Venezuela’s heavily subsidised domestic fuel prices should rise to international levels to avoid billions of dollars in annual losses as a result of smuggling, Nicolás Maduro has said in a televised address.
“Gasoline must be sold at an international price to stop smuggling to Colombia and the Caribbean,” the president said.
Like most oil-producing countries, Venezuela has for decades subsidised fuel as a benefit to consumers. But its fuel prices have remained nearly flat for years despite hyperinflation that the International Monetary Fund has projected would reach 1 million per cent this year.
That means that for the price of a cup of coffee, a driver can fill the tank of a small SUV nearly 9,000 times. Recently, the average price of a coffee with milk was 2.2m bolivars, or about 50 cents, local media has reported.
Smugglers do brisk business reselling fuel in neighbouring countries.
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Under the late Hugo Chávez, who ushered in Venezuela’s socialist revolution in 1999, a new constitution and numerous elections placed nearly all government institutions under the control of the ruling Socialist party.
This concentration of power was aided by a feuding opposition which carried out ineffectual campaigns and electoral boycotts. After Chávez died of cancer in 2013, he was succeeded by Nicolás Maduro who is even less tolerant of dissent.
Growing political authoritarianism has coincided with greater state dominance over the economy. But expropriations, price controls and mismanagement have led to a 40% contraction of the economy in the past five years.
Oil accounts for 96% of Venezuela’s export income but many foreign companies have been driven out and production has dropped to a 30-year low.
The resulting fiscal crisis has prompted the government to print more money, which has led to hyperinflation and a collapse of the currency.
It also means that the government can’t import enough food and medicine to meet demand.
Maduro has rejected economic reforms out of loyalty to socialism and because many government officials are allegedly getting rich off the economic distortions – through exchange rate scams and by selling scarce food on the black market.
Maduro said the government would still provide direct subsidies to citizens holding the “fatherland card”, a state-issued identification card that the government uses to provide bonuses and track use of social services.
He said the subsidy was only available to those who registered their cars in a vehicle census being conducted by the state.
On Friday, the UN said that more than half a million Venezuelans had crossed into Ecuador this year as part of one of the largest mass migrations in Latin American history.
About 547,000 citizens have entered Ecuador since January – mostly through its northern border with Colombia – to escape rampant crime and political violence, a collapsing economy and severe shortages of food and medicines.
More than 1 million Venezuelans have also crossed into Colombia since the exodus began in 2015. Others have fanned out across Latin American and Caribbean nations including Mexico, the Dominican Republic and Trindad and Tobago. Tens of thousands have hiked into Brazil down a remote Amazon road known as the Hunger Highway.