Americas

Venezuela

Venezuela: The Rise and Fall of a Petrostate
Venezuela’s descent into economic and political chaos in recent years is a cautionary tale of the dangerous influence that resource wealth can have on developing countries.

Backgrounder by Diana Roy and Amelia Cheatham Jul 31, 2024

The Day After in Venezuela
If Nicolas Maduro relinquishes power, he will leave behind a country in economic and political ruin and the Western Hemisphere’s largest humanitarian crisis. The United States and its international partners should prepare now to help Venezuelans address major security and justice challenges.

Council Special Report by Paul J. Angelo Sep 24, 2020

A Venezuelan Refugee Crisis
In addition to a sharp economic downturn, Venezuela faces a humanitarian crisis. The United States can do little to prevent a downward spiral, but it should take measures to mitigate the political, economic, and humanitarian consequences of a potential mass emigration.

Contingency Planning Memorandum by Shannon K. O'Neil Feb 15, 2018

  • United States
    A Conversation With Mark Jones and Kellie Meiman Hock
    This post features Mark P. Jones, the James A. Baker III Institute for Public Policy’s political science fellow and Joseph D. Jamail Chair in Latin America Studies at Rice University, and Kellie Meiman Hock, managing partner and director of the Brazil and Southern Cone and trade practices at McLarty Associates. Latin America’s Moment recently sat down with Jones and Meiman Hock to discuss Argentina’s outlook. What economic challenges does Argentine President Mauricio Macri inherit from the Fernández de Kirchner government and how will he tackle them? Meiman Hock: Critically low foreign currency reserves represent Argentina’s biggest economic challenge. It is estimated accessible reserves stand somewhere between $2 billion and $6 billion at this time. Macri will work toward reaching a settlement with the holdouts in order to access international credit markets, but this will take time. In the near term, he will need to cut deals with the World Bank and the International Monetary Fund (IMF), which will necessitate resolving pending arbitration claims, as well as normalizing Argentine statistics. With reserves at a sufficient level, he will be better equipped to address other challenges: unifying the exchange rate, addressing inflation, loosening price, capital, and import controls, and eliminating most export taxes. Jones: In addition to anemic foreign reserves, Macri must also deal with a fiscal deficit at 7 percent of GDP this year and growing, and an overvalued peso. Macri will try to rein in rising public employee salaries and reduce expensive energy subsidies to consumers in the city and province of Buenos Aires. Are there any economic positives for the new president? Jones: Argentina is blessed with tremendous human capital and bountiful natural resources. If Macri can establish a credible rule of law and economic stability, U.S. and Argentine investors will pour funds into the development of Vaca Muerta and other shale gas deposits in addition to traditional investments in agriculture. Meiman Hock: The current situation in Brazil is both a positive and negative for Argentina. On the one hand, the economic downturn in Argentina’s largest trading partner will diminish demand for Argentine exports. On the other, if Macri can lay out a clear plan forward and build confidence, Argentina stands to attract investors currently disenchanted with Brazil and with pent-up demand for Argentina. Who will make up Macri’s government and what is his strategy for working with Congress? Jones: Macri’s eschewed a European-style coalition or even a president-dominated multi-party one à la Brazil. The government will be mostly made up of members of Macri’s PRO party. His electoral allies, the Radicals (UCR), received only a few second- and third-tier ministry positions. In Congress, Macri will try to garner some Peronist support to move legislation forward, given the PRO has only a small share of seats. But to Macri’s advantage, former President Fernández de Kirchner’s Frente Para la Victoria party is splintering and he can leverage the financial resources at his disposal to work out agreements with governors and other territorial leaders who possess considerable sway with deputies and senators from their respective provinces. Still, as the midterm elections approach in the second half of 2017, Macri will be watchful of both Peronists (including Sergio Massa), as well as the Radicals (UCR)—who realizing further PRO growth will likely come at their expense—may turn against him. Meiman Hock: Macri has chosen—at least nominally—to disperse power within his cabinet. Rather than having a traditional super minister of economy, his goal is to have several centers of power, with his trusted advisors in the presidency ensuring that, rather than a solo act, the Macri administration performs more like an orchestra. How will Macri reshape Argentina’s place in the region? Meiman Hock: Argentina under Macri will attempt to assert a new role in the region. It is telling that Macri’s first foreign trips, even before his inauguration, were to Brazil and Chile, seeking to build closer ties with the two countries. We can expect that Macri will be tougher on Venezuela, and will also leverage Argentine participation in the G20 to make a splash on the world stage. Jones: With the United States, Macri will work to reestablish a stronger relationship. Under former President Fernández de Kirchner, things could not have been much worse. But Macri’s team will have to be strategic in the rapprochement as their hands are tied somewhat by public opinion. Over half of Argentines don’t have a positive view of the United States, and even more don’t trust it. Still, the United States will have a stronger ally in Argentina on issues relating to Venezuela, drug trafficking, Iran, and the growing role of China in the region.
