Venezuela: From Richest Country in Latin America to “Basket Case”

Venezuela is on the verge of implosion. Inflation has skyrocketed, shortages of food and other basic necessities abound, and Venezuelans are increasingly fleeing the country and relocating around the region. Calls for President Nicolás Maduro to go are getting louder and louder. Over the past few weeks, thousands of protestors have gathered on Venezuela's streets, demanding the president step down. As violence escalates, with dozens of protestors killed, other countries are taking notice. U.S. President Donald Trump, for example, recently met with a jailed opposition leader's wife and commented about the dire conditions in Venezuela. But the U.S. may need to do more. The Cipher Brief’s Kaitlin Lavinder spoke with former U.S. Ambassador to Venezuela Patrick Duddy about the current situation and how it impacts U.S. interests.

The Cipher Brief: You’ve written about warning indicators of violence and democratic derailment in Venezuela. On Monday, President Nicolás Maduro called for a constituent assembly asserting “we need to transform the state.” How significant is this step? 

Ambassador Patrick Duddy: This appears to be another effort to neutralize the opposition without risking the government's grip on power. Maduro clearly doesn’t want to hold new national elections. All recent polling suggests that he and his government would be trounced in a free and fair election. In December of 2015, remember, the opposition parties capitalized on the public’s profound unhappiness with the Maduro administration’s mismanagement of the nation’s affairs to capture two-thirds of the seats in the National Assembly. Since then, the situation in Venezuela has deteriorated even further, and support for the government has continued to erode.  

In the meantime, Maduro has consistently attempted to marginalize the legislature, delegitimize its elected opposition majority, and discredit its leaders. As for a constituent assembly – which would be convened to write a new constitution – many opposition leaders and local analysts see the proposal as a thinly disguised power grab. Certainly Maduro’s call for a constituent assembly would seem to implicitly concede the point that the government no longer enjoys majority popular support. I think it is unlikely to placate those who are in the streets demanding change.  

TCB: We’re hearing reports that the Venezuelan government of President Maduro may be arming militias, known as colectivos, who have been firing on protestors over the past week or so. Are there any other violence indicators that you see right now? And what could this mean for the coming months?

PD: I think various kinds of shortages – for instance of food and medicine – as well as the distribution of arms can exacerbate conditions on the ground. Obviously, distributing weapons to government supporters has the potential to make the situation exponentially worse. I’m not sure if the arming of the militia has begun, but it has been threatened. The arming of the militia would be a very serious step, but the colectivos are distinct from the militias. They are already armed. These are informal, vigilante groups which act sometimes as regime enforcers, and they have become much more active lately, reportedly firing on demonstrators. Any kind of expansion of that activity would certainly indicate that things are spinning out of control.

Back in 1989, attempts to significantly raise the price of gasoline at the pump helped to precipitate a national crisis known as the Caracazo. A cut off of supplies of gasoline now would also be sharply felt by both supporters and opponents of the government.

TCB: There’s concern that the situation in Venezuela right now is going to cause – and is already causing – mass migration to surrounding countries, specifically Colombia. How concerning is this? And what could the impact be on not just the surrounding region, but on the United States as well, given that the U.S. is one of Colombia’s closest allies?

PD: A mass migration into Colombia could be very disruptive on the ground in Colombia, particularly close to the border. Colombians are already dealing with a very complicated situation in their own interior. They are trying to implement the peace agreement with the FARC while continuing to fight drug traffickers. But there are also continuing issues with the National Liberation Army – the ELN – and there are reports that the coca cultivation has surged. Beyond all of this, Colombia already has to deal with millions of their own internally displaced citizens. An influx of significant numbers of poor Venezuelans would impose a tremendous burden on the government of Colombia at the national and regional levels.

Venezuela is no longer as important to us commercially as it once was. But the United States, of course, has always been interested in having stable, prosperous neighbors. For decades, we have supported both economic development and the consolidation of democracy. So instability and the current effective collapse of Venezuela’s political institutions is inherently a setback for the U.S. – in part because its collapse also threatens the stability of other countries in the region.

Venezuela’s implosion is also clearly stressing institutions like the Organization for American States (OAS), where there’s a strong movement to declare Venezuela in violation of the Inter-American Democratic Charter. But if and when the OAS were to do that, further questions would rise. For example, exactly what follows from such a declaration? Last week, Venezuela announced its intention to withdraw from the institution. Withdrawal is a two-year process once formally initiated, but it will have the immediate effect of further isolating the regime within the region. It is hard to imagine how Maduro and company could think this step will benefit Venezuela. Indeed, it smacks of desperation. It will not, however, substantially affect the activities and operations of the OAS. Nevertheless, I think those who are trying to avert a deepening of the crisis there will be disappointed by Venezuela’s decision to walk away from the institution.

TCB: Are there any other specific interests that the U.S. has in Venezuela that should make it concerned with the situation there? What, if any, emergent policy do we see in the Trump Administration?

PD: The Trump Administration has publicly expressed its concern for the erosion of human rights and the hollowing out of the country’s political institutions. Many in Washington, as well as elsewhere, have called for the release of political prisoners.

