Latin American Integration: No New Ideas

By Carlos Malamud*

Heads of state stand for a picture at the 14th ALBA Summit held in Caracas in 2017

Heads of state at the 14th ALBA Summit held in Caracas in 2017/ EneasMx/ Wikimedia Commons

Several proposals claiming to promote regional integration in Latin America, particularly South America, have received attention in recent months, but proponents’ continued reliance on the same political-ideological alignments as always leaves little hope of bridging the deep splits in the region. Coming in the wake of completion of the EU-Mercosur trade agreement, after arduous and complicated negotiations, the proposals appeared to be good news. But that has not been the case.

  • The new push follows the creation of PROSUR by right-leaning governments in March and, more recently, efforts to relaunch UNASUR by left-leaning groups such as the Grupo de Puebla (Progresivamente) – each claiming commitment to unify the region behind their political visions. Two of the main advocates, Chilean President Sebastián Piñera on the right and Argentine Presidential Candidate Alberto Fernández on the left, have taken the easy path of convoking like-minded supporters while rejecting opponents.
  • These groups appear to have learned nothing from the first decade of the 21st century, when Venezuelan President Hugo Chávez pushed his Bolivarian project. The three efforts emblematic of the period – ALBA, CELAC, and UNASUR – all eventually failed. The rise of neoliberal governments in various countries since then has produced an even more complex situation. The new governments have continued emphasizing ideological conformity, reducing prospects for unity. Last December, a “Conservative Summit of the Americas” inspired by Brazilian President Jair Bolsonaro and his son met in Foz de Iguazú to rally the most extreme elements of the region’s right, conditioning participation on total agreement with its tenets.

There are exceptions.  The Pacific Alliance – a trade accord launched by Chile, Colombia, Peru, and Mexico eight years ago – has remained inclusive despite changes of government in each country. MERCOSUR, with its solid foundation and intense commercial exchanges, has also resisted ideological temptation in its way, although dismissive insults between President Bolsonaro and Argentine candidate Fernández do not bode well (even if both know that they need each other in the long run). But the fear is that extreme ideologies will, once again, trump national interests.

The intense electoral cycle of the past three years, and the pending elections in Argentina, Bolivia, and Uruguay, further complicate the situation. As the “turn to the right” has not turned out as predicted, the results of these three races this month will make regional relations even more unstable. The lack of a new vision for promoting Latin American regional integration is aggravated by the growing sense among both extremes of the political spectrum that they have to dig trenches.

  • The need for a new vision is obvious as the growing attacks on multilateralism and the escalation of the U.S.-China trade war are going to force practically all international actors to take sides. Latin America will suffer potentially grave consequences if its governments and political leaders don’t grasp that inclusion, not exclusion, is the only way to advance unity and integration. Acceptance of differences, dialogue, and negotiation are what’s needed now, as is a creative imagination that can accept reality as it is, with all its problems and imbalances. The question is whether the existing leaders will be able to overcome this sad state of affairs.

October 1, 2019

*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 originally was published in the Elcano Blog.

Venezuela’s Communal Councils: Holding on During Dark Times

By Michael McCarthy and Jared Abbott*

Venezuelan President Nicolas Maduro walking with community leaders

Maduro in Protected Cultivation Houses of Quibor-Edo / Flicker / Creative Commons /https://www.flickr.com/photos/chavezcandanga/8402610886/in/photostream/

Venezuela’s Communal Councils (Consejos Comunales), created in 2006, endure as an influential grassroots mechanism amid the country’s cataclysmic economic depression and political crisis. Increasingly, their primary function appears to be helping embattled President Nicolás Maduro’s ruling party maintain loyalty among its declining base. Three factors linked to Chavismo’s melding of party and state have enabled the Councils to survive amid radically changed conditions: linking them to state-run food distribution programs, giving them problem-solving functionality, and building block-level group ties in Council-created spaces.

