The deteriorating economy – more than opposition
protests – may eventually force Maduro out, experts say.
BY JOACHIM BAMRUD
Will Venezuela’s protests
end with the ousting of the country’s president Nicolas Maduro, following the recent example of Ukraine? The South
American country appears to be facing an economic freefall while the government
is ramping up its persecution of the opposition, including stripping Maria Corina Machado – a key opposition leader
-- of her seat in the national assembly while continuing to detain another
prominent opposition leader, Leopoldo
Lopez, and the opposition mayor of San Cristobal, Daniel Ceballos.
On Tuesday, Maduro
announced that three air force generals have been arrested on charges of plotting
a coup in league with opposition politicians during the country's rumbling
civil unrest, Reuters reports.
In addition to demanding
Maduro’s resignation, protesters are complaining about high inflation,
shortages of basic foods, and one of the worst rates of violent crime in the world, the news agency
says. Venezuela has Latin America’s worst crime rates, according to the Latin
Crime Index from Latinvex.
So far at least 34
people have died since the protests began on February 12. Venezuelan business mogul Gustavo Cisneros, chairman of the Cisneros Group, made a rare entry
into politics last week with an op-ed in the Financial Times and Spain’s El
Pais calling for meddling by Pope Francis to end the growing violence. “The
situation is no longer tenable, and it cries out for attention and help from
the international community,” he wrote. “Pope Francis could bring to a halt the
nation’s destructive journey.”
MADURO: HOW LONG?
Meanwhile, the protests –
entering their sixth straight week – are raising the specter of a possible exit
of Maduro, who has been president since March 2013 when long-time president
Hugo Chavez died. Maduro was formally elected in April for a six-year term.
“Given how things are going, it would be surprising if he finished out his full
term,” says Michael Shifter,
president of the Inter-American Dialogue. “It is probably a mistake to underestimate
Maduro’s staying power, at least over the next year. Beyond that it is likely to
become more difficult.”
Otto Reich, President of Otto Reich Associates, former US
Ambassador to Venezuela and former Assistant Secretary of State for Western
Hemisphere Affairs, believes Maduro’s chances of staying in power over the next
year depends on the economy.
“Whether Maduro stays in
power for 12 months or not depends mainly on the horrible state of the economy,”
he says. “It is hard to exaggerate how close Venezuela is to bankruptcy. There
is no liquidity. Not enough reserves. Foreign companies are leaving, domestic
investors are persecuted, there is no foreign or domestic investment, no
maintenance of the industrial base. No foreign exchange to buy the 80 percent
of the food consumption that must be imported, leading to unprecedented food
shortages in the nation with the biggest oil reserves in the world. Venezuela's
21st Century Socialism looks exactly like Fidel Castro's 20th Century version
in Cuba. If there is not a sudden economic miracle, neither Maduro nor any
other Chavista can feed 30 million
people. It is not hard to predict what would happen to the rulers in that
Cynthia J. Arnson, Director of the Latin American Program at
the Woodrow Wilson International Center for Scholars, sees Maduro safe for now.
“Thus far the protests appear to have united, not divided the regime,” she says.
The ultimate arbiter of Maduro’s fate will be the armed forces, should future
protests look like they are getting out of hand, Arnson says. “Maduro’s
ability to improve economic performance—a real wild card—will be critical to
the consolidation of his power,” she says.
“Equally critical in the near to medium term will be the opposition’s
ability to adopt a unified and credible strategy for reaching beyond their core
of current supporters.”
MORE OR LESS PROTESTS?
The protests may die
down in the short term, due to a combination of factors, Arnson believes. “First,
the government crackdown has been relentless, not only in terms of deaths but
also the number of arrests and the government’s determination to clear the
streets of barricades,” she says. “Second,
in Venezuela as elsewhere, the public can tire of the difficulty in navigating
around the protests, so sympathy with the protestors tends to wane. Third, without visible, positive results, the
morale of the protesters themselves will lag.”
The results are likely
to be seen much more over the long term, in that the regime has been incapable
of addressing the economic and security crises and the country’s level of
polarization, Arnson points out. “The
question is how or if the opposition will build on what has taken place since
February to expand its reach into the Chavista
base,” she says.