    Blog Post by Shannon K. O'Neil December 15, 2015 Latin America’s Moment
  • Global
    The World Next Week: December 3, 2015
    Podcast
    Climate talks wrap up in Paris, and Venezuela and France hold elections.
    Podcast with James M. Lindsay and Robert McMahon December 3, 2015 The World Next Week
  • Americas
    Latin America’s Middle Class
    The first decade of the 21st century was a good one for Latin America. A recent Pew Research Center report estimates that some 63 million individuals entered the middle class, measured as earning between ten and twenty dollars a day. Add in the 36 million more members of the upper-middle class, and 47 percent of those in South America—a near majority—are no longer poor. Mexico brought over 10 million people into its middle ranks during the decade, raising the combined share of the middle and upper classes to roughly 38 percent of the population. George Gao, "Latin America’s Middle Class Grows, but in Some Regions More Than Others," 2015. Unsurprisingly, the commodity boom helped. Demand for oil, soybeans, copper, iron ores, and numerous other raw materials boosted investment, increased exports, and created jobs. Abundant global capital and easy credit spurred public and private consumption, lifting consumption of the middle even more, and supporting expanding retail sectors and employment. Government policies, in particular conditional cash transfer programs such as Oportunidades in Mexico and Bolsa Familia in Brazil reduced inequality and poverty as well. With historically low unemployment rates and rising real wages, the middle thrived. World Bank, "World Development Indicators," 2015. World Bank, "World Development Indicators," 2015. Slowing growth since 2013 is now reversing some of these gains. With Brazil, Argentina, and Venezuela already in recession, the IMF projects regional growth of just half a percent for 2015. Falling commodity prices and higher public and consumer debt levels mean exports and consumption are down. As nations search for new growth engines, weak schools, bad infrastructure, and limited R&D investment leave them with few easy short-term options. Governments too are limited in their ability to fill the gaps, given increased debt loads and relatively weak tax collection. The report is somewhat pessimistic about the prospects for this newly emerging middle class. Many live paycheck to paycheck, and are deeply indebted. In Brazil, average household debt—mostly high interest consumer credit—now stands at 46 percent of disposable income. One study estimates that 14 percent will fall back into poverty in the coming decade. The prognosis is not all bleak. Central America, which missed the earlier uptick, could see its middle class grow. And recent data from Mexico shows poverty continuing to decline in many of its northern states (even as it rose overall). Interestingly, the positive results in many Mexican states and hopes for Central America’s middle ranks depend on U.S. trade ties. The United States remains the world’s largest consumer market, its draw heightened as China falters and the EU stagnates. And U.S.-Latin America exchanges are more likely to rely on manufactured goods and services than raw materials, another benefit as these nations work to protect and expand their middle income sectors. Whether countries are able or not to expand these ties, the coming decade will prove much harder for the region, both for those that gained and those that did not, during the boom.
    Blog Post by Shannon K. O'Neil September 15, 2015 Latin America’s Moment
  • Venezuela
    Assessing Venezuela's Economic and Strategic Position
    Play
    Experts discuss recent developments in Venezuelan politics.
    Event with Patrick Duddy, Miguel Angel Santos and Carl Meacham June 23, 2015
  • China
    China’s RMB Swap Lines with Latin America
    My colleagues Benn Steil and Dinah Walker recently published a great interactive on the spread of central bank currency swaps since the financial crisis. They find the United States provided developing nations with significant support through swap lines at the height of the financial crisis, but that China has been the most active extender of swap lines since 2009. China now has thirty-one swap agreements outstanding. The interactive also tells an interesting Latin America story. Argentina is one of the only countries in the world to take China up on its offer. Last year Argentina activated the swap line, and has since drawn a reported $2.7 billion of an available $11 billion. Under the agreed terms, the RMB may be freely converted into dollars. This is significant for Argentina, whose dollar reserves have plummeted from $53 billion in 2011 to $31 billion today. As such, the swap lines are being used less to settle Chinese goods trade than as a palliative for those unable to rely on the U.S. Federal Reserve, or in Argentina’s case most of the international banking system. International Monetary Fund, "Argentina: International Reserves/Foreign Currency Liquidity," 2015. China also maintains swap agreements with Brazil and Suriname, and just this week signed an agreement with Chile. Notably not on this list is Venezuela, which has already received $56 billion in loans since 2007. Even the Chinese seem to have their limits. Here is a link for more of Steil and Walker’s analyses on the topic.
