The Three Speeds of the Venezuelan Crisis

By Leonardo Vivas

Any candid observer visiting Venezuela five years ago could hardly anticipate what the country has become under Nicolas Maduro’s government. Enjoying the longest oil boom in recent history, vast internal support and a strong international network, Chavez built a well-knit political system granting him and his successors what at the time seemed destined to be a long-lasting reign. But, modeled to a large extent on a variation of 20th century socialism with a tropical flavor and the largesse of an oil economy, the economic model began to show signs of instability even before Chavez’s 2012 second reelection and his passing away the following year. Today the system is in ruins and the entire edifice of 21st Century Socialism—as it was branded—is on the verge of collapse. But, will it effectively collapse? Has the democratic opposition gathered enough strength to produce a transition out of the complex system Chavez built or will the regime survive with the backing of the military? Will it evolve into a clearer autocratic regime, in the liking of Turkish President Recep Tayyip Erdogan’s post-coup cleanup operation? The answers to these questions are unclear. What comes next is an attempt to provide some context to illustrate possible scenarios.

The economic legacy of the Chavez revolution
With coffers full as a result of the oil boom of the past decades and the political advantage of a brief coup attempt in 2002, Chavez established a draconian exchange rate control in order to hold a tight grip on the economy and exercise a greater domination over society as a whole. What began as a provisional measure became over time the essence of the economic system and eventually an important clue to its demise, when it happens. Over the years, several combinations of exchange rate values (at times four, including the black market) gave way to dramatic shortages, especially of foreign currency, which limited access to imported goods and led to growing scarcity of basic goods, notably food and medicines. With the official exchange rate oscillating until mid-2016 between the 6.3 official value and the black market peaking at 1,000 to the US$, prices distortions wrought havoc in all areas of production and services.


President Nicolas Maduro
President Nicolas Maduro

Under those disturbances, the administration’s almost only tool has been to drastically limit economic agents’ access to foreign exchange—less than 60 percent in value of imports in 2016 as compared to 2014. As a result, inflation has run wild (around 250 percent in 2015, 650 in the first two quarters of 2016), the value of GDP dropped to around 10 percent in 2015 (estimated at -6 to -7 percent in 2016), and a pervasive scarcity of essential goods ensued. Most humiliating in social terms, however, has been forcing Venezuelans to line up, in many cases on a daily basis, to shop essential products. As many media outlets have reported worldwide, most Venezuelans—especially the poor—live a nightmare today in their struggle to survive scarcity.

In particular, inflation—the highest worldwide—has affected the purchasing power of the poor, who spend a large portion of their income purchasing foodstuffs, medicines and other essential goods high up in the scarcity list. Those low-income groups were favored by Chávez’s social policies for more than a decade. But in December 2015, the same people, feeling abandoned and even betrayed, were part of an electoral revolt in the legislative elections. If it was a perfect storm, it was clearly a self-inflicted one.

Paradoxically, the government’s typical response to the crisis combines actions repeated to constant failure in the last four years—and continue to this day. First, tightening up established controls: price controls and rationing essential goods to weekly or monthly purchases based on ID card numbers. Secondly, accusing local producers and retail stores of hoarding and sabotage, imposing ludicrous fines, expropriating companies or imprisoning businessmen. Thirdly, mobilizing the vast network of state-controlled media into a full-fledged call against an “economic war” allegedly staged by the local bourgeoisie, the U.S. (“the empire”), or the opposition.

From December 2015 to this moment the situation has worsened, edging into a humanitarian crisis. In mid-July of this year, under the astonished eyes of the international media tens of thousands Venezuelans—mostly women—crossed the border with Colombia in order to obtain much-needed essential goods after both the Colombian and Venezuelan governments agreed to open the border.

Three main components in the current crisis
Judging the Venezuelan situation merely through the lenses of the economic debacle, however, might amount to missing the point. As often happens with societies under situations like these, Venezuela is currently suffering a multi-faceted crisis, of which the economic drama depicted above is only the surface. The four-pillar system Chavez cleverly built almost twenty years ago is collapsing. Its leadership has so far been unable to transform it or restore a semblance of a working society. For starters, the charismatic leader gone, the current president is in stark contrast to the late Chavez, a leader who nurtured vast fantasies of redemption, settled old scores against the four-decade democratic leadership, and was very apt both at building international alliances and navigating troubled waters. Even if Maduro seems to be the exact opposite, he has shown very strong survival skills. Despite his lack of popular support, he has been able to rebuild his ailing coalition by working closer every day with the military elite that has provided support to the regime during most of the period.

