South America: Venezuela Humanitarian Crisis Roiling Region

By Michael McCarthy*

A line of Venezuelan migrants at a Colombian border checkpoint.

Venezuelan migrants at a Colombian border checkpoint. / Colombia Reports / Wikimedia

The humanitarian crisis driven by both Venezuela’s increasingly dire economic situation and political repression is taxing all of northern South America, with no remedy in sight.  In what UN High Commissioner for Refugees officials call “one of the largest mass-population movements in Latin American history,” an estimated 2.3 million Venezuelans – about 7 percent of the country’s population – have poured out of the country since 2014.  According to UNHCR, more than half of them suffer from malnutrition, and a significant percentage suffer from diseases, such as diphtheria and measles, previously thought to be under control.  The crisis is posing economic and security challenges to neighboring countries:

  • Colombia has seen the greatest flow. About one million refugees have crossed the border since 2015, but arrivals have peaked – reaching about 5,000 per day – as the Venezuelan economy hits new lows.  Venezuelans’ fears that Colombia’s new president, Iván Duque, will close the border have driven part of the surge, but Venezuelan President Nicolás Maduro’s recent policy announcements – including a fórmula mágica that includes controlling inflation by lopping five zeros off current prices – are main drivers, according to most observers.
  • Ecuador received more Venezuelans in the first half of 2018 than in all of 2017 (340,000 to 287,000). Confronted with severe disruptions in border communities, Quito has declared a month-long “emergency” in four border provinces and has sent doctors and other personnel to help mitigate the impact of the arrival of several thousand Venezuelans a day.  Ecuador has announced that it is now denying entry to persons without passports.  Quito last week called for a regional summit on the crisis in mid-September.
  • Peru is the largest refugee hosting country in the Americas, but it has now begun to demand official documentation.
  • Brazil has taken in several tens of thousands of Venezuelans, but the influx is provoking local tensions. A regional judge closed the border – a decision overturned by the Supreme Court – and locals in the border city of Pacaraima took matters into their own hands vigilante-style, burning down a tent city and chasing about 1,200 Venezuelans back across the border.  Argentina and Uruguay, which last granted residency to 31,000 and 2,500 Venezuelans, are beginning to feel pressure to slow the flow.
  • Guyana is also upset because Venezuelans claiming Guyanese citizenship are arriving with claims to properties held by others since at least the 1980s. As the International Court of Justice takes up Georgetown’s case on its decades-old border dispute with Venezuela, the refugees’ arrival is an unwelcome distraction.

The United States and European Union have offered assistance, mostly to Colombia.

  • Earlier this month, Washington announced it would give Colombia an additional US$9 million in aid to provide water, sanitation, hygiene and some medications to Venezuelan migrants – bringing the overall U.S. commitment to over US$46 million over the past two years. USAID has cast the aid as supporting a “regional response” to the problem, but Washington’s closest ally, Colombia, will receive the overwhelming share.  U.S. Defense Secretary Mattis has announced he’s sending a hospital ship, the USNS Comfort, to Colombia and “possibly other destinations” to help.
  • In June, the EU committed €35.1 million (US$40.2 million), mostly for “emergency aid and medium-term development assistance” for people remaining in Venezuela and for neighboring countries affected by the crisis, and the EU Commission promised it would mobilize its migration and asylum program to provide help for migrants.

Assistance from the U.S. and EU, as well as any future help from multilateral development banks, is crucial but, ultimately, these interventions are palliatives.  Durable solutions will have to come from within Venezuela and from regional initiatives.  The summit proposed by Ecuador will produce little without strong leadership that at the moment appears absent.  The Organization of American States seems fatigued by the issue, and its Secretary General’s personalization of the struggle against Maduro over the past year has left him few options as well. UNASUR has been severely weakened – most recently by Colombian President Duque’s announcement of his country’s definitive withdrawal from the group – and its interlocutors from past efforts to find a solution in Venezuela have refrained from public comment.  The leadership of UN refugee specialists is critical, but the Security Council is very divided over the Venezuela crisis and the Secretary General has failed to gain traction with efforts to take a more active political role to address the Venezuelan crisis.  With Maduro’s fórmula mágica for resolving Venezuela’s economic challenges having next to no possibility of helping, the hemisphere should not be surprised that the flow of refugees will surely continue.

August 28, 2018

* Michael McCarthy is a Research Fellow with the Center for Latin American & Latino Studies.  He publishes Caracas Wire, a newsletter on Venezuela and South America.

Fake News: Threat to Democracy

By John Dinges*

Newspaper stand in Mexico City

A newspaper stand in Mexico City. As traditional news media faces growing competition from social media and emerging technologies, fake news poses a threat to legitimate news media and democracy itself. / Pablo Andrés Rivero / Flickr / Creative Commons

Fake news threatens to destroy the fundamental values of a free press throughout the hemisphere, and only a redoubling of efforts to build and protect investigative journalism would appear to offer hope in stemming its growing influence.  Journalism faces a number of challenges, including violence, authoritarian pressure, manipulation by commercial interests, and competition from “social media.”  But the combination of fake news and new technologies to spread it pose an asymmetric threat to legitimate news media and to democracy itself.