    Blog Post by Shannon K. O'Neil May 28, 2015 Latin America’s Moment
  • United States
    Leopoldo Lopez, Democracy, and the 2016 Presidential Race
    Today at the Council on Foreign Relations we hosted Lilian Tintori, the wife of the Venezuelan political leader—and political prisoner—Leopoldo Lopez. With her were Lopez’s father and mother, and his five year old daughter. They are in Washington campaigning for his freedom, and for the freedom of all Venezuelans. For fifteen months Lopez has been jailed by the Maduro regime on ludicrous, trumped-up charges after a phony, fixed trial. He remains in a military prison. His true crime was be an elected mayor and a leader of the opposition, and far more popular than Maduro. The case struck me in part because yesterday, in Israel, I met with Natan Sharansky, the former Soviet political prisoner. On Sharansky’s desk was a photo he pointed out. In the background was the headquarters of the Soviet KGB, the infamous Lubyanka—where Sharansky had been held before his conviction and his imprisonment in the Gulag for 9 years. There, Sharansky had been told he would never get out of Russia and would die in prison. But in the foreground of the photo stand Sharansky, his wife Avital—who had spent years campaigning for her husband’s freedom just as Lilian Tintori is doing—with their daughters, sons-in-law, and grandchildren. This was a photo celebrating the victory of freedom over oppression, and of faith over despair. The Lopez case is becoming an international cause. Thirty-six Latin American former presidents of all political stripes have endorsed his cause—though it seems that no sitting president has spoken out, which should be a cause of shame in Latin America. The failure of the OAS to act has also been shameful, and is one of a long list of failures by the last OAS secretary general, Jose Maria Insulza. During his term the OAS, once a bulwark of freedom in the region, turned back to being a dictators’ club. Fortunately his term is ending. Now the Lopez case will be an early test of the new secretary general, Luis Almagro of Uruguay. The Inter-American Court of Human Rights, the European Parliament, and most major human rights groups have spoken out in support of Lopez. If Almagro is serious about democracy in the Americas, so will he. So will any U.S. politician of the left or the right who is asked about it, and many have. It is a compelling case, and given the state of U.S.-Venezuelan relations there is no down side in our political system. The more publicity given this cause, the better. The harder cases come where there is a down side or where matters appear more complex. Take Egypt, for example: there, many U.S. political leaders take a “forget about human rights” view. Indeed the failures of the “Arab Spring” outside of Tunisia have left many analysts, diplomats, and politicians saying forget about human rights in the entire Arab world. After all, we have many interests there, just as we do with tyrannies such as Russia and China—ranging from trade to security to Iran. In the case of Egypt, it’s striking that so short-sighted an argument can be persuasive so soon after its obvious failure. Many of the same people who said “forget about human rights, we need stability” under Mubarak are saying it again, now about the Sisi regime—just a few years after the “stable” Mubarak regime crumbled in a couple of weeks. Today Sisi is crushing political life in Egypt. He is crushing the Muslim Brotherhood, or trying to do so, but crushing as well all NGOs and civil society organizations and political parties and democracy initiatives and human rights groups. The recent history of Egypt suggests that the likely outcome, in a few years, is an explosion. History also teaches that when a ruler does this, the conspiratorial and extremist organizations regroup. They survive and often thrive in the dark. The groups that are more effectively crushed are the moderates. So when the explosion comes, are we shocked when the extremists seem better organized and prepared, and seize power or win the first election? The Sisi formula may work for a few years, but it is no formula for stability. The United States is now entering a presidential race when these issues will be debated, and it’s a debate well worth having. We will find some candidates in essence saying “forget about human rights” while others remind us of America’s role as a beacon in the dark for those struggling for freedom. Some of the likely candidates, who include sitting senators and a former secretary of state, have a record on these issues, and it is fair to question them about their support for freedom—or their subordination of freedom to real or imagined advantages in other realms, or in favor of smoother relations with foreign rulers no matter how brutal or repressive. We should be working hard to achieve freedom for Leopoldo Lopez, and for his counterparts around the globe: political prisoners whose crime was peaceful action on behalf of democracy and human rights. We should do so in hostile countries, and in friendly countries. If during this presidential campaign indifference to freedom is suggested as a wise and prudent U.S. foreign policy, let’s demand that candidates explain why that policy is truly practical—and how it comports with American values.