More generally, the U.S. has for years regularly pointed to the rise in drug trafficking through Venezuela. Venezuela is not a producer of coca derivatives, that is, cocaine or coca paste, but there are very strong indications that Venezuela has become a preferred route for drug traffickers. As the country becomes increasingly an ungoverned or ungovernable space, that traffic could become even worse. At the same time, the U.S. has expressed concerns about some of the groups outside of the region, like Iran, with which the Venezuelan government has attempted to develop closer relations.

TCB: In an Op-Ed you recently wrote, you discussed the lack of high-level U.S. administration positions vis-à-vis the Western Hemisphere that have been filled under President Trump. Why do you think that is? Especially if, as you’ve just said, there are many reasons to be concerned about the instability in Venezuela right now.

PD: I would like to see the Trump administration get its team for the region in place. The administration is focused elsewhere and there are good reasons why. Obviously, the situation in the Korean peninsula is an extremely serious one, as is the situation in Syria, and the United States, of course, remains engaged in Afghanistan and Iraq. While the president and his national security team are focused on those problem sets – and I think that focus is merited – they have neither been prepared to outline a positive agenda for U.S. relations with the Western Hemisphere nor address some of the developing challenges.

That’s very worrisome because the Western Hemisphere is immensely important to the United States, and we now have strong competition in the region. China is not only Venezuela’s largest source of external funding. China has also replaced the U.S. as Brazil and Chile’s largest trading partner. We need to pay attention. More than 42 percent of all U.S. exports are sold to the Western Hemisphere.

There are some stories in the media now that suggest the Trump Administration is beginning to prepare nominations for key positions within the Defense Department, but the State Department has not been a priority so far. In fact, there are media reports that Secretary of State Rex Tillerson is planning to make substantial cuts to the Department of State.

TCB: Tell me if I’m wrong, but if President Maduro goes, then the Vice President will take over, correct?

PD: This depends on timing. Had there been a successful recall referendum before the end of the first week of January of this year, and the opposition was seeking such a referendum, then new elections would have to have been held almost immediately, according to the constitution. After that date, if President Maduro were to vacate the office for whatever reason, under whatever pretext, the constitution stipulates that the sitting Vice President should take over until already scheduled elections could be held at the end of Maduro’s tenure in 2018. A key consideration here is that the Vice President of Venezuela is not an elected position; it’s an appointed position.

The current Vice President, Tareck el Aissami, is someone the U.S. government, through the Office for Foreign Asset Control (OFAC) of the Department of the Treasury, has named a kingpin because of his connections to international narcotics trafficking. Because the Vice President is appointed not elected, el Aissami could be replaced, albeit there is no indication that the Venezuelan government is considering that step.

TCB: Does the situation look better if Maduro goes, given that Vice President el Aissami was just named a drug kingpin?

PD: The situation would not be improved if Maduro left office and the unelected el Aissami took over. I think the opposition would like to see new general elections held immediately. Even absent a commitment to do that, the situation would improve markedly if a number of things were to happen. If the government would, first, release the political prisoners and withdraw the baseless accusations directed at Henrique Capriles Radonski, the Governor of Miranda State. Capriles previously ran for president, and the accusations against him are clearly intended to marginalize him for the next 15 years, to push him out of national politics. 

Second, the Venezuelan government could announce its intention to respect the constitutional authorities of the national legislature – which it has ignored and attempted to neutralize since the opposition won a supermajority in December of 2015.

Third, it could announce an election calendar and commit to allow robust international election observation.

It is worth noting that in Venezuela there are two related crises. There is the political crisis which has people in the streets. But part of what has fueled the political crisis is the collapse of the economy. Again, if we’re looking to try to lower the likelihood for some sort of social explosion, the government is also going to have to make clear that they would permit humanitarian assistance into the country, for instance, to relieve the extraordinary shortage of medical supplies and also to help recoup the country’s stocks of basic food items.

Recently, the Food and Agriculture Organization of the United Nations declared in one of its periodic reports that the situation in Venezuela is already acute and could get worse. The shortage of basic medicines is, arguably, even more serious than the food shortages. As long as the government resists efforts to alleviate the humanitarian difficulties now affecting the population, things will remain tense.

TCB: Why is the government resisting efforts to change a completely failed economic model?

PD: Years ago, the administration of former President Hugo Chávez announced that they were going to choreograph a complete transformation of the economy. Chávez called the program they were trying to implement Twenty-first Century Socialism and it was at the very heart of Chávez’s Bolivarian Revolution. I think they are resisting acknowledging that their economic model has failed, because if it has failed, they have failed. So, instead of recognizing the scope of their failure, they look for scapegoats – sometimes blaming their own private sector, sometimes the United States, often both. In recent months, they have tried to convince the Venezuelan people that they are the victims of an “economic war” against the Bolivarian Revolution. This is preposterous, especially the notion that the U.S. is surreptitiously waging an economic war against the regime. 

The United States continues to buy Venezuelan oil. Now, as I said earlier, they are not nearly so important to us as they once were years ago, but we are still very important to them, arguably, as important to their economy as ever. Ninety-six percent of all of their export earnings come from oil, and we are still their largest market. We have not stopped buying oil from them, and most of their non-oil industries are now moribund – thanks in large part to the Bolivarian Revolution’s interventions, nationalizations, and expropriations. 

The reality is the Chávez and Maduro administrations wasted the opportunities that came with the record high oil prices. A country that was once the richest in Latin America is now a basket case, and the Bolivarians are to blame. The scope of their failure, with the world’s greatest reserves of oil, is just astounding.