  • Survey data we collected in late 2018 demonstrates that participation in Councils has declined as resources have contracted, but the groups remain alive and well. Our poll of more than 1,078 Communal Council participants revealed that about a third perceive the Councils’ reach as remaining as strong as before the economic slide accelerated four years ago, while another 13 percent believe participation has even grown. Sixty-two percent of respondents who reported ever participating said that they still did in 2018.
  • The Councils have been critical in minimizing major disturbances in popular sectors over the past five years through the role they have played – in coordination with the Comités Locales de Abastecimiento y Producción (CLAP) – in distributing monthly food boxes to a large majority of the population. Not surprisingly, of all the Councils’ thematic committees, food committees are by far the most active. Council participants reporting being active in a food committee increased from zero in 2009 to 20 percent in 2018.
  • Our survey and interviews show that the Councils have been crucial in sustaining the party’s capacity to mobilize its core supporters in key moments such as during widely criticized elections that Maduro held in May 2018. Our research also finds that most Councils are not necessarily ideologically soaked spaces of pro-regime behavior, although many citizens understand them in highly political terms. Participation, while heavily skewed toward Chavismo, reflects the whole Venezuelan political spectrum and often transcends partisan politics. Our survey shows, moreover, that over 60 percent of Venezuelans reported as recently as last December that the Councils benefit the whole community, not just party members. This practical problem-solving dimension helps enable the Councils to retain relatively broad support among Venezuelan society.
  • Our survey results suggest that the Councils are effective in increasing positive attitudes toward the government even in the absence of direct material benefits. For instance, of those who reported that their opinion of the ruling party improved since they began participating in a Council, the vast majority cited their improved social status in the community or increased political efficacy, rather than the receipt of material benefits through the Councils, as the reason for their improved attitude toward the party.

The Councils have operated across three competing models: a “deepening democracy” model focused on expanding avenues of citizen participation within the existing political system; a utopian “dual power” model aimed at replacing the existing political system with a radical direct-democracy; and a “vanguardist” model where the councils serve as a direct instrument of the party to mobilize and grow the electoral base. While all three models played an important role during the early years of the Councils, the vanguard model has recently superseded the others. Although still sometimes used by different party factions to stimulate debate about the government’s policies and performance, the Councils’ role in consolidating a loyal base of supporters to withstand the current period of economic and political crisis has been much more important.

The Councils’ evolving relationship with the ruling Socialist Party raises serious questions about whether, as political and economic conditions grow less stable, participatory institutions like the Councils open political spaces for engagement and incorporation, or devolve into a cynically deployed tool of populist autocrats – with unsettling implications for the future of participatory democracy that some leftist parties in Latin America advocate. Indeed, the Venezuela example suggests that, when political and economic conditions become less favorable for sustaining participatory institutions, most parties will either abandon them or instrumentalize them as part and parcel of an authoritarian power consolidation strategy. The groups’ changing political character becomes a matter not of “if,” but of “when.” Political party leaders can, if they want and if they try, stay true to the participatory vision through imaginative leadership and creative organizational schemes. In Venezuela, however, they have not.

September 9, 2019

* Michael McCarthy is a Research Fellow with the Center for Latin American & Latino Studies, Adjunct Professor of International Affairs at GWU’s Elliott School, and publisher of Caracas Wire, a newsletter on Venezuela and South America. Jared Abbott is a PhD Candidate in Political Science at Harvard University. This is adapted from their article, Grassroots Participation in Defense of Dictatorship, in the Summer 2019 Fletcher Forum.

Venezuela: When Will the Military Flip?

By Fulton Armstrong

venezuelan military marching

A military exercise in Caracas, Venezuela. / Cancilleria del Ecuador / Flickr / Creative Commons

Venezuelan leader Juan Guaidó and his backers, including the Trump administration, are increasingly focused on swaying the country’s security forces to switch allegiance from Nicolás Maduro to the National Assembly President.  Guaidó has appealed to the military to support his efforts to “restore constitutional order” and is pushing through the legislature a law giving amnesty to cooperating officers for certain crimes committed since President Chávez took office in early 1999.  U.S. officials, apparently to shake up the armed forces, continue to say that “all options are on the table”; National Security Advisor John Bolton held a notepad at a press briefing referring to “5,000 troops to Colombia.”  Maduro, for his part, continues to orchestrate loyalty pledges from senior officers and preside over military exercises.

