“Life has been hard for years now. It’s true that food prices have come down recently, but they’re still so high,” says Rodrigo, a private security guard working in Caracas, Venezuela’s capital. He did not want to give his last name.

Amid a decades-long economic crisis, Rodrigo thinks that “people are ready for a change.” On Sunday, he will join 21 million people who are eligible to vote in picking the country’s next president.

The general election falls on the birthday of Hugo Chavez. While Chavez had a troubling record on human rights, the charismatic left-wing leader – who governed Venezuela from 1999 until his death in 2013 – was celebrated as a champion of the poor.

His less popular successor, Nicolas Maduro, is now up against opposition candidate Edmundo Gonzalez Urrutia, a retired diplomat. And polls show Gonzalez leading by a wide margin.

But Maduro has a knack for clinging to power. Most opposition parties boycotted his re-election in 2018, arguing the poll was neither free nor fair. In January, Maduro banned his main rival, Maria Corina Machado, from running.

While accusations of government interference have marred elections in Venezuela for decades, Maduro has said that he will recognise the result of Sunday’s ballot.

“I’m not sure what will happen next Monday. There’s talk of things getting violent. But even if Gonzalez wins,” Rodrigo acknowledged, “I’m not sure he can transform the country like Chavez did.”

During his tenure, Chavez successfully used high oil prices – the lifeblood of Venezuela’s economy – to double Venezuela’s GDP per capita. Welfare programmes were expanded and poverty and unemployment fell.

Maduro has not been so lucky. Now in his 11th year in office, he has overseen an economic meltdown. Since 2014, output has contracted by 70 percent, more than twice the hit the United States suffered during the Great Depression.

Over that period, some 7.7 million Venezuelans – a quarter of the population – have left the country in search of work.

In 2022, the IMF described Venezuela’s state of disorder as “the single largest economic collapse for a non-conflict country in half a century”.

Government critics see the country’s downward spiral as a result of corruption.

For his part, Maduro blames Venezuela’s plight on crippling US-led sanctions, imposed with increasing degrees of severity since 2005. He is not alone. Several commentators have decried the measures as illegal and harsh.

Caracas is barred from tapping international capital markets, restricting imports and debt financing – used to clear fiscal deficits and fund infrastructure projects. In 2019, Donald Trump also stopped Venezuela from exporting crude oil to the US and from importing diluents needed to process its own heavy crude.

Commodity curse?

Venezuela boasts the largest proven oil reserves on Earth. In the late 1990s, it was pumping 3.6 million barrels a day, generating 95 percent of its export revenues. But US sanctions and years of mismanagement have left production below 1 million bpd.

“To be clear, sanctions have constrained Venezuela’s oil and gas sector. But that sits alongside administrative negligence,” said Tim Hunter, a Latin America analyst at Oxford Economics.

Hunter was alluding to decades of under-investment in PDVSA – the state-owned energy company and the backbone of Venezuela’s economy. Then, in 2017, Maduro announced a contentious executive shake-up by appointing loyal military officials to top jobs at PDVSA.

“Even accounting for low output in recent years, fossil fuels continue to make up almost half of Venezuela’s official exports. So when sales fall, from meagre production or low prices, the economy suffers,” said Hunter.

Soft hydrocarbon sales were behind Venezuela’s recent bout of hyperinflation. Oil price declines, which persisted from 2014-2017, triggered foreign currency shortages and lowered the value of the peso. They also lowered tax revenues from oil proceeds, a key source of government revenue.

Eventually, as the central bank started to print more money to cover budget shortfalls and as imports became increasingly expensive, inflation exceeded 1 million percent in 2018.

“Because Venezuela relies on imports for basic goods, its brush with hyperinflation led to import compression. For years, supermarkets and pharmacies were understocked. This’s what encouraged so many Venezuelans to leave, cratering growth even further,” says Hunter.

“Whoever wins on Sunday, the next government will have to try to move away from its reliance on oil towards other areas of productive activity. That said, in the near-term, they should try to correct oil sector inefficiencies and use the proceeds to pay off outstanding debts.”

Mountain of obligations

Venezuela defaulted on its commercial debt in 2017. Together with bonds issued by PDVSA and the state utility Elecar, the government owes approximately $92bn. Then there is an additional $57.2bn owed to China and in various arbitration awards, the Financial Times reported.

In all, Venezuela’s debt-to-GDP is estimated at 148 percent. “Given the mountain of the obligations, it will need to be cleared before the next government can kick start growth,” Luis Salas, former vice president of the economy, told Al Jazeera.

“In theory, that will mean a sovereign debt restructuring in which the government can negotiate with lenders to reduce the amount owed,” he added. “That should give them fiscal breathing room to focus on other areas, like infrastructure spending.”

In April, it was reported that financial services firm Rothschild & Co had been hired to help Caracas map out its tangled liabilities. Salas said, “The appointment of advisers is a sign that Maduro is intent on engaging with creditors and re-inserting Venezuela back into global financial markets.”

However, he pointed out that austerity programmes tend to follow debt restructurings. In entering a new deal, lenders want to maximise their chances of repayment. Governments, in turn, typically cut public spending to generate sufficient revenues to meet their new obligations.

“What many are hoping for,” says Salas, “is that we can use the oil, instead of expenditure on education and healthcare, for a deal. Of course, in practice, this can’t happen with sanctions. Until they’re lifted, we won’t restructure the debt and will continue to struggle.”

Sanctions – extremely negative impact

The administration of President Joe Biden inherited a strategy of maximum pressure on Venezuela from President Trump. But despite applied pressure, consecutive rounds of sanctions failed to dislodge Maduro.

Biden, meanwhile, pursued a different approach. Under the 2023 Barbados Agreement, he eased some sanctions – notably on oil and debt – for political guarantees, namely free and fair elections and the release of detained US citizens.

The deal allowed Venezuela to earn an additional $740m in oil sales from last October to March. But after Maduro blocked Machado from running, and following the revival of a territorial dispute with Guyana, Biden re-imposed US sanctions in April.

“Clearly, American restrictions have an extremely negative impact,” said Mark Weisbrot, co-director of the Centre for Economic and Policy Research (CEPR). “Indeed, crippling sanctions have hurt Venezuela’s economy far more than any domestic policy mistakes.”

Admittedly, Weisbrot believed that gains could be made “under a hostile foreign environment”. He pointed out that “there have been some gains, in terms of inflation and growth, in recent years.”

Consumer price gains are estimated to have fallen to 51 percent in June, while GDP growth is thought to have exceeded 5 percent in 2023.

“But,” he warned, “a wholesale recovery cannot take place under sanctions. If Gonzalez wins, they can probably be lifted quickly. If Maduro wins, even cleanly, I wouldn’t expect a change in the US position, regardless of who becomes president this November.”