Published by TIME

On Nov. 27, as the OPEC oil cartel gathered in Vienna to discuss falling oil prices, the front page of Venezuela’s anti-government Tal Cual newspaper ran a cartoon showing President Nicolás Maduro and his former oil and economic tzar Rafael Ramírez praying before a barrel of oil. With the oil and gas sector accounting for a quarter of the Venezuelan economy and oil sales the source for around 95% of export earnings, the country has been hammered by the recent drop in prices. OPEC’s decision last week to hold off on production cuts to arrest the decline promises to sharpen the pain for oil-dependent nations like Venezuela. It is also a political challenge for Maduro who has grown increasingly unpopular since being elected after the death of his political mentor Hugo Chávez last year.

Although he tried to put a brave face on the OPEC decision—in a nationally televised address the same day, Maduro claimed there was nothing for Venezuelans to worry about—the fact is that the Venezuelan economy is in free-fall. Figures released by the government in September showed annual inflation running at over 60%, while foreign currency reserves have plummeted nearly 30% in the last two years despite being propped up last week by a Chinese loan. Venezuela boasts the world’s largest oil reserves—but years of mismanagement and a lack of investment have the left the country in a fiscally tight spot, without the resources to withstand a prolonged drop in the oil price. And although it is a member of the OPEC cartel, the grouping is dominated by Saudi Arabia, one of the world’s largest oil producers, which was reported to be the prime mover behind the Nov. 27 decision in a bid to undermine shale oil production in north America.

On the streets in Caracas, with Christmas around the corner, shelves are empty, as importers lack the foreign currency they need to bring the goods in. “The government is not sufficient,” says Eleanor Romero, a 58-year-old coffee vendor, who had to wait in line for two days to buy gifts and a new fridge at a Christmas fair organized by the government last month. “I voted for Chávez and miss him. Maduro isn’t working.”

Her views are reflected in a recent poll that put Maduro’s approval rating at under 25%.

Perhaps the most telling sign of the country’s mismanaged economy is the black market exchange rate for the local bolivar currency, named, like Chávez’s political revolution, for the Latin American independence hero Simón Bolívar. Officially, one U.S. dollar buys 6.3 bolivars, according to the strongest of the three official exchange rates. But thanks to controls enacted by Chávez more than a decade ago that have severely restricted the flow of hard currency, one U.S. dollar on the black market buys more than 150 bolivars. Measured against the greenback, the bolivar has slumped by 30% in the last month alone, as the government fails to provide enough U.S. dollars through official channels, increasing demand on the black market.

“The perfect storm is brewing,” said Diego Moya-Ocampos, a senior political risk analyst at IHS, a economic and political consultancy in London. “A severe economic crisis can be expected if there is no change in economic policy.”

To bring the economy back on its feet, economists recommend a series of reforms, including overhauling the currency controls and ending generous oil and gas subsidies to nearby Caribbean nations, something that cash-strapped Venezuela can ill afford. But the President shows little sign of going down this road. “The enemies of our country are rubbing their hands with glee, thinking this will end the Bolivarian Revolution,” he said in his televised address, striking a note of defiance, even as he put in motion plans to curb the government’s spending.

Part of the government’s fiscal woes stem from the domestic subsidies that for years have kept a lid on gas prices. Long before the recent oil price fall, Venezuela subsided the cost of gas at the pump to a point where it only cost a few cents to fill an entire tank. This was the case through the boom years when Chinese demand drove up global commodities prices. The result was billions of dollars in lost revenues—money that would have helped develop the Venezuelan oil industry and cushion the blow from the weakness in international energy markets today.

The subsidies are such that, even now, as the Venezuelan economy struggles, smugglers reap huge profits by stocking up on gas in the Bolivarian Republic before crossing the border and selling the fuel at market prices in Colombia. “Gas is practically a free gift here,” says Jesús Arias, a 33-year-old who makes more money smuggling gas than working as an engineer in San Cristóbal, a couple of hours from the border. He sells fuel that costs only a couple of cents in Venezuela for more than $10 over the frontier. “Doctors, lawyers, architects, engineers like me, we’re all doing it,” he adds. “On the border, I can earn in three or four days what I earn as a professional in a month.”

The economic dysfunction and falling price of oil leaves Maduro in a tough spot. He lacks both the political will and popularity to push through meaningful reforms to push Venezuela’s economic house in order. At the same time, he is being increasingly squeezed by the weakness in the oil price. Hugo Chávez was luckier. At the height of his powers, he commanded widespread domestic acclaim, and was buoyed by rising oil prices on the world markets (he was also adept at showmanship, hosting, for example, OPEC heads of state in Caracas soon after he first came to power). Maduro faces an altogether more challenging environment.

“Ordinary Venezuelans are starting to get tired of slogans and socialist rhetoric and no concrete actions on any front,” says Moya-Ocampos. “As the economy deteriorates, so will the political situation in Venezuela.”