Meanwhile, Maduro confronts a dilemma, Shifter
argues. “If he cracks down further in an
effort to squash the unrest, that could weaken his government, help mobilize
support for the opposition and push other governments in the region to react
and apply pressure on him to ease the repression,” he says. “If he doesn’t crack down that will undermine
support among hardline Chavistas and
he will be viewed as weak in the face of a real challenge.”
Shifter believes the protests are likely to have their ebbs and flows and will
not be easy to sustain at a high level. “But in the long term if the economic
situation continues to deteriorate there may not be any other recourse for many
Venezuelans than to take to the streets,” he says.
This popular uprising has
already lasted much longer than previous ones did or than originally expected,
Reich points out.
“That augurs badly for Maduro and his cohorts,” he says. “The heavy-handed
repression seems to have shocked sectors of the population into more
anti-government action, not less. The students have been joined by many other
sectors of society. Maduro has lost the battle of public opinion in the world
because this uprising is being televised through social media.”
Machado on Friday released a video
through YouTube showing the government repression. It received
nearly 800,000 visits during the first four days.
DEVALUATION, MORE INFLATION, POSSIBLE RECESSION
On Monday, the
government launched a third currency system, Sicad 2, that effectively devalued
the Bolivar by 88 percent. The new platform sells dollars at 6.3 bolivars for
preferential goods and around 11 bolivars for other items. On the black market, greenbacks currently
fetch around 57-58 bolivars, according to Reuters.
The government’s 11-year
old restrictions on dollars have led to massive shortages of imports, the
paralyzation of the once-booming auto sector and the suspension of most flights
in and out of Venezuela.
more flexible exchange rate system is a step in the right direction, although
doubts remain about its viability,” Juan Pablo Fuentes, economist at Moody's Analytics told the
Inter-American Dialogue’s daily Latin
America Advisor. “For the new system to succeed, the government must
allow supply and demand to determine exchange rates. Yet the government has
indicated it will intervene as needed to prevent wild swings in Sicad 2."
Paula Diosquez-Rice, a senior economist for Latin America & Caribbean at
IHS Economics, agrees. “Unless the system is allowed to work without extensive
government intervention, SICAD II will not reduce the demand for foreign
exchange in Venezuela,” she said in a commentary yesterday.
that the central bank and government have limited amounts of dollars, demand
might quickly overwhelm the new market, Fuentes says. “In the most likely scenario, the government
will need to restrict demand by setting limits and/or limiting the number of
buyers,” he warns. “If so, the new market will be ineffective in replacing the
result is likely to be higher inflation and a further push towards economic
recession, he warns.
Venezuela is likely to have the world’s
highest inflation rate this year, according to a Latinvex
analysis of the latest figures from Venezuela (56.2 percent) and forecasts
from the IMF for 188 countries. Iran, the second-worst country, will likely see
inflation of 42.3 percent.
KEEPING CHAVISTAS IN LINE
The economic crisis is
impacting traditional followers of the government, although it’s unclear how
many of them will be joining the opposition protests.
“The Chavista base can’t be happy with the ongoing
economic turmoil, especially the rate of inflation, which cuts more deeply into
the purchasing power of the poor than anyone else,” Arnson says.
Some transfer of
loyalties away from the regime because of economic hardship was clearly seen in
the razor-thin vote margin by which Maduro won the presidency in 2013, she
points out. “But it’s important to
remember that issues of identity and dignity motivate the Chavista base, not just material benefits received through
government social programs,” Arnson says.
Meanwhile, many Chavistas still
prefer to support Maduro over the opposition. “Maduro retains quite a bit of
support – not because he is particularly appealing or well-liked or inspires
confidence, but because the alternative to a Chavista-led government is not clear,” Shifter says. “The opposition has a long way to go before
it closes the deal with the Chavista
base. There is still a great deal of mistrust and suspicion. Of course, if the economy continues to get
worse, Maduro could lose support among the traditional Chavistas, but he still has some policy instruments at his disposal
that could at least slow down the economic decay and soften its effects."
However, many Chavistas
are increasingly worried about the outlook. “They seem to be worried since many
of them have sent much of their money and many relatives out of Venezuela
including, incredibly enough, to the US,” Reich says.