    Blog Post by Elliott Abrams May 13, 2015 Pressure Points
  • Venezuela
    Political Crisis in Venezuela
    Venezuela is in a state of protracted crisis. Since early 2014, public frustration has been steadily rising over shortages of basic consumer goods and skyrocketing inflation, which spiked above 68 percent last year and may reach 100 percent by December 2015. The economy has contracted sharply and is expected to shrink further this year. The failure of President Hugo Chavez's successor, Nicolas Maduro, to respond effectively to these challenges has caused his approval ratings to plummet to 23 percent. In the past nine months, fissures within the ranks of the government and its base have also appeared. The risks outlined in a 2012 Council on Foreign Relations (CFR) Contingency Planning Memorandum, "Political Unrest in Venezuela," remain valid, as the possibility of significant political instability continues to increase. New Concerns The Venezuelan government has become more authoritarian since Maduro's election in 2013. Anti-government demonstrations in February and March 2014 in response to inflation and shortages were repressed with force, resulting in several dozen killed, hundreds injured, and thousands arrested. The government's reaction to the protests discredited the Maduro administration in the eyes of many international observers. Venezuela's relations with the United States are toxic. Maduro regularly accuses the United States of complicity in an "economic war" against Venezuela and of actively working to overthrow the government. Maduro used a recently announced U.S. executive order authorizing sanctions and characterizing the situation in Venezuela as "an extraordinary threat to the national security and foreign policy of the United States" as a pretext to seek and receive from the legislature authority to govern by decree until the end of the year. The Union of South American Nations (UNASUR) has unanimously supported Venezuela and called on the United States to revoke the sanctions and respect Venezuelan sovereignty. Venezuela's Inflation (2009 to 2014) Blue: Venezuela's consumer price index (left) Black: Money supply, M1, in Venezuelan Bolivars (right) Source: Pantheon Macroeconomics. The collapse of international oil prices has intensified Venezuela's problems. Oil exports account for over 96 percent of its export earnings. Price controls and a chaotic exchange rate system have resulted in severe shortages of food and other basic necessities. Neither private sector retailers nor government subsidized supermarkets have been able to keep store shelves stocked. Thousands of Venezuelans now stand in lines daily to purchase the limited supplies of staples. Some medical facilities have had to suspend operations or forego certain procedures due the shortage of medicines. The scarcity of basic food items and medicines has become a national calamity. Unless there is a sustained rebound for oil prices, the Venezuelan people are likely to experience significant austerity throughout the months leading up to the legislative elections in the fall of 2015. Venezuela could see widespread clashes between opposition demonstrators and armed civilian groups of government supporters (known as colectivos) and uniformed security forces if support for Maduro continues to drop and it appears likely the opposition will win control of the legislature, if calls for a presidential resignation gain momentum, or if shortages become more severe. Food riots and looting are also possible if shortages become more severe. Opposition leader Leopoldo Lopez and others are still imprisoned and Caracas Mayor Antonio Ledezma was arrested in February 2015. Their detention has become a rallying point for the opposition. Anticipating a resurgence of protest, the Ministry of Defense has announced that security forces will be authorized to use lethal force to repress demonstrators. Policy Implications There is little the United States can do on its own to affect change within Venezuela, but protracted political and economic crises would be damaging to long-term U.S. interests in protecting human rights, promoting representative democracy and sustainable economic growth in the Western Hemisphere, and curbing illicit financial flows from Venezuelan corruption. It would also make drug trafficking through Venezuela more difficult to track. UNASUR's reaction to U.S. sanctions has given Maduro's confidence a boost and diminished the likelihood that he will change course politically or economically absent strong regional pressure. Further unilateral U.S. efforts to mitigate the effects of the current crisis will be rejected by the Venezuelan government and UNASUR as interventionist. Recommendations The United States should use public diplomacy and the Voice of America to make clear that the United States is not intervening in Venezuela's internal affairs while stressing that the deterioration of the human rights situation and abrogation of political liberties are regional concerns. The United States should leverage Department of Defense connections with militaries around the region to stress to the Venezuelan security forces their obligation to uphold the constitution, uphold democracy, and respect human rights. The United States should also assure other militaries in Latin America that it is not considering military action against Venezuela. The United States should work with the Organization of American States (OAS) and support UNASUR efforts to restart a genuine dialogue aimed at establishing conditions for free, fair, and credible legislative elections. Member states should also encourage Venezuela to accept election observers as soon as a date is established for the fall legislative elections. The United States should privately urge individual countries—particularly Brazil, Chile, Colombia, and Peru—to endorse the OAS secretary-general's call for government dialogue with the opposition and to remind Venezuela of its obligations as a signatory of the Inter-American Democratic Charter. The United States should remind regional governments that the current U.S. sanctions target individuals, not the country as a whole. U.S. officials should stress that the United States remains the largest market for Venezuelan oil and has sought to avoid measures that would impose greater hardship on the Venezuelan people. The United States should emphasize publicly and diplomatically that it has not broken relations with Venezuela and remains interested in a more productive and practical relationship. In the event of a generalized crisis, the United States along with other concerned nations should call on the OAS secretary-general to appoint a special commission to travel to Venezuela to report on developments and promote inclusive dialogue. 