  • In its strict – and now largely unused – definition, fake news is fabricated information that’s designed to look like journalistic content but whose real purpose is to twist the truth and manipulate people’s behavior. Also called “black propaganda” and “disinformation,” it was engendered principally by intelligence agencies.  The CIA used it during the Cold War in Chile and other Latin American countries.  The Soviet Union’s KGB disseminated fabricated documents with authentic-looking formatting and signatures from Chile’s secret police.  Cuba’s Radio Havana promoted the false narrative that socialist president Salvador Allende was murdered in the 1973 military coup – he actually committed suicide.
  • The phenomenon now is broader and more threatening. Fake news has evolved to include attacks on the legitimacy of independent media, and its agile use of social media spread rapidly through personal electronic devices enhances its impact.  U.S. President Donald Trump has alleged (as recently as July 15) that the “media are the enemy of the American people.”  Latin American politicians have used accusations of fake news to attack legitimate media.  In Venezuela, the Chavista government invented the concept of “media terrorism.”  Fake news techniques are found most commonly in campaigns by authoritarian parties and governments.  Russia’s intelligence services, under President Vladimir Putin, have weaponized the techniques and are now systematically using them to intervene in European and U.S. elections, notably in supporting the 2016 victory of Donald Trump.

There is no consensus among journalists on a solution.  Tough experiences have shown, for example, that government regulatory actions tend to backfire against a free press; political leaders all too easily resort to actions that lead to the imposition of political hegemony and control.  Media laws in Ecuador, Venezuela, and Argentina were hailed as progressive in some quarters – mandating fairer distribution of broadcast spectrum, for example.  But they were most effectively used to impose political control on opposition media.  Journalists, moreover, have been thrown off balance by the phenomenon of fake news.  They have struggled to respond to effective attacks on their credibility and so far have failed to develop the tools needed to mount an effective counterattack.

  • The double challenge is how to enable consumers of media information to distinguish between false and truthful information – especially because the fake news products are designed to resonate with their biases – and how to strengthen legitimate journalists’ ability to rebuild their beleaguered credibility. Talking Points Memo journalist Josh Marshall, speaking of politically motivated falsehoods in a memo published by the U.S. House Permanent Select Committee on Intelligence last February, said:  “Conventional news and commentary [are] incapable of handling willful lying in the public sphere.”  In the case of the committee’s misleading memo, most observers agree, the legitimate media published accurate fact checking, but apparently the accurate stories had little corrective impact on public perceptions of the memo – handing a victory to fake news.

The other serious threats that journalism faces – such as the murder of dozens of Mexican journalists with practically total impunity, and the consolidation of ownership of the media in the hands of very few owners in most countries – are not insignificant.  Fake news, however, presents a more serious, even existential, threat because it short-circuits all three of the main functions of journalism in the preservation and consolidation of democracy – as sources of information the public needs in voting, as forums for political debate, and as investigators to monitor and evaluate government and private power.  In the ongoing asymmetric war between journalism and fake news, investigative journalism, if protected and funded, would appear to offer the most efficient defense for democracy.  Digital platforms have created new tools and platforms for investigative journalism, and new organizations, such as ProPublica, the International Consortium for Investigative Journalism, among others, are raising the skill level of professional journalists and enhancing their best practices.  Investigative journalists have the methodology, international base, and decades of experience needed to be the guard dogs against fake news – to investigate its purveyors, lay bare their agendas, and, over time, re-establish the truth upon which all democracies depend.

July 24, 2018

*John Dinges is an emeritus professor of journalism at Columbia University and lectures frequently in Latin America on media and democracy and investigative journalism.

Venezuela: Maduro’s Ploy Backfires

By Michael McCarthy*

Maduro and the Venezuelan flag

Venezuelan President Nicolás Maduro. / President of Russia / Flickr / Creative Commons

Almost a month after Nicolás Maduro held a snap presidential vote to strengthen his political power, the ploy appears to have largely backfired and left him weaker.  The dynamics underlying the years-long crisis have not fundamentally shifted, but the deepening impact of the economic implosion on the oil industry poses a threat to vital state interests and regime stability.  Maduro’s crisis management will face another major stress test.

  • Even the government’s own dubious figures on voter turnout – 46 percent – were too low to give the election credibility, limiting Maduro’s ability to claim a strong mandate. Criticism of the government’s efforts to sway voters by distributing food, medications, and other necessities at polling places was intense.  All but a few loyal friends in the international community have been reluctant to congratulate Maduro.  China and Russia accepted the vote count, but Beijing appeared particularly cooler than in the past, while Ecuador and Uruguay issued statements aimed at depolarizing the situation.  The OAS General Assembly lacked the 24-vote threshold necessary to invoke the Inter-American Democratic Charter to suspend Venezuela’s participation in the regional body, but the Dominican Republic’s shift away from its previous support for Maduro must have been a blow.
  • Maduro’s victory is further overshadowed by the fact that as much as 85 percent of the pro-government vote went to the party of Diosdado Cabello, who leads a competing faction under the flag of the Partido Socialista Unido (PSUV), while Maduro’s Movimiento Somos Venezuela got only 5 percent. Longtime observers argue that a battle between Maduro and Cabello, an original member of the Chávez 4F movement that staged a failed coup in 1992, is heating up.  The PSUV will hold a party congress on July 28 – Chávez’s birthday – that promises to serve as venue for Cabello to pursue his leadership ambitions.

