Venezuela's Downward Spiral

Venezuela is a nation on the brink of social and economic collapse. In late March, a heavy-handed coup attempt by the regime-directed Supreme Court sought to remove the last vestiges of authority from the democratically-elected opposition legislature. The attempt was partially reversed after its immediate and vocal rejection by the hemispheric community, but the removal of the final veneer of the government’s claim to democratic legitimacy has energized massive street protests in Caracas and elsewhere around the country. The regime has met these protests with a show of force and vows to govern “forever.” More than 20 protesters have been killed.

Venezuela today faces galloping inflation, a multi-year recession, and a massive drain of human capital. The healthcare system barely functions and food shortages exacerbated by political favoritism and regime loyalty tests are a daily reality. Caracas is reportedly the most murderous city worldwide and street crime is rampant. Corruption and drug trafficking have expanded; in February, the sitting Vice President was designated by the US Treasury as a narcotics “kingpin.” The situation continues to deteriorate and, as growing street protests have shown, is becoming potentially volatile.

The fall in oil prices off their historic highs coincided broadly with the transition of leadership from Hugo Chavez to his hand-picked successor, Nicolas Maduro, who has not just continued but strengthened the path of so-called 21st century socialism charted by his predecessor. Socialist policies have caused severe underinvestment in the energy sector, destroyed productive capacity, created a permissive environment for corruption, and enabled general mismanagement of the economy. Without the largesse of historically-high oil income to support politically-motivated spending and foreign policy adventures, Maduro’s public support has fallen below 30 percent.

Having had enough of privation and growing authoritarianism, Venezuelans voted on December 6, 2015 for change, giving the opposition an overwhelming victory to take control of the national legislature. Since then, the Maduro government has sought to undermine the result. The late March effort by the executive, executed via the Supreme Court, was a botched coup de grace of the legislature. Subsequently, calls have now been renewed for dialogue between the government and opposition, although it’s unclear to what end. In 2016, a constitutionally-mandated recall referendum demanded by the opposition and supported by the international community including the United States, Organization of American States, and numerous Latin American nations, was successfully put off by the regime for fear of losing the vote and subsequently being forced to cede power.

As a substitute, the regime entered into a political dialogue with members of the opposition it finds acceptable (while jailing others, including Leopoldo Lopez whose wife, Lilian Tintori, was recently received by President Trump at the White House). Predictably, this yielded little in the way of democratic improvement or elucidation of a peaceful path forward. Rather, it primarily allowed the regime breathing space from more aggressive demands for change including public protests and sustained international pressure. The Maduro government has made clear that it is unwilling to cede or even share power in any form, and has taken steps that call into question the integrity of the electoral calendar including national elections scheduled for 2018.

In Washington, the OAS Secretary General, Luis Almagro, has publicly laid out a devastating written critique of the anti-democratic practices of the Venezuelan government. The bottom line demand of the Almagro effort, in addition to calling for numerous other actions, is that Venezuela must hold early elections to restore democratic practice or face suspension from the hemispheric body. Fourteen of the hemisphere’s heavyweight countries have already gone on record in support. Some 22 former regional presidents have called on the OAS to the Inter-American Democratic Charter, to which Venezuela has subscribed and of which Caracas is clearly in violation. But the government is not budging—it is hunkering down—while the international community has so far proven unwilling to force the issue outside the OAS context and use of that organization’s limited diplomatic tools. Venezuela has now declared its intention to leave the OAS.

The United States has taken some limited steps to identify and sanction individuals for alleged drug trafficking and human rights abuses, and is presumably working quietly with other governments worldwide, including Europe and China, to deny Venezuela’s leadership the use of global financial conduits to hide billions of dollars in ill-gotten gains while working to identify and potentially seize such assets where possible. More such actions are overdue and may be forthcoming, given heightened bi-partisan Congressional desire to apply all leverage points.

The patience of long-suffering Venezuelans, however, appears to be running out. As the situation on the ground deteriorates, it becomes more volatile, and the amount of time left to develop peaceful solutions has shortened. Since the aborted government coup, protests have become larger and more sustained, echoing the crisis of February 2014 during which over 40 people were killed.

Current circumstances offer little in the way of hope for recovery; even the prospect of peaceful, democratic change would not immediately improve the economy. The obvious engine of growth, the oil sector, will take an extended period and many billions of investment dollars to restructure and restore before it can drive sustained economic growth. Meanwhile, the broader private sector has shrunk under intensive pressure from the regime and will need to be reconstituted, while further loans or other economic consideration from primary benefactor China cannot be assumed. Given an eventual democratic political rebalancing, either with the acceptance or more likely the departure of the current government, the international community will be called upon—after Chavismo has already wrecked the country—to offer significant assistance to bridge Venezuela back to health.

The future of the nation is now at stake, being negotiated in the streets of Caracas and elsewhere across Venezuela. It might have been done through the democratic process, but the regime has systematically and intentionally turned off that option. Now, if protests are sustained, the government and, more specifically, the military and security forces, will have to decide whether to acquiesce or repress. The Venezuelan Spring may have only just begun.

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