Secondly, the use of oil revenues to fill the gaps of a deeply unequal society by providing a host of social programs has come to an abrupt end. Thus, the economic boon marching in parallel to the excitement of a bombastic leader has disappeared almost entirely, leaving the Chavista coalition as the naked emperor. Thirdly, the polarization so typical of populists from both left and right has vanished, giving way to a small vociferous elite retrenching within the bounds of its pervasive institutional control as it confronts a majority of powerless Venezuelans. As a result, Venezuela’s pseudo-democracy has become a rarity in contemporary life: while internal legitimacy has drained to a minimum, the government’s control over almost all institutional levers of power (judiciary, the military, the police, the economy, and the media) allows the government to carry on, even without a clear idea of what comes next. Finally, the vast international coalition built by Chavez in the first decade of his reign is currently in shambles, outmaneuvered in almost all international stages: the Organiaztion of American States (OAS), Mercosur, or the UN.

Venezuelan President Nicolas Maduro.
(Accessed via wikimedia commons)
 The current crisis can be summarized as a three-fold path toward the abyss, each strand moving at a different velocity: the economy, an acute political crisis questioning the ability of the heritiers of Chavez to rule the country, and growing international isolation. The huge lines Venezuelans’ endure on a daily basis have caught the eye of the international media. But there is much more to the economic shambles affecting the country, in particular the widespread destruction of private companies of all sizes as a result of continuous misguided economic policies, including rigid macroeconomics, extreme regulations and expropriations. Overall, the economic crisis runs at high speed and demands critical and effective action.

The late Hugo Chavez
The late Hugo Chavez

A government incapable of ruling
Avoiding a humanitarian crisis would seem at least partially possible, if the recent massive crossing of the Colombian border is a good indication. Building up inventory capacity for essential goods in intermediate cities from Medellín or Bogotá to Cúcuta (or from Manaus, the the city of four million in the Brazilian Amazon) could grant a relatively stable flow of goods to the Venezuelan borders, avoiding a humanitarian disaster. Even if in the end Maduro agrees to open up the border with Colombia, his ideological obfuscation impedes him from taking prompt action: renouncing any economic rationality, he has blamed the economic woes underway in Venezuela to an economic war similar to the one suffered by Allende in Chile in 1973, which took place both from within and outside the country. Anything that proves the contrary, even if it works, is rejected. Continuous refusal to act is leading to a deeper crisis and an impending humanitarian disaster acknowledged even by the UN Secretary General.

The second track, moving at mid-range speed, corresponds to politics, which has drawn a lot of internal attention after the 2015 legislative elections. Ever since the opposition, united around the Mesa de Unidad Democratica (MUD) won by a landslide in December 2015, the main question has been the extent to which the opposition can push toward a transition out of the current regime. Facing the first major electoral blow in years that stripped the government of control over the legislature (of which the opposition took 2/3 of seats), Maduro opted to block its work and proceedings, including reversing lawmaking, ignoring political decisions, and avoiding hearings of public officials.

The ensuing institutional tit-for-tat took the front stage during most of the first semester of 2016, until the opposition, pushed by former presidential candidate Henrique Capriles, began campaigning for a recall referendum once Maduro had crossed the mid-term mark. But the continuous political wrangle and the economic collapse have put the government on the spot. Unable to solve the majority of Venezuelans’ problems (apart from the economy, criminality has soared and shortages of water and electricity distribution are a common occurrence), the government has launched one plan after another in order to give a remote semblance of governance. To no avail. The economic drama deepens by the day and in the meantime the possibility of a recall referendum has caught the imagination of a wounded nation.

When this article sees the day, the National Electoral Council (CNE) had announced the near impossibility of a recall referendum for 2016. Had it been allowed, it would have marked the end of Maduro’s rule. His collapse in public opinion has been continuous during 2016 and most opinion polls show Venezuelans attributing him or his government a very high share of the responsibility for the current crisis (up to 90 percent in some opinion polls). According to Venezuela’s constitution, if the president is recalled within the year when the midterm is crossed (2016), a new president has to be elected. The announcement followed a bold call by the MUD to a national rally for September 1st in the country’s capital to mobilize domestic and international pressure.

Acting as the government’s electoral branch, however, the CNE’s strategy has been all along to postpone the referendum until 2017 when its effect would be less damaging. Under such scenario, the recalled president would be replaced by the vice president for the rest of the term (the vice president is appointed by the president), which would allow the government party to preserve power.

One event seldom mentioned in Venezuela’s 2016 public debate is the election of governors, due in principle to take place in December of this year. The dispute over the recall referendum has to any practical effect obliterated regional elections from the news cycle; given the dispute over the referendum it is unlikely that the governors’ election take place before 2017’s second quarter. When they occur, the government will likely suffer great losses here as well – up to 70 percent of governorships, if the current opinion trends prevail.