  • Several small units of the military have flipped, and Maduro’s military attaché in Washington – serving there for a number of years to get medical treatment – has declared loyalty to Guaidó. The vast majority of the officer corps, however, still maintain an appearance of commitment to Maduro.

The most common explanation for the military’s apparent loyalty cited by Maduro’s opponents is that the high command has been bought off by opportunities to engage in corruption.  Other factors, however, may better explain why the institution has stuck with him this long.

  • Ideological reasons? Most available information suggests that Madurismo – with its gross, incompetent mismanagement of the economy, corruption, and thuggery – is not attractive to the officer corps.  But they appear to know that Chavismo has deep roots; that the elites, including the more hardline opposition, don’t understand the significance of change since 1999; and that efforts to return to the pre-Chávez era would be destabilizing and bloody.
  • Financial reasons? Although historically and perennially corrupt, senior officers arguably have been able to do more corruption under Maduro than under another regime.  That said, in their heart of hearts, they probably know a lot of their activities will continue under any government.
  • Distrust of the opposition? The military traditionally has communicated better with opposition moderates, such as Henrique Capriles, and in recent years has shown no trust in the faction that Guaidó comes from and its leader, Leopoldo López.  Information is very limited, of course, but many officers may believe that this group’s obsession with overthrowing Maduro and its no-negotiation stance has contributed to the crisis.  Senior officers’ confidence in Maduro’s ability to hold the country together seems to have evaporated, but the opposition have not presented a viable, comprehensive alternative.
  • Concern about the López-Guaidó faction’s ties with Colombia and the U.S.? Good information is elusive, but senior officers’ posture suggests that they see Bogotá’s strategic objective to keep Venezuela weak and Washington’s objective to purge the country of Chavismo and themselves.
  • Concern that the “international community” will not give them a fair deal? Distrust of Washington seems obvious, but – within their logic – senior officers almost certainly are suspicious of OAS Secretary General Luis Almagro, the Lima Group, Brazilian President Jair Bolsonaro, and others as intolerant and biased.
  • Belief that, in the face of total chaos and widespread bloodshed, they can force a last-minute peaceful solution onto Maduro? Senior officers presumably have good enough intelligence to know when and how to intervene – and persuade Maduro to accept a peaceful solution and fly into exile.  The bigger problem at this point is that they do not see a viable alternative to sticking it out.
  • Fear that Maduro’s people have deeply penetrated officer ranks, and their lives will be at stake if they move against him? As the scope of the crisis grows and the credibility of Maduro’s power begins to slip, this would appear now to be less important.  Officers talk among themselves more than outsiders think.

The Venezuelan military’s threshold for intervening against civilian governments of any stripe has always been high, amplified by the embarrassment of the reversed coup against Chávez in 2002.  None of the factors that, on balance, still appear to favor sticking with Maduro is unmovable.  Distrust of the United States, OAS, and the Lima Group – the outside forces that legitimized Guaidó’s claim to power – leave the military with no reliable allies; Cuban, Russian, and Chinese friends can provide no solace.  A credible negotiation proposal from someone like Mexican and Uruguayan Presidents López Obrador and Vázquez, especially if backed by Pope Francis, could conceivably give them a credible direction in which to push Maduro.  But at this moment – subject to rapid change – the balance still argues in favor of the military fearing a new course.

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.

Venezuela: Stalemate in a War of Attrition?

By Michael McCarthy*

33792960765_7a1d866299_h

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.

