Tuesday, May 9, 2017


In the world of currency inflation, an annualized inflation rate of 900% comes out to about 2.5% a day. Day-after-day, your cash diminishes dramatically. Makes you want to use a currency that is more stable… or deal directly in commodities/services swaps without an intervening currency… or find a way to sell hard-valued commodities (like cheap, subsidized, locally-extracted oil) to buyers across the border. This what ordinary Venezuelans face under their extreme left-wing government led by President Nicolás Maduro Moros (a former truck driver/union leader who succeeded Hugo Chávez when the latter died in office), very much a die-hard socialist Chavista (follower of Hugo Chávez’ revolutionary agenda).
Maduro clings to office, fending off recall efforts, legislative opposition and rather extreme unpopularity among a growing segment of his electorate, with an overly-friendly, partisan judiciary… and by pushing back elections where he would, given a fair vote, be purged from office.  The situation is, to put it mildly, unsustainable. Violent protests rage throughout the country; the governmental leadership is rapidly losing its grip. In a token gesture to his bureaucracy, Maduro announced a 60% pay hike… a token increase given the real inflation rate that the government simply will not acknowledge.
Maduro loves blaming foreign agents, particularly those from the United States, and the plunge in the global price of oil as underlying causes of his nation’s economic crisis. While his loyalists buy these explanations, the number of his followers is dropping like a stone… and Caracas is increasingly isolated from its neighbors. “Venezuela said on Wednesday [4/26] it was withdrawing from the Organization of American States, deepening the diplomatic isolation of the socialist-run nation that is already out of step with Latin America's steady shift to the right… Venezuela said the move was a response to a Washington-backed campaign against the ruling Socialist Party that is meant to trample on the sovereignty of Venezuela, the United States' principal ideological adversary in the region.” Reuters, April 26th. Can this chaos continue?
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, May 3rd. Indeed, protestors have taken to wearing face masks – to obscure their identity and to protect against tear gas – and heavy work gloves on the right hand – to toss tear gas canisters back at the police.
In the above article and reacting to Maduro’s call for a constitutional reform of the entire state, former U.S. Ambassador to Caracas, Patrick Duddy, tells it like it is: 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.”  
In a companion The Cipher Brief piece, political commentators Michael Shifter and Ben Raderstorf add: “Chaos, it seems, has become a new norm in Venezuela. In the past month [April], masses of peaceful protesters opposed to President Nicolás Maduro have been violently dispersed by state security forces almost every day. Masked demonstrators burn barricades and face off regularly with armed quasi-paramilitary motorcycle gangs, known as colectivos, controlled by the government. So far, in the last month of unrest, nearly 30 people have been killed.
“The current turmoil in Venezuela began when the Supreme Court, packed with Chavista loyalists of the Maduro regime, issued a ruling on March 29 that essentially dissolved the already-marginalized National Assembly and assumed the country’s legislative powers for itself. Although the court quickly reversed the ruling in the face of domestic protests and international outcry, the episode revealed the fragility of even a semblance of constitutional order in the country and sparked long-simmering tensions. 
“Meanwhile, the economy continues to grind to a relative halt, shrinking well over 10 percent last year. The actual rate of inflation is difficult to measure, due to countless distortions and price controls, but reliable estimates put it at more than 700 percent, making it the world’s highest. The state-owned oil industry – Venezuela has the largest proven reserves in the world – has been hobbled by mismanagement, corruption, and lack of investment. As a result, the economic and humanitarian crisis has grown severe. There are reports of mass shortages of food and medicine, and the security situation has deteriorated. According to most counts, there are more than 100 political prisoners in Venezuela.
“Last year, the Chavista government refused to hold a recall referendum on President Maduro that was constitutionally guaranteed. On Monday [5/1], it announced a new national vote to create a new ‘constituent’ assembly – apparently an attempt to sideline the opposition further.”
What is the likely resolution of this monstrously failing government? A military coup is the obvious “Latin American” fallback, and many believe that this may be the only viable path. What other possibilities exist?
“The opposition clearly hopes that the end of Chavismo is near. After almost two decades in power, starting with former President Hugo Chávez in 1999, the Chavista government could fall fairly quickly and be replaced by an interim government – either from the opposition or the military, or with a pact between the two to hold new elections. Maduro could also face a palace coup in which the government doesn’t so much collapse, but instead is eased out in favor of another faction attempting to placate the protesters with incremental change. This could be an orderly process, or the government could simply implode, possibly resulting in uncontrolled lawlessness, widespread violence, and near-total economic paralysis.
“The best evidence for this scenario is just how broad-based the protests have become. There are reports that – for the first time – Venezuela’s poor (who formed the bedrock of Chavismo’s support) have begun to join the protests, which previously were made up of mostly middle class citizens.
“If this continues, the military may simply not be willing or able to engage in the sort of repression necessary to quell such a popular uprising. There may be a point when the government simply splinters and certain factions are unwilling to support Maduro any longer.
“The key sector to watch is the military. If a substantial number of senior officials abandons Maduro, his time in office will likely be cut short. The armed forces are already a key pillar of the government and in charge of critical functions such as food distribution…
“At the same time, Maduro has defied predictions of government collapse for several years. The challenges have long seemed insurmountable, but still, the government endures. To be sure, the economic and political stresses on the government will only continue to grow, but its resilience has consistently been underestimated. Maduro seems to have dug in, just waiting for the price of oil – which sustained Chávez’s prosperity and popularity – to rise again.
“While the opposition is united today in some respects, fractures may emerge quickly as the situation unfolds. Differences over strategy and leadership could again become debilitating. The Chavistas have cleverly manipulated these divisions for years and hope to continue to do so. Without a clear political alternative in place, Venezuelans will continue to have difficulties translating street protests into real change.
“Similarly, there is hardly a clear path to resolving the economic crisis. The country is in massive debt, the oil industry is crumbling, and most productive businesses have closed or fled the country. As much as the Venezuelan people are struggling now, an adjustment plan could bring about even more suffering, at least in the short term. For many, government rations and price controls are the only thing that makes food, gasoline, and other necessities affordable in the face of skyrocketing black market prices.
“In this scenario, greater repression and concentration of power cannot be ruled out. Maduro may shutter congress, send soldiers out to disperse the protesters in an even more violent way, and attempt to imprison the opposition en masse.” Michael Shifter and Ben Raderstorf. In the end, the wildly inconsistent and distracted Trump administration has to deal with this toxic variable in our own backyard. In case you didn’t know, CitiGo Oil is owned by Petróleos de Venezuela, S.A. (the Venezuelan state-owned oil and natural gas company). Complicated. And as he admits himself, Donald Trump does not do well with “complicated.”
I’m Peter Dekom, and global instability, particularly when it is in our own hemisphere, is not good for any of us.

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