Street demonstration in Caracas
Street demonstration in Caracas

The Bolivarian Revolution facing isolation
The third speed channel of the crisis occurs outside Venezuela. As is often the case in international affairs, it runs at a much slower pace than domestic economics and politics. In this domain, isolation is the name of the game. The tightly knit network of allies built by Chavez during his early years, fostered in the favorable conditions presented by the backlash against George W. Bush’s 2002 invasion of Iraq, has all but evaporated. Main political allies in Argentina and Brazil are out of office, Peru recently elected a more vocal international opponent to Chavismo, and the coming peace in Colombia between the government and the Revolutionary Armed Forces of Colombia (FARC) has already pushed president Juan Manuel Santos out of neutrality. Even Chile, under socialist president Michele Bachelet, voted against Venezuela in the OAS. This turn in events has impacted Maduro’s ability to influence Mercosur, the powerful southern cone integration group. The group’s pro-tempore presidency, which rotates between member countries on an annual basis, has been denied to Venezuela despite Maduro’s decision to appoint himself. At the same time, Venezuela’s economic influence in the Caribbean and Central America has waned due to the erosion of its capacity to grant oil at reduced prices. The drop in the world price of oil has made Venezuela just short of irrelevant in the Caribbean basin.

But by far the most dramatic turnaround has been in the OAS, where Luis Almagro, former foreign affairs minister of Uruguay (ruled by the moderate socialist Frente Amplio) and now its Secretary General has criticized Venezuela’s transit toward greater authoritarian rule. He recently convened the conference of foreign affairs ministers of the OAS to present a full-fledged critique of Venezuela’s authoritarian drive, pledging to apply the Democratic Charter of the organization. The charter includes provisions to act if a government slips out of democratic rule, be it as a result of a military intervention, or if separation of powers is compromised, or if any other weakening of democratic rule occurs. Since the meeting the clock has been ticking as the regional body waits for the crisis to evolve and for a constitutional solution to occur.

On top of this, the US has stepped up pressure in the form of legal actions against high military officials for favoring—or being an active part—of narcotics dealings. The most recent was an early August indictment in a New York district court “charging Nestor Luis Reverol Torres, the former General Director of Venezuela’s Oficina Nacional Antidrogas (ONA) and former commander of Venezuela’s National Guard, and Edylberto Jose Molina Molina, the former Sub-Director of ONA and currently Venezuela’s military attaché to Germany, with participating in an international cocaine distribution conspiracy”. Only a week before, two nephews of Cilia Flores, the Venezuelan First Lady, were also indicted for conspiracy to import cocaine, after being captured in Haiti in November 2015.

Maduro has countered international isolation by convening an ad-hoc commission to promote dialogue between government and opposition, formed by former presidents Rodriguez Zapatero from Spain, Leonel Fernandez from Dominican Republic, and Martin Torrijos from Panama. Initially, the commission was received coldly by the opposition because all three members lean favorably toward Maduro. But after the dialogue received support by the US government, the European Union and the OAS, the opposition decided to follow suit, asking that an emissary from the Pope be included. So far, however, neither conversations nor negotiations have transpired. The commission may find greater use if a deadlock occurs at the end of the year and the social situation worsens.


Why social collapse doesn’t translate into political revolution
It is typical for analysts of societies experiencing the pangs of economic disarray and political collapse to see political revolution taking place, somewhat like the Arab Spring or the Ukrainian revolution, which brought down strong authoritarian regimes. This doesn’t seem to be what’s happening in Venezuela. There are three main reasons for this provisional conclusion. First, in their struggle against authoritarianism, societies go through different phases, following different methods to achieve freedom. At the beginning of the Chavez regime, Venezuelans took to the streets as the country headed in a direction totally at odds with their idea of society. And they did so in tremendous numbers. From 2002 to 2004, for the first time in the country’s history hundred of thousands of protesters flooded the main highways of the capital city. But, the wave of protests came to an abrupt halt after the most important of them, in April 2002, turned into an unintended (for the protesters) coup.

The Paraguana refinery in Venezuela is one of the largest oil refineries in the world. Once buoyed by its immense oil wealth, Venezuela’s economy has struggled mightily in recent years, and worsened in recent months, contributing heavily to the current social and political crisis. (Accessed via wikimedia commons)

A more recent reason was the failure of the attempt in 2014 to stage another round of massive protests led by a portion of the opposition (“La Salida” or “The Exit”). The attempt, mostly by university students, ended up in a wave of violence from the police and national guards in cahoots with militia groups supported by the government. If the protests served to unveil the inherent repressive nature of a declining political model, especially to an international audience formerly enchanted by Chavez, it also alerted a majority of peaceful Venezuelans about the risks of direct confrontational methods.