Maduro’s weakness appears to have motivated several actions he’s taken since the election.  Most observers believe that he directed a raft of prisoner releases to improve his sagging image, pacify the situation, and set the stage for dialogue.  He reportedly wanted to reshuffle his cabinet to shore up unity, but internal political difficulties apparently have delayed it temporarily.

  • He also released a U.S. national, Joshua Holt, who had been under arrest since 2016 on trumped up charges of espionage and conspiracy to undermine the constitution. Maduro’s goal may have been to disarm U.S. criticism and open a line of communication, but the day after the election he also expelled the U.S. Chargé d’Affaires and his deputy.  The U.S. State Department wasted no time in reciprocating by expelling two Venezuelan diplomats, and later, in the wake of the Holt release, it underlined that policy toward Venezuela “remains unchanged.”

More U.S. sanctions may be imposed, but Maduro’s self-destructive rule is doing his government even more harm.  A combination of increasing hyperinflation and a potential record drop in month-to-month oil production from May-June suggest a rapidly worsening economy.  Press reports suggest state oil company PDVSA will soon announce that it cannot honor its monthly production obligations with a number of key partners – a major blow for a government dependent on oil for 95 percent of its income.  After calling for a boycott of the May 20 vote, the traditional opposition breathed a collective sigh of relief that a majority of voters stayed home, but this does not give them the win they need to regain public trust.  Continually bleak prognoses once again stir speculation that the military will step in.  Yet it is not so simple.  The military seems to operate more according to informal networks and personality-driven hierarchies, creating divisions that make it hard for groups to credibly act in the name of the armed forces.  So far, senior officials seem to have determined that loyalties to a dysfunctional regime do not yet sufficiently threaten business and institutional interests for them to take action.

 June 14, 2018

* Michael McCarthy is a Research Fellow with the Center for Latin American & Latino Studies.  He publishes Caracas Wire, a newsletter on Venezuela and South America.

A Summit in Search of the Americas

By Carlos Malamud*

A large round table encompasses a room with various heads of state from the Americas

Last week’s Summit of the Americas in Lima, Peru. / U.S. State Department / Public Domain

The Summit of the Americas in Lima last weekend has left its organizers and principal participants with a bittersweet feeling, leaning to the bitter.  The absence of Donald Trump, Raúl Castro, and Nicolás Maduro reflects only the existing difficulties.  The bigger problems relate to the impossibility of achieving general consensus about the big hemispheric issues, such as corruption or Venezuela, and – of even greater concern – the lack of clarity and substance of the Latin America policy of the United States.

  • The Summits initially were linked to Washington’s efforts to create the Free Trade Area of the Americas (FTAA), but since that project’s failure they have represented the United States’ ongoing interest in Latin America and the Caribbean. That explains why, since the Summit process was created in 1994, no resident of the White House has missed a Summit – regardless of how complicated national and international situations have been.  That was until Donald Trump gave priority to the conflict in Syria over his relationship with Latin American counterparts.

The disturbing thing is not just Trump’s conflict with Mexico, or his hostility toward Cuba and Venezuela.  Neither is the deterioration of the image of the United States in Latin America since President Obama’s term ended.  The fundamental problem is the lack of clear indications from the Trump Administration about its intentions and objectives in the region.  This is the case even with the closest countries.  For example, several South American countries’ exports to the United States could be affected by the trade war between Beijing and Washington.  But no one has clear answers about the policies driving these events, and no one is taking steps to reduce the impact of them or of Washington’s lack of policy.

  • Even though the official theme of the Summit was “Democratic Governance against Corruption,” it was impossible for the participants to go beyond good words and advance any global solutions. Without a doubt, this is good evidence of the weakness of regional integration.  In their Final Declaration, the leaders were unable to include either a condemnation of Venezuela or a call to disregard its Presidential elections on May 20.  Instead, what we got was a statement by the Grupo de Lima plus the United States expressing extreme concern for the situation in Venezuela.  Despite the decline of the Bolivarian project and Maduro’s isolation, Bolivia, Cuba and some Caribbean states dependent for oil on Petrocaribe remain capable of blocking hemispheric consensus.

This probably will not be the last Summit of the Americas, but future of these hemispheric meetings depends in great part on the capacity of the governments in the hemisphere, beginning with the United Sates, to redefine continental relations and find anew the essence of the Americas.  This means more than just responding to the growing Chinese role; it means putting on the table the real problems that affect the continent and going beyond mere rhetoric about them.  For now, with hemispheric relations buffeted by the unpredictable slams issuing in the form of Trump’s tweets, it will be difficult to get there.