Latin America: The Spirit of Constitutionalism under Attack

By Maxwell Cameron*

Venezuela constitition

A participant in a march in Venezuela holds up the country’s constitution. / TeleSURtv / Flickr / Creative Commons

Recent events in Paraguay and Venezuela raise yet again the issue of whether political leaders are capable of deliberating and acting in ways that show an appreciation for constitutional essentials, or whether they choose instead to perform their roles and offices in ways that continuously test constitutional principles and, over time, contribute to their erosion.  The principles of re-election and term limits are important in every presidential democracy, the product of historical circumstance.  In the case of Paraguay, a dictatorship under strongman Alfredo Stroessner from 1954 to 1989, sensitivity to the idea of a president serving for too long is strong.  Venezuela’s elimination of term limits a few years ago set a dangerous precedent.  Other constitutions limit incumbents to one term (Mexico, Paraguay) or two terms (United States, Colombia); in some constitutions, presidents cannot be re-elected immediately but can run later after a term has elapsed (Peru, Uruguay).

  • More important than the constitutionality of term limits is that the re-election issue be settled in a way that commands the assent of all parties – within a certain spirit of constitutionalism. Paraguayan President Horacio Cartes’s error was to think that he could change the constitution by means that violated this spirit, even if the public would arguably support a modification of the re-election rule if pursued in the right way.  (Since the fall of Stroessner, the Partido Colorado, the pillar of his rule, has won every election except in 2008, when Catholic priest Fernando Lugo was elected.  Lugo was deposed in 2012.)  The President of the Senate, Roberto Acevedo, opposed the change and was outraged by the way it was adopted: the Senate voted in a special session held behind closed doors.  In that session, 25 Senators approved the measure, bypassing the opposition Partido Liberal Radical Auténtico.

The showdown in Venezuela over President Maduro’s effort to shut down the congress was another undemocratic blunder.  A decision by the Tribunal Supremo de Justicia (TSJ), Venezuela’s supreme court, to arrogate legislative functions to itself or delegate them to other branches or agencies was unconstitutional.  (The TSJ has the power only to declare a law invalid or that another branch of government is operating outside the law.)  When the Fiscal General de la República, Venezuela’s equivalent of attorney general, Luisa Ortega Díaz argued that the TSJ’s decision was unconstitutional, she gave herself political cover by expressing loyalty to the Constitution of 1999 – the legitimacy of which has long been undermined by the fact that it is a document made to measure for chavismo.  As a result of this and significant domestic and international pressure, the government backed down – a rare event.  The attorney general’s insistence that the constitution not be violated indicates that a spirit of constitutionalism among chavistas is not completely dead, but it also shows that it remains a mechanism for coordinating the actions of agents within the government.  Her position also raises the possibility of a split between constitutionalists and hardline militarists within the regime.

Democracy is not just a system of rules.  It requires politicians to acknowledge and respect the essential constitutional agreements that have to underpin the struggle for power in a self-governing community.  The crises in Paraguay and Venezuela both forewarn of the dangers of excessive partisanship and the risks of playing fast and loose with constitutional rules.  Something similar seems to be playing out in Ecuador, where allegations of fraud have been made by the opposition.  If spurious, they are condemnable; if supported by evidence, they are deeply disturbing.  Either way, they reflect mistrust in institutions after a decade of rule by Rafael Correa (Likewise, U.S. Senate Republicans’ threats to use of the “nuclear option” to confirm Judge Gorsuch threatens to deepen the politicization of the U.S. Supreme Court.)  The cost of the failure of politicians and citizens to cultivate a spirit of constitutionalism is very heavy.  In Paraguay, it has resulted in deadly protests and resignations by top officials; in Venezuela it has taken the country to the brink of civil war; in Ecuador, there is a real prospect of debilitating governance problems as Lenín Moreno of Alianza PAIS takes office; and in the United States we are starting to see the kinds of governance problems that have long been associated with the “politicized states” (to use Douglas Chalmers’s phrase) of Latin America.

