Expulsion of U.S. diplomats underscores Venezuela’s economic woes

CARACAS, Venezuela — President Nicolas Maduro’s expulsion Monday of three U.S. diplomats was another sign of the increasingly dire problems Venezuela’s government faces and the extreme measures he is taking to try to divert supporters’ attention from them, analysts said.

In a speech commemorating the 200th anniversary of a revolutionary battle in western Falcon state, Maduro said he was expelling acting charges d’affaires Kelly Keiderling, Elizabeth Hoffman and David Moo for allegedly meeting with opposition figures and “taking actions to sabotage the electricity system.”

Maduro had previously charged right-wing opponents with sabotage last month in connection with the outage of a high voltage transmission line in western Venezuela that caused blackouts across the country. Since then, power blackouts have become more frequent in Caracas and elsewhere in Venezuela.

Venezuelans go to the polls in December to elect mayors and city councils across Venezuela. Meanwhile consumers are increasingly frustrated by economic problems, including scarcities of basic foodstuffs and inflation exceeding 40%, the highest rate in South America.

The national currency, the bolivar, has steadily devalued on black market exchanges to the point it takes as much as 42 bolivars to buy a dollar, compared with the official rate of 6.3 bolivars. A scarcity of dollars caused partly by mounting debts means tourists and business travelers making foreign trips have no choice but to pay the devalued rate.

Last week, Maduro flew to China to negotiate a $5-billion loan to address what observers say is the government’s acute cash shortage and also to fund campaign activities ahead of the elections. The loan brought to $50 billion the amount Venezuela has borrowed from China in recent years.

Economist Angel Garcia Banchs said the loans, which represent a “forward purchase” of Venezuelan oil, are unconstitutional because they transfer ownership rights of a national resource to China.

“Chinese loans are an illegitimate debt,” Banchs said. “But from an economic point of view, the problem is not so much the loan per se, but how the government uses the funds, which is to finance the consumption of imported goods, and not to generate the capacity to produce and export.”

The central bank revealed last month that foreign reserves had hit a nine-year low. Last week the Colombian government revealed that Venezuela would pay for $600 million in food items not in cash but with dollar-denominated Venezuelan bonds.

Expulsions of U.S. diplomats are not unique in Venezuela. Maduro’s predecessor, the late Hugo Chavez, in 2008 expelled then-U.S. Ambassador Patrick Duddy and in 2010 announced he would not accept Larry Palmer, Duddy’s designated replacement, because of critical remarks Palmer made during his confirmation hearings. The U.S. and Venezuela have not exchanged ambassadors since then.

“I have proof in my hand of ... of their hostile, illegal and interventionist attitudes,” Maduro said of the diplomats before the largely military audience in Coro. “Out of Venezuela! Yankees, go home!”

The U.S. Embassy issued a statement denying the charge, saying: “We completely reject the Venezuelan government’s allegations of U.S. government involvement in any type of conspiracy to destabilize the Venezuela government.”

Last month, Maduro slammed the cartoon and movie character Spiderman for inciting violence, which for many recalled Chavez’s criticism during his tenure of the U.S. custom of Halloween.

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Special correspondents Mogollon reported from Caracas and Kraul from Bogota, Colombia.