April 17, 2018

*Carlos Malamud is Senior Analyst for Latin America at the Elcano Royal Institute, and Professor of Latin American History at the Universidad Nacional de Educación a Distancia (UNED), Madrid.  A version of this article was originally published in El Heraldo de México.

Lima Group: Committed to Democratic Principles?

By Nicolás Comini*

Group of men and women stand at a podium

Government officials from different Latin American countries met in August 2017 to sign the “Lima Declaration,” establishing the Lima Group. / Ministerio de Relaciones Exteriores, Perú / Flickr / Creative Commons

The “Lima Group” – an informal alliance of 12 Latin American countries created to observe the sensitive situation in Venezuela – has shown that its defense of democracy in the hemisphere is inconsistent.  Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico, Panama, Paraguay, and Peru have on at least a handful of occasions condemned Venezuelan President Nicolás Maduro for stoking political violence, holding political prisoners, committing electoral fraud, and engaging in other abuses, justifying their positions as based on ethics, morals, and good practices.

The reactions of the Lima Group and its leading members to the situation in Honduras since that country’s presidential election in November, however, suggests that the values they espouse do not have universal application.  After OAS Secretary General Luis Almagro declared that the election lacked credibility and called for new elections, some countries’ pro-democracy fervor faded.

  • Argentine President Mauricio Macri’s administration quickly recognized Honduran President Juan Orlando Hernández’s victory and officially declared its “disposition to continue working for the development of closer ties of friendship and more cooperation between the two nations.” The Brazilian foreign ministry expressed its “commitment to maintain and strengthen the ties of friendship and cooperation that traditionally have united both countries.”  In Mexico, President Enrique Peña Nieto’s government quickly recognized Hernández as well, calling on “Honduran society to support dialogue in order to preserve peace and democratic stability in that sister nation.”

The discrepancies between the group’s rhetoric and actions appear to be rooted in various reasons.

  • Political alignments take precedence over values. Honduran President Hernández has been active in the group’s (and indirectly the OAS’) efforts on Venezuela.  Honduras is a member of the Lima Group, and Hernández is perceived by conservative governments as an ally to contain the spread of the left.  The risk of massive Venezuelan population displacement, with profound potential consequences for neighboring countries, contrasts with the situation in Honduras.  With the region entering a new election cycle, moreover, incumbents’ lack of support for Almagro’s position signals that they do not want the OAS messing around in their own electoral processes.
  • These governments also see Hernández as a strategic United States ally in Central America in combating drug trafficking, transnational criminal networks, money laundering, and irregular migration. Many of the governments may also refrain from criticizing the belief that Tegucigalpa benefits from the presence of 1 million Hondurans in the United States (more than half of whom the State Department says “are believed to be undocumented”).  In addition, Honduras was one of the eight countries that supported President Donald Trump’s rejection of the UN General Assembly Resolution asking nations not to locate diplomatic missions in Jerusalem.

The crises in Venezuela and Honduras are indeed different, and the international community’s interests in them are naturally different.  Maduro’s and Hernández’s failings affect other countries’ political and economic equities in different ways.  Maduro’s undemocratic actions increase unpredictability in the management of oil and other sectors of foreign interest, whereas Hernández’s represent predictability, if not stability, in areas that Washington cares about and Buenos Aires, Brasilia, and the rest of Latin America do not.  But the high-sounding values at stake – democracy, institutionality, and rule of law – are the same in both countries.  While Venezuela’s population is three times the size of Honduras’ and its political crisis arguably three times more advanced, the moral responsibility – and moral authority – of the Lima Group or its member nations is many times greater in a small, vulnerable, poor country like Honduras.  Security forces have gunned down some three dozen oppositionists and protestors since the November election, and allegations of human rights violations have soared, but Latin America’s major democracies have been silent.

  • The failure to support the OAS’ call for new elections was not just a stab in the back of Secretary General Almagro; it revealed that their rhetoric about the OAS Democracy Charter – embodiment of democratic values they demand be respected in Venezuela – are not as universal as they say. When the Lima Group last Tuesday (with considerable justification) rejected the Venezuelan National Assembly’s call for an early presidential election, the Hernández government’s signature was there alongside the others.  If universal democratic values and principles are not for universal application – if even an informal grouping will not criticize a small actor with whom they do not have major equities at stake – their value is much diminished.

January 30, 2018

* Nicolás Comini is Director of the Bachelor and Master Programs in International Relations at the Universidad del Salvador (Buenos Aires) and Professor at the New York University-Buenos Aires.  He was Research Fellow at CLALS.