April 5, 2017

* Maxwell A. Cameron is Director of the Centre for the Study of Democratic Institutions at the University of British Columbia.

Venezuela: Trying to Stay Afloat

By Michael McCarthy* and Fulton Armstrong

Venezuela Oil Maduro

Photo Credit: Democracy Chronicles and Charles Henry (modified) / Flickr / Creative Commons

Venezuelan President Nicolás Maduro continues to receive increasingly bleak economic news, and his modestly positive policy responses seem unlikely to help.  Oil revenues dropped 293 percent from 2014 (US$37 billion) to 2015 (US$12.5 billion).  The value of oil exports, which account for 95 percent of the country’s export earnings, has dropped to a 30-year low ($30 a barrel), accelerating a recession, paralyzing shortages, and soaring inflation.  The Central Bank reported that inflation reached 180.9 percent in 2015, and that the GDP contracted for the second consecutive year (5.7 percent).  Maduro blamed an “imperialist strategy in a petroleum war” aimed at destroying OPEC.  He also asserted that Venezuela suffered from an “international financial blockade” that – by obstructing the country’s efforts to refinance its debt – was intended to force it “to its knees” and to “take over” its wealth.

Several days after celebrating a Supreme Court decision reaffirming his authority to declare an “economic emergency,” which the opposition challenged last month, Maduro this week announced several modest economic measures aimed at stemming the slide.

  • He ordered a 60-fold increase in gasoline prices – dramatic-sounding but preserving Venezuelan gas (about US$0.23 per gallon at the black-market exchange rate) as one of the cheapest in the world – but the decision is significant as the first increase in about 20 years. An increase in 1989 triggered riots – the famous Caracazo that most analysts cite as the beginning of the end of the old order that Hugo Chavez toppled definitively when elected President in 1998.  In allusion to this past, Maduro said he “hoped people on the streets would understand.”  (Caracas-based consultancy Ecoanalítica estimates that the existing fuel subsidy costs the Venezuelan government US$12 billion a year.)
  • Maduro also announced a 37 percent devaluation of the bolívar – from 6.3 to 10 to the U.S. dollar – for official exchange rates used for the essential goods like food and medicine. The bolívar trades at about 1,000 to one on the black market, but the decreased subsidy implicit of the official rate for necessities is nonetheless significant.
  • Venezuela’s proposal for an OPEC freeze in oil production, in hopes of driving oil prices back up, drew supportive remarks from Qatar, the United Arab Emirates, Russia, Saudi Arabia, and even Iran, but the scheme has lacked traction. Industry observers said one reason is that Tehran is eager to increase exports to regain market share as sanctions against it are lifted.
  • Maduro replaced economic czar Luis Salas – known as a hardline leftist – just five weeks after appointing him, and appointed in his place a more business-friendly economist, Miguel Pérez Abad, who had been serving as Minister of Commerce. Pérez Abad, whose appointment the President of the Venezuelan Chamber of Commerce described as a “friendly sign,” has publicly (and accurately) said that Venezuela must simplify its byzantine exchange rate system.
  • These changes come amid Maduro’s increasingly frank self-criticism about state corruption. He recently described a government food distribution company as “rotten” while calling for a restructuring of state-run food import and distribution outlets.

In a four-hour speech replete with foul language and insults against opposition leaders, the President argued that the measures are “a necessary action to balance things,” and he said, “I take responsibility for it.”  But his measures are piecemeal at best.  As opposition leaders have pointed out, he has not explained how he is going to pay Venezuela’s debt, obtain the foreign exchange to import sufficient amounts of basic goods, and guarantee food for the people.  With US$10 billion in bond payments coming due this year, the country has no clear path for avoiding default.  However painful for the population and politically costly for the government, measures such as gasoline price increases will have little impact.  The government wanted the opposition to share some of the costs for economic policy changes, but opposition politicians say that the gas price increase and devaluation are too little, too late. Most believe economic revival depends on dismantling the entire chavista system.  They are once again talking about removing Maduro through a referendum or other means – with one leader, Henrique Capriles, openly calling for a presidential recall, and another, Henry Ramos, the President of the National Assembly, calling for a constitutional amendment to cut the presidential term from six to four years.  The government’s measures suggest a welcome change from Maduro’s previous strategy of buying time through diversionary tactics.  However, the economic measures are likely to fail and, moreover, they increase the chances political temperatures will surge once again.

