February 25, 2014

TSG IntelBrief: Venezuela and Inexorable Change?

• As the current situation unfolds in Ukraine—though with distinct contrasts—it may provide apt lessons for Venezuelan President Nicolás Maduro

• As the populist movement era of Hugo Chavez fades, Venezuelans are increasingly struggling to throw off the mantle of authoritarian rule and dysfunctional government in favor of a viable economy, crime reduction, and availability of consumer staples.

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  Caracas has begun a precipitous and probably unavoidable spiral of action and consequence. While President Maduro rants that he’s waging an “economic war against the parasitic bourgeoisie,” struggling families wonder if a single Venezuelan leader is willing and able to address their legitimate concerns. The president and his supporters appear to be losing control of not only the economy, but of national stability and security.  Stark change appears imminent—inflation is at 56 percent and climbing, unemployment is widespread, food shortages are prolific and often exacerbated by government ineptitude. In the meantime, crime, a long-term and chronic problem in Venezuela—and often a symptom of pure desperation—is skyrocketing.


Cause and Effect

Given the manipulative-socialist approach of President Maduro’s predecessor, Hugo Chavez, it’s hard to imagine how contemporary events could have unfolded in another way. Chavez pursued broad populist measures and pandered to a huge base of poor Venezuelans. The persistent message to the “Chavistas”—of enduring resonance—was that they were the oft-exploited targets of the wealthy. Chavez essentially created a generation with a strong sense of vengeful entitlement. This makes for good politics but bad governance. This has also been unfortunate for Venezuela, given that the International Monetary Fund expects most of Latin America to face at least three percent economic growth in 2014-2015. 

Unlike Mexico, Central America, and the Caribbean economies, which are tied to the US economy and are presently faring well, Venezuela is in economic tailspin. Its being saddled with one of the world’s highest inflation rate is bad enough, but access to even the most basic consumer goods, like sugar and toilet paper, is increasingly difficult. President Maduro’s economic policies and price controls, enforced by the police, the military and plain-clothes thugs have demonized capitalism and the free market to the point that merchants frequently operate at a loss. 

In recent months Mr Maduro has directed Venezuelans to join him in conducting a national audit of retailers to ensure they comply with his dictates for capping prices and profits. He also ordered the military to occupy several retail chains and slash prices on refrigerators, televisions, and other appliances. Soldiers and government inspectors visited more than 1,400 shops and arrested more than 100 "bourgeois" businessmen. In a final insult, the president decreed that all private business profits were restricted to levels between 15 and 30 percent. 


It Begins—the People Fight Back

Over the past two weeks at least twelve people have been killed in anti-government protests. The population is now polarized and the call has gone out for even more widespread protests. This is further escalation of the protests of February 12, when tens of thousands of opposition protestors filled several city blocks in Caracas, motivating the president to call out the National Guard to prevent further rallies. Following those events, the protestors became increasingly militant and violence spread nationwide. Reacting in kind, Mr Maduro chose to escalate rather than defuse hostilities. He sent 3,000 soldiers to pacify the city of San Cristobal—as a result, the soldiers blockaded the city and cut off Internet access.

President Maduro has also targeted opposition leaders—in some cases alleging that they are “terrorists,” supported by the United States. Opposition leader Leopoldo Lopez has been jailed on charges of inciting violence (originally he was charged with terrorism and murder, but those charges were dropped). However, Lopez’ arrest had the opposite effect of that intended by the president. Opposition forces have now become even more emboldened. To further complicate matters, because there is no private media coverage and the government is not reporting on the protests and fatality count, activists have taken to voraciously reporting their own (often sensationalized) versions of events through social media.  The result has been both effective and viral. Yesterday, anti-government demonstrators set up barricades in Caracas, paralyzing traffic and preventing people, to include providers of vital services, from going to work.


Next Steps

There are some voices of reason amidst the chaos. Former opposition presidential candidate Henrique Capriles has publicly called for demonstrators to avoid violence. Regional analysts say such a goal may not be easy to accomplish. The protests and rallies seem instead to be fueled by an overwhelming outrage—with few specific demands. Venezuelans are shouting, dying, and lying wounded in the streets because of their years of putting up with, and now profound disdain for, the state of Venezuelan affairs. Such anger is difficult to communicate—let alone dissuade or calm—and change now appears inexorable along demands for the government to account for itself.

Almost to script, President Maduro is poised to make things worse. He is threatening to declare a form of martial law known as a state of exception in the western state of Táchira, a traditional opposition stronghold, where protesters have been particularly active and opposition is growing. Said the president: “If I have to declare a state of exception in Táchira, I’m ready to declare it and send in the tanks, the troops, planes, all of the military force of the country.”

Perhaps taking Mr Maduro’s words as a potentially lethal promise, opposition leaders, as part of a gathering of mayors and governors, met yesterday in an effort to open communication between the two sides. The dialogue comes after Maduro warned protestors that there would be legal consequences to their leaders missing the meeting. Speaking at a rally in Caracas, Henrique Capriles maintained, “We don’t want confrontation, we want solutions. The government of Nicolas Maduro that we are seeing is a historic error, but we can’t get out of this mistake by making another one.”


       • During the national holiday of Carnaval on March 3 and 4 this year, the tenor of street protests may temporarily subside

• In almost a mirror of the opposition-government interaction in Ukraine, President Maduro seems to be underestimating opposition leaders. Though from different parties, Capriles and Lopez are showing a united front and Maduro is playing into their hands with a hardline stance that promises to generate greater bloodshed

• As of yet, there are no indications that oil exports from Venezuela have been impacted by the current state of affairs.



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