Venezuela: Sliding into a Generalized Default

By Arturo C. Porzecanski*

Two bank bills in green and yellow

Venezuelan bonds from 1896. / icollector / Creative Commons

The Venezuelan government is now officially in default – per the leading credit-rating agencies (Fitch, Moody’s, and S&P) and the International Swaps and Derivatives Association (ISDA) – and seems to have no viable way out.  It has been three months since interest payments on various dollar-denominated bonds issued by the government and the state-owned oil company, PDVSA, have been late or not paid, with the total of coupons currently in arrears exceeding $1 billion.

  • In early November, President Nicolás Maduro announced that he would seek to restructure debt obligations, while suggesting the country would keep making payments during negotiations. As proof of his good intentions, he soon after paid a hefty $1.1 billion redemption payment on a PDVSA bond.  However, since a perfunctory meeting with some bondholders in mid-November, investors have not heard anything.
  • The government has blamed its precarious financial position on technical difficulties arising from financial sanctions imposed by the U.S. government – “the ongoing aggression, permanent sabotage, blockade, and financial persecution to which our people have been subjected” which “are in fact hurting the bondholders in international financial institutions.”

Once attempted, Venezuela’s debt restructuring – some $37 billion in government debt and $28 billion in PDVSA debt – could potentially become the world’s fourth largest, according to Moody’s.  A future restructuring could encompass $65 billion (plus interest arrears), compared to Greece in 2012 ($262 billion), Argentina in 2001 ($83 billion), and Russia in 1998 ($73 billion).

  • Restructuring negotiations with Venezuela will be difficult because the country owes at least another $65 billion to domestic bondholders, lenders from China and Russia, foreign airlines, banks and foreign suppliers, as well as foreign investors waiting to be compensated for nationalized properties. Another complication is that the validity of some debts could be challenged, especially by an eventual successor government, because not all received proper authorization (e.g., from the National Assembly).  Also, investors will be reluctant to grant meaningful debt relief unless the country’s capacity to honor the new obligations is substantially augmented, such as by taking drastic actions to revive the crumbling oil industry.  Finally, current U.S. sanctions would need to be relaxed to enable American investors to take possession of new government bonds from Venezuela incorporating the agreed-upon concessions (e.g., on maturity and coupons), in exchange for retiring the existing bonds – as per standard practice in debt restructurings.
  • An outbreak of disruptive litigation against Venezuela is a significant risk because the indentures of outstanding bonds specify that any disputes that arise are to be settled by U.S. rather than Venezuelan or international courts. Impatient creditors with favorable court judgments could make it difficult for Venezuela to keep repatriating oil export earnings home.  As the Argentina-related litigation and arbitration saga demonstrated, it is possible, though not easy or quick, for private investors to collect from a deadbeat government.

Maduro’s widening default is but the latest casualty of his and Hugo Chavez’s maladministration of the economy and public finances.  Government revenues relative to GDP are now less than half their level in 2013-14, while government spending is still running well above the levels of four or five years ago.  As a result, the fiscal deficit is now a whopping 25 percent of GDP and is financed mainly by the Central Bank, feeding hyperinflation.  A drop in oil production to its lowest level in three decades – a mere 1.8 million barrels per day as of late 2017 – and lower world prices have caused oil export earnings to shrivel up from almost $95 billion in 2012 to less than $30 billion in 2017 – a $65 billion drop.  Not even a drastic cut in government dollar sales for import purposes, which has provoked an unprecedented $50 billion compression of imports (from $65 billion in 2012 to about $15 billion in 2017) has been able to offset the calamitous fall in exports.  The default is also rooted in Venezuela’s gradual loss of its ability to sell new bonds abroad to replace maturing obligations and to help cover the interest bill.  Without the benefit of raising any fresh bondholder financing during 2017, last year the government would have had to come up with $10 billion out of pocket in order to cover all debt-service obligations to bondholders.  The equivalent debt-service figures for this year and next are on the order of $9 billion each – realistically, a “Mission Impossible” absent much higher oil production and prices.  The Trump Administration’s sanctions, forbidding U.S.-based investors to purchase new Venezuelan government bonds from August 25 on, were just the last nail in the external financing coffin.

January 9, 2018

*Dr. Arturo C. Porzecanski is Distinguished Economist in Residence at American University and Director of the International Economic Relations Program at its School of International Service.

The Anticorruption Imperative for Latin America

By Matthew Taylor*

Bar graph showing accountability in Latin America

Graphic courtesy of author. For a larger version, please click here.

Latin America’s reactions to the massive transnational scandals involving the Brazilian construction giant Odebrecht and its subsidiary Braskem are an important sign of progress in anticorruption efforts.  But across the region, courts’ reluctance to challenge elites remains a major obstacle to deeper accountability.  Brazilian, Swiss, and U.S. authorities’ announcement in December 2016 of a multibillion dollar global corruption settlement with the Brazilian firms – valued at $3.5 to 4.5 billion – was remarkable for being the largest in history.  It was also shocking for its revelations: Odebrecht admitted using a variety of elaborate subterfuges to launder bribe payments and corrupt proceeds, including by setting up a bribe department and buying an offshore bank.  Graft allowed executives to rewrite laws in their own favor, and guaranteed that the right officials were in the right place when public contracts were up for bidding.  The firms netted $3.60 for every $1 they spent on bribes in Brazil, and admitted to paying $788 million in bribes across twelve countries, including ten in Latin America.