February 19, 2016

* Michael McCarthy is a Research Fellow with the Center for Latin American & Latino Studies.

Venezuela: Implications of the Opposition’s Landslide Victory

By Michael McCarthy*

Venezuela Elections 2015

Photo Credits: Nicolas Raymond and 2 dvx ve (modified) / Flickr and Wikimedia Commons, respectively / Creative Commons

Venezuela is just beginning to feel the shock waves of the opposition’s landslide victory and humbling defeat of President Nicolás Maduro’s PSUV.  Riding a wave of discontent with the Maduro government’s management of the economy and political repression, the opposition Mesa de Unidad (MUD) coalition won at least 112 seats in the 167-seat parliament, giving it a commanding two-thirds majority.  The MUD won the popular vote 56-41.  The political scenarios are wide open.  Some preliminary analytical judgments follow:

  • Maduro has accepted the election results, but serious questions remain whether he and his advisors will engage in the give-and-take necessary to make divided government work. He is restructuring his cabinet and has called on supporters to “relaunch” the Bolivarian Revolution.  He says he will strenuously oppose any amnesty law for imprisoned opposition members – a top MUD priority – and that he will “go to combat” if the opposition tries to remove him from office.
  • Despite its historic achievement, the opposition will face challenges to build sustainable unity. The MUD is a heterogeneous electoral alliance, and the hardline and moderate factions are likely to disagree about strategy – whether the time is ripe for pressing for Maduro’s resignation or for cultivating support from disaffected chavistas.
    • The opposition faces the challenge of demonstrating a commitment to what they have criticized most about chavismo – democratic inclusion.  If they want to put Venezuela back together, for example, the MUD will have to decide how to provide PSUV officials guarantees of political inclusion.
    • Passing an amnesty law for political prisoners and addressing the dire economic situation are high on the MUD’s unified agenda – and probably will remain part of a consensus platform.
    • Less clear is how aggressively the opposition will push its agenda from the National Assembly.  Most in the MUD are more closely aligned with the moderate strategy of former presidential candidate Henrique Capriles, but others will want to push harder.  They may try to remove chavista-appointed Supreme Court judges likely to oppose Constitutional changes that would curtail Maduro’s powers.
    • The forced resignation of Guatemalan President Pérez Molina and the recent opening of an impeachment process against Brazilian President Dilma Rousseff may embolden similar initiatives in Venezuela.
  • The country’s tarnished election system functioned better than many critics had predicted. The 74 percent voter turnout was eight points higher than the last legislative elections.  Reports of violence and irregularities were few.  The Armed Forces provided effective security at the polls, and behaved in a manner that suggests an interest in defending their institutional reputation.  The National Electoral Council (CNE) disappointed many by issuing an unprecedented call for voting centers to remain open even if there were no voters in line, and for delaying reporting the final results, but the voting process was clean enough.
  • Outside Venezuela, chavismo’s loss may be a setback from some leftists – but a relief for most others. Maduro’s defeat is a potential liberation from the albatross that the disastrous Venezuelan regime has become.  For most left-leaning leaders, chavismo had become a deeply flawed project that has, for several years, been toxic.
  • For anti-chavistas outside Venezuela (including some in Washington), the election results indicate that the way to overcome the catastrophe over which Maduro presided was not to threaten the regime with sanctions and encourage extremists in the opposition, but instead to push for the election to take place, with the most safeguards possible. There is precedent for Latin American dictatorships falling in elections that they put on the agenda and then could not stop.
  • Although Maduro’s saber-rattling along the Colombian and Guyanese borders failed to divert attention from his internal mess, his rhetoric of resistance to yielding power suggests the international community should keep an eye on him in case he tries again.
  • The Venezuelan victors should also understand the anxiety of their neighbors over the future of Petrocaribe and other initiatives. Venezuela under Chavez did an enormous service to the region by subsidizing oil in ways that helping governments achieve important social advances.  Long before Chavez, Venezuela used its oil wealth to support allies.  Such assistance is as important now as it has been for decades.

