On Chávez's birthday, Venezuela's new leader still lives in his shadows

Standing before hundreds of red-clad supporters in Sabaneta, Venezuela, President Nicolás Maduro sought to rally party faithful yesterday afternoon as he paid homage to his late predecessor.

Events marking what would have been former President Hugo Chávez's 59th birthday were held throughout the Andean nation on Sunday. Mr. Maduro traveled to the fallen leader's birthplace in the western state of Barinas to personally commemorate his memory and to shore up support in this politically divided nation.

"It has not been easy," Maduro said of his first 100 days as president. "On behalf of our Comandante …[we must] become more united and prepare for new battles and new victories."

Maduro's short time in office has been marred by a stumbling economy and allegations of fraud in his April 14 Election Day victory. Strife in the streets appears to have settled, but recent poll data suggest that public opinion of Maduro has reached new lows. With as much as half of the country disapproving of his policies, observers say Venezuela's political divide is hampering actions to correct the nation's distressed economy.

"It seems what might be most characteristic of Chávez's legacy is a divided nation," says Carlos Romero, a political scientist at the University of Central Venezuela. "We have reached a point of status quo where neither side, government or opposition, is able to pull the country out of its current crisis."

'Benefit of the doubt'

Well before Maduro was elected to office, Venezuelans were feeling the fallout of a liquidity crunch – gripped by nagging shortages of everything from toilet paper to toothpaste – due to strict currency controls and lavish spending before the October 2012 presidential election.

Companies are struggling to stock store shelves as dollars have dried up on official exchange markets and inflation has surged to a five year high, making it one of the world's highest at just under 40 percent.

A recent poll from the firm Datanálisis found that 58 percent of the country now view his handling of the economy negatively and believe corrective measures are needed. Negative perceptions of his government have climbed from roughly 40 percent to 48 percent over the first two months in office, as well.

Despite unhappiness with Maduro's government, his popularity as a politician is still virtually tied with opposition leader Henrique Capriles. Maduro beat Mr. Capriles by a razor-thin margin of less than 2 percentage points in last spring's presidential election. "The numbers are now essentially the same as they were during the April presidential election," says pollster Luis Vicente Leon, president of Datanálisis, noting that "many of Maduro's base supporters are likely to be giving him the benefit of the doubt."

Reconciling with the private sector?

Maduro has taken steps to stem widespread shortages of basic goods by promising wider access to hard currency for cash-strapped businesses. Venezuela's currency controls have been in effect for more than a decade, and are vigorously opposed by business leaders who say it makes meeting import demands nearly impossible. The controls have been kept intact, but the government reactivated the Complementary System for the Administration of Foreign Currency (SICAD), which works as a type of currency auction selling dollars for bolívares and serving as a legal workaround of currency controls and alternative to the black market.

The move has been seen by some as an easing of controls as companies and individuals can now buy and sell dollars (and dollar denominated debt) on the exchange. But due to its sparse and infrequent offerings, SICAD has thus far failed to restore market confidence. Greenbacks are still fetching five times their official worth on the black market.

"The underlying problems of high fiscal deficit, inflation, scarcity of basic goods and lack of competitiveness the Venezuelan economy faces are likely to persist," wrote Barclay's analysts Alejandro Arreaza and Alejando Grisanti in a client note.

"SICAD might provide some temporary relief, but more adjustments will likely be needed sooner rather than later."

Looking to the past to move forward

By dusk Maduro had returned to the Venezuelan capital to finish yesterday's events in the Caracas hillside slum 23 de Enero.

"We will consolidate economic recovery and finish overcoming the economic sabotage that remains," Maduro shouted out from the military barracks overlooking the slum and all of Caracas, where Chávez's tomb is held.

Leon from Datanálisis agrees that additional unpopular adjustments are needed to remedy the country's ailing economy. Yet lacking the popular support of his predecessor, Maduro is caught between a rock and a hard place. If he fails to push forward with tough economic changes, it "would be extremely costly for Maduro's popularity," Leon says.

When Maduro's final speech transitioned to painting an image of the "road ahead," he asked his followers to, in fact, look to the past. Recalling Chávez's life he asked Venezuelans to "turn this pain into strength" in order to create "energy for the future."