The political salience of the charges is roughly similar in all ten Latin countries, muddying the reputations of presidents or former presidents in Argentina, Colombia, the Dominican Republic, Peru, Panama, Venezuela and, of course, Brazil.  Ministers and high-level officials have been implicated in the remaining countries: Ecuador, Guatemala, and Mexico.  Nearly one year after the settlement, it is time to ask how well law enforcement and judicial processes are resolving the allegations against these high-powered public and private sector elites.

  • In a paper forthcoming in Daedalus, I argue that accountability can be thought of as the outcome of a basic equation – A = (T + O + S) * (E – D) – combining transparency (T), defined in its most essential sense as public access to information about the government’s work; oversight (O), meaning that government functions are susceptible to surveillance that gives public or private agents the right to intensively evaluate the government’s performance; and sanction (S), effectively punishing wrongdoing and establishing societal norms to their rightful place. These are tempered by institutional effectiveness (E) – understood as the outcome of state capacity, relevant laws and procedures, and citizen engagement – and political dominance (D), which diminishes the incentives for active oversight or energetic sanction.  The graph above uses a combination of data points from the World Justice Project to measure each of the five variables.
  • The comparison yields mixed findings. On average, the nations implicated in the Odebrecht settlement do quite well on transparency, effectiveness, and political dominance – the outcome of a generation of democratic rule (with Venezuela being the obvious outlier).  But all ten countries perform comparatively poorly when it comes to oversight, and abysmally when the criterion is sanction.  This does not bode well for accountability, especially if we consider that among the Odebrecht Latin Ten, the highest-scoring country on the sanction criteria is Argentina, whose score is still below the middle-income country average.  In Brazil, where trial courts have led the way in imposing sanctions on business elites, political leaders are nonetheless protected against meaningful sanctions by an arcane system of privileged standing in the high courts.

Latin American judicial systems – long rigged to protect local economic and political elites – remain the principal obstacle to accountability.  The Odebrecht settlement signaled that a new day has arrived: new international norms and law enforcement across multiple jurisdictions are likely to continue to upset the cozy arrangements that have protected the region’s elites from corruption revelations for decades.  But true accountability will only come when local courts and prosecutors are empowered to effectively punish corrupt elites.  That implies changes in legal procedure, new laws, and most importantly, political will.  Perhaps the Odebrecht case will galvanize domestic public opinion and mobilize policymakers about the need to improve local justice systems.  The enormous costs of corruption revealed by the Odebrecht settlement suggest that change cannot come soon enough.

November 6, 2017

* Matthew Taylor is Associate Professor at the School of International Service at American University.  His forthcoming article in Daedalus is entitled “Getting to Accountability: A Framework for Planning and Implementing Anticorruption Strategies.”

Venezuela: Can Trump’s Coercive Diplomacy Help?

By Michael McCarthy*

A large auditorium-style room filled with people watching a speaker at the front

U.S. President Trump addresses the United Nations General Assembly on September 19, 2017. / John Gillespie / Flickr / Creative Commons

U.S. President Trump’s new rhetorical attacks and financial sanctions against the Venezuelan government suggest a shift toward coercive diplomacy aimed at achieving regime change, but U.S. power faces significant limits in the conflict-ridden country.  At the UN General Assembly on Tuesday, Trump called President Maduro an authoritarian and said “this situation is completely unacceptable and we cannot stand by and watch.”  Washington’s approach emphasizes sticks – sanctions against President Maduro, senior advisors, and threatened action against the oil sector – over carrots, while also voicing support for the opening of new mediated face-to-face talks between Maduro and the opposition.  A contact group of six Latin American and four European countries is promoting the talks, with the backing of UN Secretary General and the Vatican, to help avoid the worst-case scenario of open conflict.  Previous efforts to coordinate a multilateral coalition that simultaneously keeps the pressure on the government while opening negotiation avenues have failed – and agreeing on a roadmap is even more complex in view of the installation of the Constituent Assembly that stripped the elected, opposition-controlled National Assembly of its powers.

  • Trump’s new Executive Order directs financial sanctions that come close to directly threatening Maduro’s vital supports. It bans Caracas from issuing new debt in the United States and prohibits U.S.-based CITGO – a wholly owned subsidiary of the Venezuelan state oil company – from repatriating dividends to Caracas.  These measures will impose austerity on Maduro (who claims he will still make upcoming debt payments) and future actions are likely to try and undermine the government’s economic foundations.
  • In addition to installing the Constituent Assembly, Maduro seems to be pursuing a new regime-survival strategy in which he plays the role of a non-vengeful victim. Maduro criticized Trump’s sanctions and called him “the new Hitler” after the UN speech on Tuesday, but he’s also offered donations to aid post-Harvey recovery efforts in Houston and invoked John Lennon in a call for “giving peace a chance” in a New York Times ad earlier this month.  To regain a degree of credibility, Maduro will probably consider making elections for Governors slated for October 15 look competitive, but whether he has the political capital with his base to make bigger political or economic moves is unclear.  He may look to establish a new institutional equilibrium of dual legislatures, though it would hinge on removing the threat of retaliation against the opposition via the Constituent Assembly’s so-called “Truth Commission.”  He may also try to address massive fiscal imbalances by reforming the multi-tiered exchange rate, though this would be difficult as the system’s subsidized dollars help underwrite regime loyalty.