December 9, 2015

* Michael McCarthy is a Research Fellow with the Center for Latin American and Latino Studies.

What Does Macri’s Victory Mean for Latin America’s Left Turns?

By Eric Hershberg and Fulton Armstrong

South America right

Photo Credits: Douglas Fernandes and _Butte_ / Flickr / Creative Commons

Argentine President-elect Mauricio Macri’s actions since his historic victory last week indicate a rightward shift in domestic and foreign policy that some observers are tempted to proclaim as part of a broader Latin American trend.  He has reiterated promises of broad economic reforms and appointed a cabinet – including former JP Morgan executive and ex-Central Bank chief Alfonso Prat-Gay as his finance minister – to implement them.  He has further pledged to reverse outgoing President Fernández de Kirchner’s protectionist trade policies.  (During the campaign, advocates of unbound capitalism cheered when he named Ayn Rand’s “The Fountainhead” as one of his favorite books.)  Macri has named Susana Malcorra, a senior aide to UN Secretary General Ban Ki-moon with strong diplomatic credentials, to be his foreign minister and, for starters, directed her to reverse policies he judged to coddle Venezuela. The President-elect, who takes office on December 10, is speaking with the confidence of a President elected with more than a 3-point margin over Kirchnerista candidate Daniel Scioli and with control over more than the 91 seats (one third of the total 257 seats) that his Cambiemos coalition won in the lower house of Congress.  (His party is the first, however, to control simultaneously the Province of Buenos Aires, the City of Buenos Aires, and presidency.)

The temptation in some quarters to declare Macri’s victory as the beginning of the end for Latin America’s “Left Turns” is understandable but nonetheless premature.  To be sure, the Argentine electoral results coincide with other major setbacks for various currents of the Latin American left:  The Chavista project in Venezuela is crashing; Brazilian President Rousseff and her party are mired in a corruption morass and economic crisis whose combined effects may cut short her time in office; President Correa, facing a dire economic situation in Ecuador, is increasingly talking about abandoning efforts to run yet again in 2017.  Chilean President Bachelet’s low popularity and declining public support for the Vázquez government in Uruguay may be additional signs that the prospects for the “pink tide” are very much in doubt.

But in Argentina and beyond, the jury is still out.  Through no action of its own, the South American left enjoyed the multiple benefits of the decade-long commodity boom that began in 2003.  Just as its electoral successes did not indicate wholesale shifts to the left in the region – indeed political scientists have long questioned whether the evidence supports claims of a leftward shift in popular preferences – today’s parallel crises may reflect the end of of the boom rather than a rejection of left-leaning governments.  Many of the policies advanced by various currents of the “pink tide” may remain highly popular, even while they are no longer affordable.  Another tempting explanation is that Latin Americans are rejecting leaders who they perceive as corrupt, irrespective of their placement on the left-right spectrum.  In Argentina, notably, Macri hasn’t rejected the Kirchneristas’ redistributive agenda but has instead emphasized the confusing, corrupt way it has been pursued for the past 12 years.  (Never before has an Argentine rightist portrayed eliminating poverty as a core priority.)  It may well be that voters understand economic slowdowns and dysfunction as a product of corruption rather than the fallout from declines in historically high commodity prices.