    Contingency Planning Memorandum by Patrick Duddy March 30, 2015 Center for Preventive Action
  • Mexico
    Elections to Watch in 2015
    The region will hold just two presidential elections this year, choosing new leaders in Guatemala and Argentina. More prevalent will be congressional and local elections. Midterms in Mexico, Venezuela, and Colombia in particular may prove bellwethers for the direction of these three important regional economies. With term limits barring Otto Pérez Molina from running again, Guatemalans will head to the polls in September. The current front-runner is Manuel Baldizón of the Libertad Democrática Renovada (LIDER), returning to the electoral ring to try and avenge his second round defeat by Pérez Molina in 2011. The president’s Partido Patriota (PP) has thrown its support behind former Minister of Communications, Infrastructure, and Housing Alejandro Sinibaldi. Sandra Torres of the Unidad Nacional de la Esperanza (UNE), who divorced former President Álvaro Colom to be constitutionally eligible to run for office, also has significant name recognition and possibilities. Early polls suggest that none of the candidates has the 50 percent needed to avoid a second round. More closely watched, at least from the global financial world hoping to resolve the current debt impasse, will be Argentina’s October presidential elections. President Cristina Kirchner has yet to throw her weight behind any of the precandidates, though most expect her to (grudgingly) endorse Daniel Scioli, current governor of the province of Buenos Aires, who comes from her Frente Peronista para la Victoria (FPV) and is the front-runner in most polls. Other favorites include Sergio Massa, a Kirchner defector and current federal legislator attracting dissident peronist and opposition support behind his candidacy and party, the Frente Renovador. Mauricio Macri represents the one non-peronist in the leading bunch, leveraging his track record as a well-known businessman, former president of the storied Boca Juniors soccer team, and now mayor of Buenos Aires. To win in the first round Scioli would need to convince 45 percent of voters to stick with the FPV (or 40 percent and a 10 percent advantage over the second-place finisher), otherwise he will face a November run-off. Among midterm elections, Mexico’s president Enrique Peña Nieto and his Partido Revolucionario Institucional (PRI) may face significant challenges come July, when the entire lower house, nine governorships, and control of Mexico City’s delegations are up for grabs. The lack of immediate benefits from the recent spate of economic reforms combined with an evolving and deepening political crisis due to several instances of state associated violence and corruption make the PRI vulnerable. The question is whether the fractured PAN and PRD opposition can overcome their own problems to take advantage of their governing rival’s weakness. Colombia will hold regional elections in October that, among other positions, will determine the next mayor of Bogotá—the second most powerful elected office in the country. With well-known leftist Gustavo Petro stepping down, candidates from across the political spectrum have jumped into the race. In polls, the leftist Polo Democrático Alternativo (PDA) leads with Clara López. President Santos’ coalition, the Unidad Nacional, will likely endorse Rafael Pardo of Partido Liberal Colombiano (PLC), while former president Álvaro Uribe is already pushing Francisco Santos of the Centro Democrático (CD). Finally, Venezuelans are scheduled to head to the polls in December to renew all 165 members of its National Assembly. In the face of falling public support—with just 25 percent approving of Maduro’s performance—rising inflation, food and basic good shortages, the government has responded with increasingly authoritarian measures. Opposition leader Leopoldo Lopez has been in pre-trial detention since February and Maria Corina Machado has been recently charged with conspiring to assassinate President Maduro (along with the U.S. Ambassador to Colombia, Kevin Whitaker). Assuming the elections occur as planned, the opposition will have to overcome its own deep historic divisions to do well—a challenge for newly elected executive-secretary of the opposition coalition Democratic Unity (MUD) Jesús Torrealba. If they do, and the Partido Socialisto Unido de Venezuela (PSUV) loses its legislative majority, the stage will be set for the potential recall of Maduro in 2016.  
    Blog Post by Shannon K. O'Neil January 5, 2015 Latin America’s Moment
  • Global
    The World Next Week: February 27, 2014
    Podcast
    Venezuela marks the first anniversary of Hugo Chavez's death; Israeli prime minister Benjamin Netanyahu visits the United States; and U.S. president Barack Obama releases the FY2015 budget proposal.
