De-jure President of Venezuela, Juan Guaidó.
On January 23rd, 1958, Venezuelan Dictator Marcos Pérez Jiménez was overthrown. 61 years later, on January 23rd 2019, Juan Guaidó swore himself in as “The Interim President” of Venezuela. Is this a “US-led coup”, like President Maduro claims? Or is it a “liberación”?
Given the abundance of misinformation about the matter, it is important to analyze the facts, instead of rushing to judgments. In doing so, we need to first look at the problems that plague today’s Venezuela, then attempt to dig up the major causes of such problems. It is also important, however, to understand the central figure – Juan Guaidó – before proposing analyzing the potential scenarios for the future.
Venezuela has long borne the weight of both economic and political problems. The country is witnessing hyperinflation (10000000% in 2019, according to the IMF), an economic downturn, and severe shortages of essential goods and services. Politically, after months of turmoil between the Opposition controlled Parliament (The National Assembly), contested votes on a new Constitution, and protests, the President of the National Assembly recently swore himself as Interim President. Guaido’s bid is based on a reading of the 1999 Constitution that transfers the country's Presidency to the President of the National Assembly in-case there is an abandonment of the President’s position. His supporters, which as of March 2019 include, among others, the United States of America, recognize that Nicolas Maduro’s (the incumbent President) attempts at making Venezuela a dictatorship constitute such an abandonment.
Most importantly, however, as the world watches with dismay, human rights are trampled and the people of Venezuela are being subjected to horrific living conditions. According to international organizations such as Amnesty International, as well as Venezuelan civil society organizations like Foro Penal, human rights offences such as excessive use of force, arbitrary arrests, civilians trials in military courts, trampling of free expression, and an abject failure of the state to provide for health and food, have become commonplace - particularly, since 2015.
De-facto President of Venezuela, Nicolas Maduro.
As You Sow, So Shall You Reap
The international media often depicts Venezuela as the epitome of failed socialism; nonetheless we hope this article will make it clear that the country is dealing with a problem festered by multiple causes, not simplistically understood through ideological labels. When trying to understand the causes of the Venezuelan crisis, a distinction must be made between those who claim that the causes are endogenous, and those who claim that the crisis is a perpetuation of foreign forces – particularly, the USA. The former talk about economic and political causes of the Venezuelan crisis, while the latter refer to an international conspiracy against the Government of Venezuela. While the latter has been aggressively used by Mr. Maduro's regime to justify its crackdown, and thus lacks credibility, it is nonetheless better to systematically analyze both strands, even if it only works to confirm our initial hypothesis.
Critics of Venezuelan government accuse the latter of shortsighted macroeconomic policies, unsound monetary management, systemic corruption, and, criminal misuse of the country's resources -particularly, at the hands of the oil industry.
The oil industry was the engine of the Bolivarian Revolution that brought Hugo Chavez to power and formed the core source of financing for his redistributive policies – popularly known as Chavism. The considerable sums of money from exploiting oil revenues were allocated to popular policies of socio-economic redistribution. The results were immediate. Venezuela witnessed an exponential improvement in social indicators, such as the poverty rate, Gini coefficient (used to gauge wealth inequality), access to education and healthcare, malnutrition, infant and child mortality, etc. Nonetheless, Venezuela lacked a sustainable economic strategy. As an oil-funded economy, not only did the country rely almost exclusively on oil revenues to fund its expansionary social policy budget, it also imported 97% of the consumer goods it used - almost everything from soaps and toothbrushes, to cars, and trucks, was imported. As a result, Venezuela lacked the domestic entrepreneurial - public or private - wherewithal, and became extremely dependent on international oil prices remaining high enough to finance its expenditure.
When Maduro became President in 2013, he furthered the economic legacy of Chavism. The flaws of such strategy became evident when oil prices plummeted in 2014, and Venezuela was unable to cope up with the reduced wealth inflows. The problem was exacerbated by the lack of qualified personnel in the public sector; in this regard, the Venezuelan state has often been criticized for being a top-down nepotistic feudal plutocracy, with hiring decisions based on trust, and political proximity, instead of technical acumen. As the economy fell into ruin, imports became exorbitantly expensive, living conditions deteriorated, and millions fled the country – sparking a refugee crisis in Latin America.
Chavism relied on a populist piety, given that it was centered on improving the status of the most indigent and unprivileged segments of the population. This was partly achieved at the expense of the middle class. The latter was generally anti-Chavism and became more resistant to the sort of dictatorial political economy that Chavez and Maduro sought to run.
