Venezuela braces for turmoil, economy in freefall

OREANDA-NEWS. September 01, 2016. Venezuela's increasingly isolated government is cracking down on opponents and militarizing the streets on the eve of a major pro-democracy march tomorrow.

Tensions are flaring as the oil-based economy collapses. Preliminary data from the central bank indicates that GDP plummeted by 19pc in the second quarter of 2016 compared with the same period last year. Annual inflation is 500pc and could reach double that by the end of year, a central bank economist told Argus today.

The finance ministry and central bank board of directors had expected a GDP contraction of up to 12pc in the second quarter, with annual inflation of less than 200pc, the economist said.

"The numbers refute the government's claim that Venezuela is not suffering a humanitarian crisis," the economist said, alluding to widespread shortages of food and medicine.

The IMF this year had forecast a 10pc contraction in Venezuela for 2016.

The opposition-controlled legislature coordinated tomorrow?s march to demand a timetable for a national referendum to revoke Maduro?s presidency and hold new elections.

Weak oil prices compared with 2014 and state-owned PdV?s declining crude production and exports were a "significant factor" in the economy's steep second quarter contraction, the economist said. PdV generates over 95pc of Venezuela's hard currency revenue.

Industry minister Jose Faria acknowledged earlier this month that Venezuela's hard currency revenue has plunged by over 75pc since mid-2015.

PdV's average oil price currently is just over \\$32/bl compared with \\$88.42/bl at the start of 2015.

The government?s efforts to persuade Opec and non-Opec oil producers to coordinate price-strengthening measures have long been rebuffed.

Opposition leaders say they plan a massive and peaceful turnout tomorrow, exceeding an 11 April 2002 march that briefly ousted then-President Hugo Chavez until military loyalists restored his presidency on 14 April 2002.

Surveys conducted by all sides affirm that Maduro has sparse popular support.

Maduro and hardline radicals of the ruling PSUV party repeatedly vow that there will not be any referendums in 2016 and 2017. Maduro up to now has used his control of the Supreme Court and the CNE electoral authority to delay and block attempts to schedule a referendum.

The Maduro government deployed over 2,000 troops in central and western Caracas this week as part of what interior and justice minister general Nelson Reverol describes as an "anti-crime operation." Main arteries into the city are heavily guarded with troops and tanks.

At least two opposition leaders were seized by the intelligence service Sebin in recent days.

Once vibrant regional support has rapidly evaporated this year. New governments in Argentina and Brazil have criticized the Maduro regime. And small Caribbean countries, including close ally Cuba, that rely on PdV for preferential oil supplies are beginning to look for energy alternatives.

Neighboring Colombia, where many Venezuelans now turn for basic goods, has seen a massive influx since the border?s recent reopening following a year-long closure decreed by Maduro.