    Podcast with James M. Lindsay and Robert McMahon February 27, 2014 The World Next Week
  • Economics
    Guest Post: Maduro’s Limited Foreign Policy Agenda
    This is a guest post by Stephanie Leutert, a research associate here at the Council on Foreign Relations who works with me in the Latin America program. In recent years, Venezuela’s president Nicolas Maduro has played a leading role in crafting some of his country’s best known foreign policy and regional integration initiatives. Serving as Hugo Chávez’s foreign minister from 2006 to 2012, Maduro made a name for himself in the foreign policy world through his more radical policy (toward states such as Syria, Iran, and Libya) and at times, more pragmatic approach (especially toward Colombia). But in his role as president, Maduro’s foreign policy agenda has diminished, and will likely stay that way as long as his capacity to project abroad is limited by the turmoil at home. From the beginning Maduro has struggled to gain his political footing. Unlike Chávez—who won his elections by landslides—Maduro entered office with both a slim majority and the din of cacerolazos (pot-banging protests). Soon after, he faced an opposition leader defiantly meeting with Colombia’s president, the voting dead scandal, and a leaked recording revealing his party’s infighting and corruption. While these types of political scandals and rivalries are nothing new in Venezuela, Chávez quickly put out the fires through a combination of charisma, public popularity, a network of political appointees, and strong military ties—all of which, to varying degrees, Maduro lacks. Perhaps even worse for Maduro is his responsibility to keep Venezuela’s troubled economy afloat. Nearly complete focus on the country’s oil resources (making up a full 97 percent of exports) combined with widespread mismanagement across key sectors has affected average Venezuelans. Electricity and food shortages are common (one of every five basic goods is considered scarce) and the inflation rate hovers between 20 and 35 percent (even hitting 42 percent earlier this month). The crisis has already threatened Maduro’s approval ratings, ensuring that the country’s economy (and not foreign policy) will receive the lion’s share of his attention. To top it off, Venezuela’s “twenty-first century socialism model" that was promoted across the hemisphere is also becoming a tougher sell. The state-based model has been losing regional-integration ground—at least in the public relations realm—to the Pacific Alliance (a free trade agreement between Chile, Colombia, Peru, Mexico, and perhaps soon Costa Rica and Panama). These countries have so far agreed to eliminate 90 percent of tariffs, integrate their stock markets, and encourage more seamless migration, providing an energetic alternative to other regional initiatives. While it is still too early to predict how this newest alliance will fare over the long term, its growing buzz has detracted attention from Venezuela’s preferred models. This is all not to say that Venezuela’s foreign policy can be counted out—it can’t, especially given the country’s enormous oil reserves, Chávez’s legacy of regional leadership, and Maduro’s willingness to irritate the United States for a few political points. But stabilizing his grasp on power and Venezuela’s economy will dominate Maduro’s agenda. And though efforts to unite Latin American countries through trade and energy will continue, today’s most popular initiatives may not be in the style that Chávez or Maduro would have wished.
    Blog Post by Guest Blogger for Shannon K. O'Neil August 20, 2013 Latin America’s Moment
  • Economics
    Venezuela’s Economy and Future
    Many Venezuela watchers have been waiting for the other proverbial economic shoe to drop (see here, here, and here), and for the country to fall into serious crisis. Others, such as Mark Weisbrot co-director of the Center for Economic and Policy Research, question this premise, arguing in his Guardian column that Venezuela has and will continue to make progress using its own economic model. So where does the nation stand? Those supportive of the Chávez and now Maduro government point to Venezuela’s 2012 GDP growth, which topped 5 percent (due largely to government spending). Over the last decade GDP per capita more than doubled and the poverty rate (using the World Bank’s national poverty line measurement) fell from over 60 percent of population in 2003 to some 30 percent in 2011. Inequality declined as well, and the United Nations publicly recognized the governments’ efforts in halving the number of citizens suffering from malnourishment. Moreover Venezuelans in general seem quite happy—reporting a life satisfaction rating of 7.5 (out of 10), higher than the global average of 5.5. But the underlying fundamentals question how long this can last. Oil production and exports have bankrolled most of these social programs, pumping hundreds of billions of dollars into government coffers over the last twelve years. Having spent all this money (and even augmented it with billions of dollars of debt), one can question the efficiency of Venezuela’s social programs. One also should worry about their sustainability, as the institutions to deliver services—from health care to basic electricity—are weak and in some cases deteriorating. And the flows of oil money behind all of it are increasingly fragile. Though Venezuela has almost 300 billion barrels in proven reserves, PDVSA’s own production figures show stagnation. Independent estimates (such as BP’s) reveal falling production. Whichever is true, there is a real question as to whether the country can keep supporting the current array of programs. The rest of the economy has been hollowed out over the last decade. While in the 1990s nearly a quarter of exports were non-oil products—foods, agricultural materials, and manufactured goods—today it is less than 5 percent. To put this into perspective, oil makes up 16 percent of Mexico’s total exports, 11 percent of Brazil’s, and some 89 percent of oil giant Saudi Arabia’s—still less than Venezuela’s 97 percent. For day to day life, inflation—estimated at between 20 and 35 percent (compared to 3 percent inflation in Colombia, or 6 percent in Brazil)—erodes the purchasing power of average Venezuelans, and hits the poorest the hardest. Fueling this spiral is Venezuela’s penchant to print money to fund its social programs and to pay for its imports—according to Reuters, in 2011 new currency topped $17 billion, more than any other Latin American country. To fight inflation, the government has imposed price caps, leading to shortages of basic goods—from toilet paper to milk, electricity to communion wine. In fact, the Venezuelan Central Bank’s scarcity index hit 21 percent, meaning that one out of five basic goods in Venezuela can be considered in short supply. Added to these economic woes are broader societal ones, including rising crime rates. The United Nations reports that there were some 45 homicides per 100,000, making Venezuela one of the most dangerous countries in the world. In Latin America, Venezuela is only surpassed by the notoriously bloody Honduras and El Salvador. The recent electoral investigations reaffirmed Maduro’s control over the presidency, despite the many questions that linger. What is less ambiguous is how average Venezuelans would vote today if given the chance—and it would not be for Maduro.