A third, more structural factor works against translating social discontent (and even unrest) into political street protests: the parties united in the Mesa de Unidad Democratica (MUD) are essentially electoral organizations, with little practice in the business of revolt and revolution. Revolutionary parties tend to be the ones with the experience and courage to force the battles to the streets and not the polls. Even those left-leaning parties among the MUD abandoned radical methods decades ago and are unlikely to return to such practices. As the current campaign in favor of the recall referendum has shown yet again, it is electoral events that seem to them to be the proper targets for mass mobilizations. So at least for the time being, it is highly unlikely that an open street confrontation may put the government at risk.

Is there a change of government in sight?
Because so many events and problems keep piling up on the threefold crisis, it is difficult to anticipate what the end result will be. Despite domestic and international pressure, unless internal mobilization becomes unbearable, it is unlikely that the government will clear the way for the recall referendum to take place in 2016.

In a July visit to Caracas, I was able to talk both to analysts from different walks of life, and to ordinary people. Despite finding a government beset by numerous difficulties and often stumbling over simple things, which speaks of a relative restlessness on its part, I found it in a relatively strong position. Take the internationally promoted dialogue with the opposition. Whereas Maduro uses the dialogue commission as an international loudspeaker about his honest democratic intentions, internally the government continues bullying the National Assembly with support from the judiciary. The Supreme Justice Tribunal keeps turning down legislature decisions, government officials fail to attend congressional hearings, and worse, government-supported militia squads have staged attacks—sometimes vicious—against opposition legislators with the police and the National Guard looking the other way.

Recently, the president made a decision largely interpreted as a signal of weakness by most opposition leaders: he appointed minister of defense Padrino Lopez as second in command in the cabinet, to whom all ministers from the economy must report in order to grant food supply. It may be in fact quite the contrary: a clear exhibition of the new power equation. In conclusion, the government has not yielded an inch of its grasp over society. Even with the economy degrading and social protests taking place by the day, the government continues its inaction and void rhetoric. All internal Chavista opposition has been minimized and the hard core United Socialist Party of Venezuela (PSUV), the government party, shows no evidence of fracture, apart from a few criticisms by mid-range leaders.

Does this mean the current course will continue indefinitely? I doubt it. Inaction, which will eventually weaken Padrino Lopez as it has all officials before him, might force some sort of solution. The most unlikely one, though not totally impossible, is the approval of the recall referendum to take place in 2016. If it finally occurs, due to both national and international pressure (in mid-August 15 Latin American countries demanded no delays for the referendum), it will mean that Maduro has lost all internal support and a stronger internal coalition is willing to face Maduro’s electoral defeat and get ready for a successor. It is unclear, however, who could lead the forces of Chavismo into a general election to substitute the recalled leader. Faced with the high probability of defeat, Maduro could resign, avoiding the government party the embarrassment of a recall. Interestingly, the only defenders of the president in the wake of the trial against his two nephews in law were Jorge Rodriguez, the Mayor of Caracas and Diosdado Cabello (former National Assembly president and the PSUV’s number two), who has the highest negative ratings in the country.

Another possibility is the postponement of the recall referendum for early next year, which could close possibilities for a negotiated transition given that the new government would be in the hands of a Maduro-appointed vice president. There would most probably be a change from the subdued current Vice President, Aristobulo Isturiz, who has provided almost nil value added to the government’s cause after being appointed by Maduro in January. Still, it may well be that with Maduro out of the scene the chances for a negotiated settlement might increase, providing an opportunity for a convergence on a broad list of issues (social, political, and economic) between government and opposition.

But for any negotiated settlement to take place, political pressure both internal and international must reach unseen heights. A definite approval of the recall referendum to take place, plus activation of the OAS democratic charter, a rejection of Venezuela’s right to chair Mercosur, and a full-scale mobilization of supporters of the recall referendum, could well be the cocktail leading to a transition out of Chavismo’s absolute hegemonic rule.

The last scenario is the most somber and cannot be excluded, given all prior precedents of power handling by the current Venezuelan ruling elite. Given the closer alliance with the military factor in the government, there could be an explicit march toward a more drastic authoritarian rule, including closing down of the National Assembly (or cutting down its budget, as was suggested by Maduro in early August), imprisoning a greater number of opposition leaders, and imposing martial law in different parts of the territory. The recent changes in Nicaragua, eliminating the quota of opposition deputies and paving the way for one-party rule could be a close model to follow; or Turkey’s Erdogan post-coup decisions, which led not only to a cleanup in the military but also to massive purges in both the media and the universities. In any case, though Chavismo seems to be in dire straits and condemned to abandon power, it is highly unclear how or exactly when that will take place.

Reprinted from the Harvard International Review

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