Maduro was also unable to amass the broad-based political consensus that his predecessor could achieve. When Chavez’s leadership went missing, a number of subgroups emerged with each claiming a fraction of power and trying to pursue its own interest. Despite Maduro being the official focal point of each of these subgroups, he seems to bring only limited cohesion amongst them. In other words, while Maduro still retains power, but he lacks coherent political and economic strategies.
According to some, the major cause of problems in Venezuela today is from the outside. In 2018, the country’s Foreign Minister, Jorge Arreaza, said that the economic sanctions imposed on Venezuela were “in absolute contradiction to international law.” The Former Secretary of the UN Human Rights Council, Alfred de Zayas, echoes the sentiment that such sanctions were contrary to international law and human rights law. According to Mr. De Zayas, the economic sanctions imposed by the US, under the Obama and Trump Administrations, as well as unilateral measures taken by Canada and the EU,
“...demonstrably cause death, aggravate economic crises, disrupt the production and distribution of food and medicine, constitute a push factor generating emigration, and lead to violations of human rights… [and that] twenty-first century sanctions attempt to bring not just a town, but sovereign countries to their knees” (sic).
US President Donald J. Trump.
Sanctions imposed by the US have actually put Venezuela on its knees. It was excluded from international financial markets, precluded from using oil revenues to pay for its imports, and debts – particularly, to China - its government's funds, held in the US were frozen. As a result of these sanctions, its public debt interests obligations rose. The interest spread – the difference between the interest it has to pay on its debt, and earns from its investments – reached over 6000 basis points in 2017, according to the last available data. Many other countries have also imposed bilateral measures against Venezuela for several years, but Maduro retains power and, worse still, living conditions in Venezuela parallel some of the worst in the world. Some argue that only an actual embargo on the oil sector would be effective, perhaps that is true. However, is it worth all the suffering and injustices imposed on the Venezuelan peoples? The answer is still unclear, but as of today, we are pretty far down the road of economic sanctions to return without any tangible concessions on part of President Maduro - which in all likelihood, would involve him relinquishing power.
Highlighting the major endogenous and exogenous causes to the Venezuelan crisis partly helps untangling today’s situation, yet, it leaves one question unanswered: Juan Guaidó responsible for a coup attempt, or is he necessary for an orderly constitutional transition of power in Venezuela?
On January 23, 2019, cheered on by a crowd of supporters, Juan Guaidó swore himself in as “interim president” of Venezuela. Immediately after he was sworn in, the US recognized him as the legitimate ruler of Venezuela. To champion Guaidó’s cause, President Trump imposed new sanctions against the Maduro regime, and made available a number of frozen Venezuelan Government accounts to Guaidó. Soon after, Canada, several European states, and most Latin American countries, like Brazil, Argentina, Colombia, Chile, Perú, among others, recognized Guaidó as the legitimate head of the Venezuelan state. On the other end of the ideological spectrum Russia, China, Turkey and a few Latin American countries (Mexico, Cuba, Bolivia), continued to support Maduro.
For the rest of the world, a question has since lingered, who is Juan Guaidó? What does the international community think of him? And is he really seizing power? Guaidó is a 35 year old President of the National Assembly of Venezuela, and a member of the opposition party – Voluntad Popular. Guaidó’s strategy consists of exercising financial, diplomatic, and military pressure on Maduro in order to obtain control over state-owned assets, forcing him from power. With growing support from the international community, Guaidó and his supporters have effectively created a parallel state in Venezuela – without controlling any territory (as in any other civil war). However, the most important player in the smoke and mirrors of Venezuelan politics is the Army – the hub of Chavism's patronage-based plutocracy that has allowed Maduro to retain control over the country.
For what concerns the army’s support, Guaidó seems to be under-performing. Venezuelan troops recently blocked humanitarian aid coming from the US. Such politicization of aid is particularly disturbing, for serves as a symbol of the resilience of Maduro’s government. If the troops would have allowed humanitarian aid to flow in from the US, it would have been an indication of a shift in the Army’s loyalties - or at least, a weakening of Maduro's influence. The opposition's weak control over the Army is also evinced by the relatively few desertions among the forces. Support from the Army is becomes harder as Guaidó faces difficulty in getting an approval for an amnesty bill that proposes to, effectively, pardon soldiers who help unseat Maduro. Even if the National Assembly approves the bill, it faces resistance from opposition hard-liners and human-rights organizations. How the country’s parallel Supreme Court – which meets via video conferencing – reacts, is also unpredictable.
