On the morning of February 27, 1989, Venezuelans stormed the streets of Guarenas, a town in Miranda State in protest. Little did they know, shortly after, the protest would become a riot that would spread into the capital city of Caracas and other surrounding cities. A lack of intervention by the authorities caused the riot to worsen. With the metropolitan police completely overwhelmed, security forces stepped in. The result: a week-long clash of shootings that led to the deaths of hundreds to thousands of people with majority being at the hands of the Venezuelan government. “Caracazo,” the name given for the Venezuelan riots initially began in response to the government's economic reforms and the resulting increase in the price of gasoline and transportation. What made this economic reform so significant was the fact that Venezuela sold and remains selling the world’s most inexpensive gasoline. According to Humberto Márquez, of the Inter Press Service News Agency, “For the past 10 years, gasoline has cost between three and four cents of a dollar per litre. Soft drinks cost 20 times more, a bottle of mineral water 25 times more, and an espresso in a local café 30 times more” (Márquez). In addition to the many lives it took, this long-standing subsidy created shortages of imported goods and deprived the Venezuelan oil industry of a large source of funds for reinvesting. This subsidy essentially ruined the Venezuelan economy and it remains that way today.
Venezuela’s decision to subsidize and ration gasoline was an effort to increase public spending. “The subsidies leave money in the pockets of consumers that they otherwise wouldn’t have to spend” (Gonzalez). Having public spending as the basis of its e...
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...d less than what it earns through taxes. Once inflation is kept down, Maduro will have to progressively increase gasoline prices to the point midway between the import and export prices. It is likely that Maduro would lose support and could even face the possibility of another “Caracazo,” as a result, but Venezuela has few options left. Venezuela will have to pay the price.
“Caracazo.” Wikipedia. Wikimedia Foundation, 24 Oct. 2013. Web. 03 Dec. 2013.
Gonzalez, Angel. “Almost-Free Gas Comes at a High Cost.” Wall Street Journal (2013). 12 Apr. 2013. Web. 07 July 2013.
López, Virginia. “Nicolás Maduro Promises to Use New Powers to Rescue Venezuelan Economy.” The Guardian. Guardian News and Media, 21 Nov. 2013. Web. 03 Dec. 2013.
Márquez, Humberto. “VENEZUELA: The Cost of the World’s Cheapest Gasoline.” IPS News. 29 Dec. 2008. Web. 02 Dec. 2013.
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