Regardless of the underlying drivers of electoral change and public disillusion with incumbents, it’s fair to ask if the left’s current travails and the right’s resurgence will open the way toward more accountable political leadership, whatever its ideological proclivities, or just signal an alternation of power.  Like Macri in Argentina, a new cohort of Latin American leaders will have to prove that they are more than outsiders drawing on sentiment to throw out the incumbent rascals.  The question is whether they pursue policies that make democracy more transparent, expand meaningful political participation, and sustain the social gains that have been achieved by the pink tide governments that now appear to be on the ropes.

December 2, 2015

Venezuelan Elections: Economic Crisis Turns Up the Heat on Chavismo

By Michael M. McCarthy*

A faded legacy. Photo Credit: Julio César Mesa / Flickr / Creative Commons

A faded legacy for Chavismo? Photo Credit: Julio César Mesa / Flickr / Creative Commons

Twenty-four long months since their country’s last national election, Venezuelans head back to the polls to elect a new National Assembly on December 6 in a tense political climate – with no promise that the government will respect the opposition’s near-certain victory.  All 167 seats in the unicameral body will be up for grabs in a race polarized between Chavismo’s pro government coalition and the Mesa de Unidad Democrática opposition coalition.  Thanks largely to a rapidly deteriorating economy, the government’s approval rating decreased from 50 percent in 2013 to 20 percent in September, according to the national Venebarómetro poll.  A range of polls in September indicated the MUD is poised to win either a simple or “qualified” (60 percent) majority.  Observers generally agree that the main measure of success for Chavismo is preventing the MUD from obtaining a two-thirds majority, and that blocking a qualified majority would be a major triumph.

For ordinary Venezuelans the campaign is overshadowed by the massive economic crisis.  Skyrocketing inflation, severe shortages of basic goods and services, and reduced social assistance programs are contributing to tensions on the street, where the campaign is not as present as in years past.  Nevertheless, heavy turnout is still expected – 66 percent of eligible voters participated in the last National Assembly elections in 2010, and pollsters report a strong intention to vote.

  • The MUD has shaped its campaign around leveraging the vote as a mechanism for punishing economic mismanagement and restoring some institutional balance to a political system that barely reflects opposition voices at the national level. Skepticism of the National Electoral Board, which rejected the MUD’s request for international electoral observation by the OAS, EU or UN, has increased.  Slashes to budgetary support for opposition governors and mayors, while the government channels funds to unelected parallel state and municipal authorities, make supporters wonder whether a victory will be fully respected.
  • The government refreshed its slate of candidates by promoting generational and gender diversity, but stalwarts, including current National Assembly leader Diosdado Cabello, remain prominent. The party is distributing last-minute pork to mobilize voters, and it’s working the system’s rural bias – each department is automatically allocated three deputies – where strong government presence gives it a strategic advantage.  Strikingly, the Chávez legacy has become a liability for President Maduro because the former President was much more charismatic and economic conditions were considerably better during his tenure.

The Maduro administration seems to have run out of diversionary moves after exaggerated external threats from Colombia and Guyana faded.  It is also on the defensive after the Rousseff administration, Maduro’s most powerful diplomatic partner, expressed unhappiness about Caracas’s opposition to its choice of a Brazilian political heavyweight to lead UNASUR’s “electoral accompaniment mission.”  The President has also been set on back on his heels by intensified international criticism of the trial and conviction of opposition leader Leopoldo López, who, according to a state attorney who worked the case, was sent to jail for 14 years on fraudulent charges.  Regardless of the outcome on December 6, the direction of the country is highly uncertain.  Maduro has said he’ll accept the results “whatever they are,” but he has also said “we have to win, by whatever means possible” (como sea and cualquier manera), and that if the opposition wins “I will not hand over the revolution” but rather “proceed to govern with the people in a civic-military union.”  In the next couple weeks, the government may still try to throw the opposition off course, but the MUD does not seem interested in renewing street protests – more violence is unlikely to advance its objectives. Neither do its leaders seem confident that a renewal of talks on rebuilding democratic institutions will help.

November 9, 2015

* Michael McCarthy is a Research Fellow with the Center for Latin American and Latino Studies.