Venezuela crisis reaching breaking point
The political and economic situation in Venezuela has been deteriorating for over a year. The crisis has been the subject of previous Expert Views, but several recent developments suggest that it could reach a flash point before the end of the year.
The causes of the crisis remain the same: the decline in the price of oil has cut the resources available to the state, making it impossible to import basic goods and creating growing social discontent. The government of President Nicolas Maduro has refused to deal with the National Assembly which, since December 2015, has been controlled by an opposition coalition called the Democratic Unity Roundtable, or “MUD” by its Spanish acronym.
The situation is worsening, while tension increases by the day. Very soon, President Maduro may not be able to govern the country.
National oil company Petroleos de Venezuela (PDVSA) can no longer pay its bills. This led BP to stop four tankers of Texas light crude that it was shipping to Venezuela for blending with heavy Orinoco basin oil while it waited for payment. Venezuelan oil production has been declining every month and is now down from more than 3 million barrels per day to just above 2 million. PDVSA has no money to invest and its rig count is falling, which means that production will continue to decline, probably to less than 2 million barrels per day within the next month or two.
As a consequence of the deteriorating economy, thousands of Venezuelan men have left their jobs to venture into the Amazon region to mine (illegally) for gold. These men, upon returning to their homes in Caracas and other cities, have brought malaria with them. This disease was once virtually eliminated in Venezuela. Now the number of cases threatens to create a public health crisis that, given the lack of basic medical supplies, will quickly spiral out of control.
As if the economic situation were not bad enough, Venezuelan debt payments will jump to $1.78 billion in October and $2.946 billion in November, from $725 million in August and $310 million in September. Currently, there is no indication that the Chinese will step in to relieve the credit crunch. Venezuela’s currency reserves may not cover the payments.
Finally, there is growing domestic and international pressure on President Maduro to allow a recall referendum by January 10, 2017. According to the country’s constitution, this is the last date at which the results of the referendum could trigger new elections. If a recall vote is held after that date and the government loses, President Maduro would be replaced by his loyal vice president, Aristobulo Isturiz, for the remainder of his term – that is, until 2019.
President Maduro has been doing everything to delay the referendum. Military men are increasingly being put in top government posts. In an effort to solve the nation’s supply problems, he has named Defense Minister General Vladimir Padrino Lopez to a joint Civilian-Military Presidential Command, which is now responsible for distributing food and medicine. He named General Nestor Reverol, formerly the chief of the National Guard, as interior minister just days after a United States court indicted him for drug trafficking. Even Chavistas are nervous about this new praetorian form of socialism.
On September 1, nearly 500,000 protesters flooded the streets of Caracas to demand the referendum. International actors, including the U.S., have begun to make public statements insisting that the government negotiate with the opposition in good faith. The Obama administration, which for the past two years has refrained from publicly criticizing the Maduro government, sent Secretary of State John Kerry to Argentina and Colombia to rally support for collective action against President Maduro. With the change in Brazil’s government now official, the new foreign minister, Jose Serra, has indicated his willingness to join this effort.
It would be a terrible mistake for the U.S. to intervene, and it is unlikely that it will do so during what remains of the Obama administration. It would erase all the goodwill that President Obama has earned by working with colleagues and partners in the hemisphere and by his normalization of relations with Cuba.
Brazil and Chile might be able to get the Union of South American Nations (UNASUR) to renew its mediation efforts. The most likely short term scenario is that, under all of this pressure, President Maduro will turn to the informal mediation team of ex-presidents that met previously in the Dominican Republic with representatives of MUD and the government. Meanwhile, hopes are that Mr. Maduro will allow humanitarian aid to be brought into Venezuela, to relieve the growing crisis in health and food supplies.