    Blog Post by Shannon K. O'Neil June 25, 2013 Latin America’s Moment
  • Economics
    Venezuela’s Election and the Future of Chavismo
    On Sunday some fifteen million Venezuelans headed to the polls to choose between Nicolás Maduro (Chávez’s heir apparent) and Henrique Capriles (the opposition’s leader). In an election many expected to be a sweep for Maduro, official tallies showed Capriles falling short by less than 300,000 votes (1.6 percent of the total). Though it now seems unlikely that an electoral apparatus firmly in the hands of Chavistas will allow a recount or overturn the results, this doesn’t necessarily mean the end of Venezuela’s democracy. And having Maduro at the helm in the coming months and years should complicate the legacy of Chavismo, helping Venezuela’s opposition in the medium to long term. Venezuela’s incoming president inherits serious problems with no easy solutions. The currency is overvalued, inflation is already high, the government is running a deficit near 20 percent of GDP (compared to 7 percent in the United States), food shortages are common, as are electricity blackouts, and crime has skyrocketed. In the face of all these challenges, the next president will have fewer resources—oil production is declining (Venezuela makes and exports little else these days), and Venezuela has already tapped international markets and foreign governments for loans. These problems will not only test the next president, but will also affect his popularity. Assuming it is Maduro in the Miraflores Palace, then Chavismo will incorporate both the boom and the bust years, complicating its narrative and legacy. By contrast, if Capriles takes the helm, the economic mismanagement and crime epidemic will be handed off to him and the opposition, freeing Chavismo from the fallout. Venezuela’s presidents serve six year terms. But voters, through a constitutional recall clause, could change leadership anytime after the midpoint, in 2016. And by then, the full legacy of Chavismo would be more apparent, and potentially subject to a popular referendum.
    Blog Post by Shannon K. O'Neil April 16, 2013 Latin America’s Moment
  • Human Rights
    The UN Human Rights Council Honors Hugo Chavez
    During the years when the late Hugo Chavez ruled Venezuela and attacked human rights there, the UN Human Rights Council was unable to adopt one single resolution about Venezuela. To this sad record a final note was added this week: a moment of silence in his honor. This would have been objectionable even if the Council had a tradition of such actions, and was following its own rules and procedures. But it has no such practices, so the homage to Chavez was simply a mockery of the Council’s purposes. UN Watch has an account of the event here, calling the honor to Chavez excessive, uncustomary, and disrespectful of its own experts’ findings of gross and systematic human rights abuses committed by the Caracas government, and of testimony by Venezuelan victims whom UN Watch had brought before the Council. Now should be a time for the UN to show solidarity with the victims...and not with the perpetrators. Instead of praising an autocrat who persecuted his country’s independent judges, journalists, human rights activists and students -- and who vocally supported mass murderers, tyrants and terrorists in Syria, Libya, and Iran -- the UN should be apologizing for having just elected the Chavez regime to its human rights council, and it should begin to call for accountability, reform and an end to impunity in Venezuela. It is no doubt impossible to prevent the Cuban ambassador from honoring Chavez, but here the institution honored him--putting it as UN Watch said on the side of the perpetrators instead of the victims of human rights abuses. The United States--which stayed out of the Council under President Bush but joined it under President Obama--should investigate how this incident happened and take steps now to prevent a re-occurrence. A festival of tears when Fidel Castro dies would dishonor the Council forever and cannot be permitted.
    Blog Post by Elliott Abrams March 7, 2013 Pressure Points
  • Economics
    New Era for U.S.-Venezuela Relations?