While the United States, Europeans, and Latin Americans are operating in loose formation – with Washington ratcheting up pressure while everyone else scrambles for negotiations – China and Russia are sticking to their strategic game.  As Maduro’s main financial backers, they are betting talks can stabilize the situation bit by bit.  They may kick in some more financial assistance if and when Maduro restores some stability by holding peaceful regional elections, delivering on the dialogue, and making large upcoming debt payments.  But while there is some basis for the geopolitical schadenfreude of Beijing and Moscow making it harder for Washington in Caracas, there are also signs that both have buyer’s remorse.  While they prefer Maduro stay afloat, they seem unlikely to extend loans that help stabilize the economy unconditionally.

None of the piecemeal actions that Maduro is apparently contemplating can defuse the political and social crisis, but a combination of steps may be enough to convince China and Russia to stay in the game.  Despite Trump’s statement that he was “not going to rule out a military option” in Venezuela, the Administration apparently is open to a policy of coercive diplomacy that includes genuine support for talks.  Trump attacked his predecessor for “leading from behind,” but figuring out how to sequence sticks and carrots in coordination with Latin American and European countries may require just that.  The bottom line is that the chance of a breakthrough on the biggest issues – the Constitutional road map and conditions for electoral participation – remain low, although some movement by both parties toward the middle seems realistic.  Despite the actions of outside actors, the situation is likely to remain poised over a knife-edge – without the catharsis of either peace or regime change.

September 21, 2017

* Michael McCarthy is a Research Fellow with the Center for Latin American & Latino Studies.  He publishes Caracas Wire, a newsletter on Venezuela and South America.

OAS Secretary General’s Third Way Stumbles

By Stefano Palestini Céspedes*

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Luis Almagro, OAS Secretary General, at the first day of General Assembly in Cancún, June 2017. / Juan Manuel Herrera / OAS / Flickr / Creative Commons

OAS Secretary General Luis Almagro’s effort to drive the organization’s actions on Venezuela through international mobilization appears to have run its course without success during the recent General Assembly.  From the outset, Almagro faced the tough dilemma of what to do when OAS members did not want to fulfill their commitments and were reluctant to invoke the Inter-American Democratic Charter against the Venezuelan government.  As in most international organizations, the OAS Secretary General does not have strong authority to enforce its legal instruments and essentially had two options to cope with the dilemma:

  • To admit his lack of authority – and thereby signal to the world that the organization’s commitments, such as the Democratic Charter, are not credible. In the international system, there are plenty such non-credible and non-enforceable commitments, ranging from the EU Treaty (Article 7) to the Kyoto Protocol.
  • To use his limited powers to persuade member states from within – persuading national representatives to take action. This approach risks to be perceived from outside as inaction.  If persuasion succeeds and member states decide to enforce their commitments, the credit will most likely go to the member state playing the role of leader, and not to the institution.

Faced with Venezuelan President Maduro’s rejection of the OAS’s good offices and with member states’ preference to assign diplomatic leadership to UNASUR (over which Maduro had influence), Almagro chose a third way:  to drive OAS internal processes by pressing member states from outside via international public mobilization.  Through a series of actions in his own name – issuing reports, statements, and posts on social networks – Almagro called the attention of the international community and media to the OAS’s naming and shaming of Venezuela.  By doing so, he indirectly raised the cost of inaction of member states reluctant to take a strong stand.  Maduro’s increasingly undemocratic behavior, and the election of new governments in some key states, particularly Argentina and the United States, improved the odds of success.  Indeed, the OAS gave the Venezuela crisis unprecedented salience, and on April 3 the Permanent Council passed a resolution (approved by consensus but with only 17 states in the room) that, for the first time in OAS history, demonstrated that a democratically elected government could be condemned because of “unconstitutional alterations of the constitutional order.”  A core group of 14 countries – representing more than 90 percent of the hemisphere’s population – coalesced to back up the activist Secretary General.

  • The 47th General Assembly in Cancún was supposed to crown the strategy’s success by moving the OAS from a condemnation of Venezuela towards a common plan for engagement – specifically one embracing the anti-Maduro opposition’s demands. Venezuelan diplomats managed to convince some Caribbean states – dependent on Venezuela’s Petrocaribe program to withhold support of the resolution, causing the OAS-14’s plan to fail to achieve the two-thirds majority by only three votes.  (An alternative resolution put forward at the last minute by San Vicente also failed.)

