unfortunately don’t think this problem will be resolved,” he explains, and talented health, research, and education professionals will leave public institutions. “It is a very negative dynamic for the country.”

Bellum Bodegonicum*

Economic setbacks, as Venezuela’s oil production fell almost 4% between January and February and PDVSA’s new president froze most exporting operations to audit the system, have also produced an unexpected internecine war between factions of Chavismo. In recent days, Tareck El Aissami—a former vice-president and, until last week, a quite powerful figure within the ruling party—quit his post as Minister of Oil amidst a purge related to accusations of corruption in the state oil company Pdvsa in which several of his allies have fallen. At least 21 people—ranging from cronies, army men and construction magnates to Chavista congressmen, mayors, and a former governor—have been detained for what was originally described as the “disappearance” of $3 billion dollars from PDVSA. Nevertheless, Reuters uncovered that PDVSA’s long chain of shady intermediaries to avoid sanctions left the company with $21.2 billion of outstanding receivables since 2020: about 84% of the company’s total value of invoiced shipments.

“Due to the sanctions on Venezuela and Russia, PDVSA has serious difficulties collecting oil and depends on a wide network of intermediaries, who keep a good part of the income. Add to that the discount on the sale of crude to compete with other suppliers,” tweeted Oliveros, “In short, Venezuela stops receiving an important part of the flow of oil revenues. In addition, there is an increase in corruption since there is no way to control all intermediaries. Therefore, the purge we see today.” And now we know that PDVSA – sanctioned– not only offers large price discounts, selling a much higher amount of crude compared to what it ends up charging, but also loses much of its income to a large network of intermediaries. 

The optimism of 2022, when the United States sent a delegation to Venezuela to ensure the northward flow of Venezuelan oil after the invasion of Ukraine, has vanished.

While Maduro—next to El Aissami—assured in March of 2022 that Venezuela’s production would rise to 2 million barrels per day (bpd) “rain or shine” that year, the country’s production nowadays is less than 705.000 bpd. Even Chevron, which received a new much-hyped license last year, is reaching the ceiling of possible production in Venezuela due to political risk and the country’s limited logistics.

El Aissami’s ousting, in fact, could represent a setback for economic reforms. “Chavismo has never been monolithic,” says Oliveros. For him, there are radical anti-Madurista groups that believe reforms are a betrayal to Hugo Chávez’s legacy, there are groups—which includes El Aissami’s faction—that want faster reforms and leverage dollarization and there are groups, which include Delcy Rodríguez’s faction, “that are more skeptical and critical of dollarization, probably influenced by [Rafael] Correa’s former minister who are now advisers” for the Venezuelan government. “It seems that this last group is the one that has advanced the most and the reason we are seeing a kind of curb, trying to undo the advances of dollarization,” he says, for example the IGTF tax over dollar transactions.

In Venezuela’s fragile economy, he says, such policies “put more pressure or accelerate the economic downturn,” reversing the invigoration brought by dollarization. While Olivares believes the government will “surely” still show some economic pragmatism and will continue to give space to the private sector, the insistence to push the rebolivarización of the economy and to continue with an “erratic” exchange and monetary policy will just generate more inflation and devaluation, “with very negative results for the economy.” Without reforms, the dreams of a “Chinese model” in Venezuela enthusiastically promoted by optimistic businessmen in recent years have faltered. Cuento chino. 


In Caracas, symbolism abounds. The date palms that were brought in late 2021 to decorate highways—Miami style—are now being removed. In fact, the builder of many of the new empty towers that crown the wealthy district of Las Mercedes in Caracas—the man behind the blue glass and electric-walled skyline of this strange new land—is among those detained in the PDVSA purge. The model “reached its ceiling prematurely”, Olivares says, “The brake on dollarization hurried it up.” 

* Another term coined recently by GT Aveledo

Tony Frangie Mawad

Tony (1997) is one of Caracas Chronicles' editors, where he writes since 2016. He graduated in Journalism and Political Science from Boston University in 2021. Since then, he has written at Bloomberg, The Economist, Politico and others.