    Much of the discussion surrounding Chavez’s passing has focused on what his absence will mean for Venezuela’s internal politics, but below is my take for the BBC on how it may affect U.S.-Venezuela relations. You can also read the article here. After fourteen years in power, Venezuelan president Hugo Chavez lost his long and secretive battle with cancer. Many now wonder about his domestic and international legacy. For the U.S., one of the important questions is whether his bilateral foreign policy approach will continue without him. The U.S.-Venezuela relationship has been characterized over the past decade by public spats and outlandish statements, but it was not always so hostile. When Chavez was elected in 1998, interactions between the two countries were cordial; Chavez even traveled to Washington to meet then-President Bill Clinton. But the relations soon headed downhill. In 2002 Chavez accused the U.S. of supporting the coup that briefly ousted him from power, as U.S. officials were quick to welcome the transition. In 2005 bilateral counter-narcotics operations ended. Since then American spokespersons have criticized Venezuelan officials for their involvement in the drug trade, skewering the country in annual drug reports and freezing the assets of at least seven current or former Venezuelan officials. The bad blood was immortalized in Chavez’s 2006 United Nations speech when he theatrically referred to then-President George Bush as the devil, commenting on the distinct smell of sulphur that remained at the podium. In 2010, Chavez declared then-Ambassador Patrick Duddy persona non grata, marking the last time that the U.S. had an ambassadorial presence in Venezuela (but not the last time the two countries have expelled diplomatic personnel). With Chavez’s death, some have hoped for a change in the US-Venezuela relationship. But just because Chavez is gone it doesn’t mean the tensions in bilateral relations will ease. The U.S. is too useful and tempting a foil for papering over internal disagreements in Chavez’s party and for rallying loyal supporters for the upcoming presidential election to expect any abrupt change. Heir apparent and now interim President Nicolas Maduro’s speech right before Chavez’s death shows this. In it he expelled two U.S. diplomats and even accused the U.S. of causing Chavez’s cancer. But in the longer term, trade, commercial relations and personal ties could shift U.S.-Venezuelan relations for the better. First and foremost are the economic ties between the two nations. Despite the rhetorical animosity of the last decade, trade continued. The U.S. remains the largest recipient of Venezuelan oil—some 40 percent percent of Venezuelan oil exports (and oil makes up over 90 percent of the country’s total exports). In turn, the U.S. has continued to send machinery and cars, and even increased exports of natural gas and petroleum products to the South American nation. The hard currency and goods are vital to the functioning of Venezuela’s economy, government and society, and may become even more so through the anticipated tough economic times ahead. Despite the increased government management of the economy through price controls and the nationalization of hundreds of private companies over the last decade, many well- and lesser-known U.S. companies still work in Venezuela, providing not just goods but ongoing links with the United States. In addition to these commercial links, the more than 200,000 Venezuelans living in the U.S. and the hundreds of thousands more that have ties through family, friends and colleagues, could also bring the two countries together. Finally, as subsequent Venezuelan governments look to adjust their economic policies in the coming months and years, the experience of their neighbors provide incentives to forge a more amicable bilateral relationship. Colombia, Brazil, Peru, along with other Latin American nations, have opened up to the U.S. and the world more broadly in recent years and in the process have benefited tremendously. In the last set of hemispheric elections, a "third way" combining open markets, balanced fiscal accounts, and socially inclusive policies—most closely identified with former Brazilian President Luiz Inacio Lula da Silva—became an almost mantra for incumbent and opposition party candidates alike (including Chavez’s 2012 rival, Henrique Capriles Radonski). These nations and leaders illustrate a real and positive path forward, not just economically but also diplomatically. Today Venezuela faces significant political uncertainty, as Mr Maduro works to unite the many factions within Chavez’s party. He does so without Chavez’s charisma nor the deep-seated loyalty he inspired. The next administration also will confront growing economic and fiscal problems, making governing all the harder in the months to come. Still, in most of Latin America anti-U.S. rhetoric is fading, which suggests it can in Venezuela too.
    Blog Post by Shannon K. O'Neil March 6, 2013 Latin America’s Moment
  • International Organizations
    Is the International Community Growing Apart?
    In this radio interview on From Washington Al Mundo of February 13, 2013, Dr. Stewart Patrick explains how and why the world is increasingly complicated as emerging democracies promote a diverse range of interests. Exploring issues of traditional power competition, cybersecurity, and the eurozone crisis, Patrick explains the current state of multilateral cooperation. He goes on to discuss the deadlock in the UN Security Council concerning the situation in Syria and explore governance issues in South America. [audio: http://www.cfr.org/content/publications/media/press/Stewart-Interview-FWAM-021313-part4.mp3]
    Blog Post by Stewart M. Patrick February 26, 2013 The Internationalist