Secretary General Almagro’s “third way” approach was risky, made under the assumption that the two traditional options would fail.  Reasonable observers can second-guess him, but there is little evidence that either of the other options would have fared any better.  The crisis in Venezuela is a hard case for the Inter-American Democratic Charter, and the OAS’s strict intergovernmentalism militates against decisive action.  Almagro’s public relations pressure from outside arguably worked with the larger states, but alienated the smaller.  A more cautious approach (as I argued here) perhaps would have helped to bring CARICOM states on board.  For now, what is clear is that the OAS will not play a major role in managing Venezuela’s democracy crisis – unless the already severe situation in the country shakes even the OAS fence sitters.  A pending question is whether the OAS might succeed in inventing a role for itself in post-crisis Venezuela.

June 30, 2017

Stefano Palestini Céspedes is a former CLALS Research Fellow and Postdoctoral Fellow at the Department of Political and Social Sciences at the Freie Universität Berlin, where he specializes in international organizations and regional governance.

Venezuela: Stalemate in a War of Attrition?

By Michael McCarthy*

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Members of Venezuela’s opposition march against President Maduro at a demonstration in April 2017. / A. Davey / Flickr / Creative Commons

The pace of provocation and counter-provocation in Venezuela has reached a new high, and there does not seem to be a stabilizing force that can induce a de-escalation.  It’s unclear if the country’s power struggle is experiencing a new cycle in its multi-year confrontation, or if two months of protests mark the start of a downward spiral that will plunge the country into even deeper crisis.  Neither the government nor opposition appears near the point of exhaustion that would make efforts at a meaningful negotiated settlement fruitful.  An examination of their agendas, moreover, paints a picture of an intractable conflict.

  • President Nicolás Maduro is in raw survival mode – perhaps driven by fear of disgrace as the man who lost the Chávez legacy entrusted to him – and is forcing a rewrite of the Constitution as he lurches toward outright dictatorship. He deeply resents that the opposition never acknowledged the legitimacy of his election, and he was shaken when jeered and egged at a public rally recently.  He has condoned violence by his party’s vigilantes and the Guardia Nacional, but almost certainly grasps its political cost, including within the government and military.  Faced with the certain prospect of persecution by an opposition-dominated government, he probably sees no incentive to negotiate his denouement.
  • The opposition remains heterogeneous and is united almost exclusively in the fervent belief that Maduro – through evil and incompetence – is destroying the country. Government repression and their own self-inflicted wounds have precluded development of a sophisticated strategic planning capacity.  Although opponents’ preferred option is to remove Maduro at the ballot box, some also apparently believe that ratcheting up the violence will force the military – reluctant to intervene – to lean on Maduro to depart.
  • The senior ranks of the military, compromised by corruption and narco-trafficking during the Chávez-Maduro era, show no signs of wavering, but discontent among field-grade officers at the Regional Commands – who will have to serve under a successor government – may become palpable during the military promotion season that formally concludes July 5. As the Guardia Nacional soils its reputation, the military wants to stay off the streets as long as possible.  There’s no evidence of sympathy with the opposition; their primary concern is avoiding being part of the bloodshed.  How the military would orchestrate a post-Maduro era is unknowable.
  • The country’s economic and financial crises have devastated oil production, making it impossible for Maduro to pump his way out of the crisis and increasing his reliance on foreign capital. Indebting itself further at an extremely high cost, the government bought some time by selling $2.8 billion in bonds to Goldman Sachs – through a counterparty – for $865 million in cash.
  • The sectores populares are highly agitated but lack leadership. The working class has largely fallen into poverty, now estimated at 80 percent nationally, and neighborhoods previously home to chavismo’s base have shown tolerance for the opposition and outright disdain for the ruling coalition, including knocking down statues of Hugo Chávez.

Neither the government nor opposition has yet shown concern that its resources and energy are nearing exhaustion – and the military, so far, is not prepared to tell one or the other to give up the struggle.  As long as both sides think that they can break the other, moreover, the prospects for either regime collapse or a mediated settlement seem unlikely, and it is hard to imagine the emergence of a stabilizing force that can mitigate conflict.  External forces may try to facilitate a resolution but are unlikely to succeed.  Brazil’s corruption scandals have removed it as a player; UNASUR’s failures have rendered it irrelevant; and Maduro preempted any final OAS censuring by announcing withdrawal from the organization (though his foreign minister will attend its General Assembly this month).  Washington continues to rely on sanctions – most recently freezing the assets of eight members of Venezuela’s Supreme Court – but seems reluctant to get more deeply involved, and given the turmoil that characterizes the Trump administration, it may in any event be incapable of doing so.  Absent the emergence of a viable formula within Venezuela to overcome the costly stalemate, the war of attrition between regime and opposition will likely continue without meaningful involvement of external actors.

June 5, 2017

* Michael McCarthy is a Research Fellow with the Center for Latin American & Latino Studies.  He is International Associate for Venebarómetro polling and publishes Caracas Wire, a newsletter on Venezuela and South America.