Guaidó’s real success however, lies in the realm of economic policy. CitgoPdVsa, operating in the US, is ousting executives known to support the Maduro administration. A newly constituted Board of Directors would further alter the balance of economic balance in Guaidó’s favour. Disguising their geostrategic interests, pro-Guaidó countries are also leveraging on the fact that Guaidó’s Presidency does seem to be in accordance with Venezuelan law. The interim President invoked Articles 233, 333, and 350, of the 1999 Constitution, the legitimacy of which was confirmed by several experts on the matter – despite the fact that in early 2018, Maduro replaced the Constitution itself. Constitutional lawyer Jose Vicente Haro said that Guaidó took over the office of the President, both legally and constitutionally. Hence, despite allegations of foreign meddling, Guaidó’s move seems to be a constitutional transition, and not an attempted coup. Whether the enormous capital expended by foreign powers presents a solution or worsens the problem, only time can tell.
On February 23rd, Guaidó claimed that he would do whatever it takes to free Venezuela from Maduro. This implies that the possibility of an armed conflict is yet to be ruled out. Perhaps the most unlikely, as well as the most precipitous way of removing Maduro, is the threat of a US led military invasion of the country. This is a possibility hinted upon by close advisors of Donald Trump, led by NSA John Bolton. However, that’s a long shot. Any solution to the challenge will either have to be found domestically, or through international diplomacy. The problem is that Maduro’s alternatives at the moment, consist of either staying in power or facing a trial at the International Criminal Court. As long as this is the situational matrix, he will certainly have no incentive in finding an internal solution to the problem.
This calls for a change in the attitude of the international community, which will have to be filled in by the EU. Having taken a much feebler stance than the other great powers, the EU could encourage, or even mediate, such internal political negotiations, thus fostering an internal compromise between Chavist and anti-Chavist forces. At the bare minimum, they could encourage the opposition to let Maduro flee to a sympathetic country – say, Cuba – on retirement, rather than force him into a public trial. Regardless, a peaceful exit for Maduro doesn’t solve the crux of Venezuela’s problem, for that, we need to consider the day after the revolution.
The Day After
Picture the day Maduro is removed from power. Fireworks light up the Venezuelan sky, media houses rush to the country and jubilantly report the end of a long siege, with millions of people singing in the background. Soon however, as the first sunrise dawns on a post-Maduro Venezuela, the realities of economic and social harship begin to re-emerge. Supermarkets are still empty, the currency is still worthless, some aid trucks have driven in from the border but are barely enough for subsistence, there is no electricity, and the government coffers are empty as creditors knock on the doors. A single question hangs, how long before the new government falls to the ways of the Ancien Régime, or worse still, goes the way of the Arab Spring? So what should be done?
Some think that Venezuela should nationalize all key industries and give life to a self-sufficient socialist economy. But this seems largely utopic. On the opposite side of the political spectrum, people argue that Venezuela would need neo-liberal structural adjustment programs, with the aid of organizations like the IMF, and World Bank. This will face significant resistance from the public. Over the last decade, Venezuela has dramatically reduced social spending, while wages have fallen. A neo-liberal adjustment program would further decrease public spending and could precipitate a worsening of living conditions, engendering chaos. Then there is the currency, the Venezuelan Bolivar is so badly devalued that any attempt to scrap, and replace it with a new currency could backfire, unless the new currency is supported by a regime trusted by markets, and backed by tangible assets.
Experts suggest that the oil sector could be the key to untangling the country’s problems. However, it would mean that its international lenders – particularly, China, which holds a bulk of oil denominated debt – will have to forgo a portion of their dues and restructure the rest. At the same time, the country would need an infusion of capital to invest in the oil sector, which must transition from a crude oil exporting role, into a refining and producing petroleum products. Each of these steps will take a substantial amount of time to fructify, during which the world will have to come together and bail Venezuela out of bankruptcy. The country will have to reinvent a system of taxation, kickstart economic growth, and provide employment to millions of people. The task is enormously difficult, but just possible.
For the sake of millions of Venezuelans, we must hope that all of this can be accomplished. Over the last few weeks however, the initial euphoria surrounding Guaidó has petered out as Maduro continues to dig in its heels. The only two countries capable of ending Venezuela's misery - the US and China - have shown little public signs of cooperating, or even discussing the issue. Time is running out, and we cannot let Venezuela go Syria's way.
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About the Author
Born and raised in the small island of Sardinia, Chiara holds a Bachelor in International Economics and Management from Bocconi University and an MSc in Social Policy and Development from the LSE. Her research interests and past experience revolve around migration, gender, social well-being, and environmental health. A voracious reader, tenacious half-marathon runner, and with a forma mentis that is pillared on insatiable curiosity and critical thinking, she has an undying love for the art of writing.