Three Keys to Understanding Venezuela’s Latest Crisis

Feb 19, 2014

Mounting tensions on the streets of Venezuela’s major urban areas have once again brought the country to the brink of political disaster in this oil-rich country where the Andes meet the Caribbean. Protests called for on Tuesday by opposition figure Leopoldo López brought to a head long simmering  tensions between the chavista movement, led by current President Nicolás Maduro, and an amorphous and increasingly vocal opposition that is challenging the nearly fifteen-year rule of a political movement led by Hugo Chávez until he died last year from cancer.

Here are three keys to understanding what is unfolding in Venezuela at present:

1) The death of Hugo Chávez has put chavismo to the test.

The death of Venezuela’s charismatic leader, Hugo Chávez, last year has brought his 21st Century Socialist Movement to its greatest test.  Despite being Chávez’s handpicked successor, current President Maduro managed only a razor-thin victory (50.7 percent to 49.1 percent) in the April 2013 elections. The ruling United Socialist Movement of Venezuela (PSUV) averted complete disaster in subsequent municipal elections in December by outpolling (49 percent) the opposition movement while candidates of the opposition managed to retain control of major urban areas including in  parts of Caracas, but saw their total vote drop to 43 percent. 

Rather than a convincing victory for either party, recent elections made increasingly clear that both sides maintained strong support among their base and that the independent vote – possibly around 1 million – were still up for grabs. How Maduro manages the economy, ballooning inflation, growing scarcity at the grocery store, and public perceptions will be the key to the country’s political future. For an opposition that had gambled on an electoral resolution to Venezuela’s political and economic polarization, the respectable but unfavorable results of the 2013 elections meant that they entered a two-year hiatus in elections with few opportunities to challenge Maduro and the ruling party.

2) Oil may not save Venezuela this time around. 

Blessed with the world’s largest proven oil reserves, Venezuela has long avoided the painful reality of an economy skewed by oil riches. Generous subsidies to consumers for auto fuel have meant prices as low as 6 cents a gallon, while currency controls result in higher prices for imported goods and de facto subsidies for domestic production. Venezuela has also used its oil wealth to extend its international influence among oil dependent countries in the Caribbean (especially Cuba), Central America, and elsewhere. 

But Venezuela’s generosity abroad and domestically has become increasingly difficult to sustain as the price of crude has settled at around $100/barrel and production rates have fallen at the state owned Petróleos de Venezuela (PDVSA). To compensate, Venezuela has, in part, resorted to even stricter currency controls (to hold onto scarce foreign currency) and sought to borrow money from China and potential joint ventures with Iran to leverage future production. It’s a hole that keeps getting deeper and more difficult to fill.

As a consequence, the Venezuelan economy is facing the highest inflation rate in the hemisphere, estimated at 50 percent last year, and increasing scarcity in basic consumer goods such as toilet paper, sugar, and even the ubiquitous corn flour used to make arepas, a staple on every kitchen table. 

The irony of a country with enormous oil reserves unable to supply basic goods has posed a major challenge to Maduro and chavismo. Past strategies for navigating economic hardship with oil largesse are no longer viable given that oil production is falling, some unexploited oil has already been monetized, and the dual currency program is proving economically costly and increasingly untenable. To manage these troubled waters, Maduro has turned increasingly against foreign and domestic enemies, some visible and others not. 

He has lashed out against speculators and unscrupulous business people whom he accuses of taking advantage of economic difficulties to profit handsomely by exacerbating scarcity and driving up prices. He has expelled U.S. diplomats for alleged conspiracies to orchestrate his overthrow, and shuttered or severely limited opposition media and international coverage of the unrest.  Reports circulate of government efforts to block social media images sent via Twitter although the state phone company has denied it. Alas, he has tried to manage a growing economic crisis by taking political actions that are popular among his base but are unlikely to significantly alter the economic reality. These measures will likely alienate the small but critical independent sector in Venezuela.

3) Venezuela’s opposition is also fracturing and pursuing a risky strategy. 

Through the elections of 2013, Venezuela’s opposition has remained mostly unified under the banner of the MUD – United Democratic Roundtable – and its leader, Henrique Capriles Radonsky,  governor of the populous Miranda state that surrounds Caracas. This unity was hard-won amongst a divergent opposition that early in the Chávez years had been fractious and allowed chavismo to win successive elections and consolidate power with institutions such as the military, judiciary, and legislature.

After the recent local elections in which opposition candidates failed to land a knockout punch on the PSUV, the opposition entered a difficult and soul-searching phase. With no more elections for two years, the logic of unity for electoral purposes lessened. Capriles’s close but ultimately unsuccessful bid for the presidency and subsequent local elections led some to question whether he still represented the best option for the opposition going forward.

With growing economic hardships gaining the public’s attention a second opposition leader, Leopoldo López, who contended for MUD’s presidential nomination in 2011, eventually losing to Capriles, decided to take a different tack in confronting the government this time. With smaller anti-government protests beginning in the Andean cities of Mérida and San Cristóbal, López decided that he would vocally and publicly support the protests. As these and other protests  turned violent last week, López called for more public protests including a rally in Caracas on Tuesday, February 18. 

While López maintains he is calling for peaceful demonstrations, Maduro and the government have reacted vehemently calling the protestors “fascists” and issuing an arrest warrant for López for inciting violence, damaging public property, murder, and terrorism. The government spent several days searching in vain for López even allegedly sending armed intelligence agents to the offices of López’s political movement in search for him.

Upping the ante, López responded by attending Tuesday’s rally and turning himself in. He reportedly explained, “Today I present myself before an unjust and corrupt justice system that violates the Constitution and the laws.” 

From the beginning Capriles appeared to pursue a strategy different from López by offering forceful criticism of the government but falling short of calling for public protests. He warned that demonstrations were not only dangerous but potentially misleading to people who wanted change in Venezuela. Yet on Tuesday, Capriles attended the protests and tweeted, “We went to the peaceful rally to support Leopoldo López [with] our solidarity and backing. He did what must be done, confront persecution.”  Whether the public arrest of López will douse the passions of the opposition or simply fuel them is an open question.

Is this the end for chavismo? There is no doubt that with the events of this week Venezuela has entered a new and troubling phase in the chavista revolution. It is tempting to state unequivocally that this is the movement’s last stand and that political overreach and economic mismanagement have finally caught up to Chávez’s followers. 

This is anything but certain. Maduro and chavismo have many tools at their disposal that may allow them to wiggle off the hook once again. The key will be whether the opposition remains united and is able to win over the independents and those on the fringe of chavismo who may not have as much invested in the current regime and are increasingly pressed by the abysmal economic situation.
 

Experts & Staff