Venezuela: Is Guaidó the Knight in Shining Armor?

By Fulton Armstrong

Guaidó and Maduro image

Guaido and Maduro / Wikimedia Commons

The OAS, United States, and a number of Latin American governments are pinning high hopes that newly inaugurated National Assembly President Juan Guaidó will lead Venezuela out of its crisis and “back to democracy,” but the opposition needs much more than foreign support to achieve its goal of ousting President Nicolás Maduro.  The 35-year-old Guaidó, an engineer with eight years of political experience, proclaimed last Friday that “we will oust Maduro and his gang from power” and that he had the right to call new Presidential elections and to serve as Interim President while they are prepared.  He called on the military, which has shown some small fissures but so far appears to remain overwhelmingly loyal to President Nicolás Maduro, to “assume its responsibility … and remove the usurper [Maduro].”  He is organizing a national march on January 23 that, according to observers, he hopes will show the military the strength of his support.  (Maduro’s party, the PSUV, has announced its own demonstration that day.)

  • International reaction came fast and strong. OAS Secretary General Luis Almagro, who calls the Maduro government a “narco-dictadura,” immediately started referring to Guaidó in Tweets and public statements as “interim president” of the republic.  Brazilian President Jair Bolsonaro’s son sent a congratulatory message also recognizing Guaidó in that capacity.  The dozen predominantly conservative governments speaking as the Grupo de Lima have declared Maduro illegitimate and embraced Guaidó’s leadership if not the title.  President Trump’s National Security Advisor, John Bolton, praised the leader’s “courageous decision” to challenge the Maduro government without explicitly recognizing him as Interim President.

Inside Venezuela, reactions to Guaidó’s power play reflected longstanding political alignments.

  • Maduro, who refers to Guaidó as un muchacho, has ridiculed his statements as a “Twitter coup,” and his political machine has followed with the usual attacks. Maduro has reiterated his call for negotiations with leaders of the opposition.  He has distanced himself from the embarrassing arrest of Guaidó last Sunday, claiming that it was made possible by “the corrupt and traitorous cooperation of a group of officials” in his intelligence service, SEBIN.
  • Guaidó’s party, Voluntad Popular (VP), is solidly behind him. Its founder, Leopoldo López, who is under house arrest, has led the charge in his defense, and their key allies – including María Corina Machado (Súmate), former Attorney General Luisa Ortega Díaz, and many leading Venezuelans in the United States – are supporting him too.
  • The party’s splits with opposition moderates remain deep, however. Henrique Capriles (Primero Justicia) issued a scathing critique of Guaidó’s strategy.  He accused VP of sponsoring violence that will use “the people of Venezuela as cannon fodder,” and he has called them “saboteurs” blocking serious talks and feeding the people unrealistic expectations.”  Other moderates have also recoiled from Guaidó’s approach and are reportedly bewildered by the OAS Secretary General and others’ support for direct confrontation.

As the political class engages in yet another cycle of struggles, the military, once again, is seen as the ultimate arbiter that all sides want to influence.  Maduro’s punishment of seemingly disloyal officers recently has probably been a double-edged sword – feeding resentment while instilling discipline – but unhappiness with Maduro does not translate into support for the opposition.  There appears to be no love between the military and the Voluntad Popular leadership, whose confrontational tactics almost certainly concern the military and whose political program and popular base remain unclear.  Despite deep corruption in the officer corps, moreover, most officers probably see themselves as nationalists and might chafe at the idea of the OAS or regional governments trying to be the kingmakers.  Strange things can always happen, but celebration of the Interim President seems premature and even counterproductive.

 January 17, 2019

A Right Turn in Latin America?

By Santiago Anria and Kenneth Roberts*

Jair Bolsonaro

Brazilian President Jair Bolsonaro in January 2019. / Marcos Brandão / Agência Senado / Flickr / Creative Commons

After a long winning streak, the left in Latin America has experienced electoral defeats in a number of former strongholds since 2015 – including Argentina, Chile, and Brazil – but the trend is not unidirectional and so far falls short of being a regional “right turn.”

  • Right wing presidents govern today in those three countries as well as Colombia, Guatemala, Paraguay, Honduras, Panama, and Peru – a scenario that is quite different from 2010, when about two-thirds of Latin Americans lived under some form of leftist government. Democratization, financial crises, and market liberalization shaped the 1980s-90s, while mounting social discontent against neoliberal market reforms helped to produce a “left turn” that spread across the region following the election of Hugo Chávez in 1998.  Leftist candidates won 30 presidential elections in 11 different Latin American countries between 1998 and 2014.

The current trend lines are hardly unidirectional across the region.  Mexico, which remained under conservative government when most of the region turned toward the left after 1998, has recently elected long-time leftist leader Andrés Manuel López Obrador to the presidency.  Incumbent leftist parties have been re-elected one or more times in Uruguay, Bolivia, Costa Rica, and El Salvador.  Notably, leftist parties in some countries where they have been historically weak, such as Colombia and Honduras, have strengthened electorally and organizationally, laying the groundwork for further growth.  Leftists’ records elsewhere are mixed.  Rivalries among Ecuadorean leftists make their future uncertain.  Venezuelan President Maduro and Nicaraguan President Ortega have resorted to increasingly repressive and authoritarian measures to maintain their grip on power.

  • With the possible exception of Brazil, the right’s surge is not the result of the sort of social backlash that brought the left to power. In general, the right’s victories appear to be a routine alternation of power rather than a regional wave with common starting points and driving forces.  Argentina and Chile are the two clearest examples of routine electoral alternation of power explained by retrospective, anti-incumbency voting in contexts of economic slow-downs, corruption scandals, and social policy discontent.  In countries like Paraguay and Honduras, on the other hand, the shifts were initiated by non-electoral means – a politically motivated presidential impeachment in the former and a military coup in the latter – and then consolidated through elections after the fact.  In Brazil, the right turn can be traced back to the social protests that broke out against Dilma Rousseff’s leftist PT government in June 2013, but former conservative allies’ opportunistic impeachment of Rousseff, along with their imprisonment of former President and PT founder Lula, seriously weakened her party – paving the way for the election of anti-establishment candidate Jair Bolsonaro.

The left in power is still strong, though probably not unbeatable today, in countries like Bolivia and Uruguay, at least in part because of their roots in and strong connections with social movements.  Unlike the PT, both Bolivia’s MAS and Uruguay’s FA have managed to preserve more of their movement character and to avoid extreme forms of top-down control and professionalization.  The ability of mass popular constituencies and grass-roots activism to hold party leaders accountable and steer public policies in desired directions—a condition largely absent in countries like Brazil, Ecuador, and Venezuela—has helped the left maintain cohesion in Bolivia and Uruguay.  This cohesion, accompanied by significant reductions of inequality, helps to explain the continued vitality of left parties in these countries.  The recent strengthening of leftist alternatives in Mexico and Colombia, moreover, should guard against facile assumptions that a region wide right turn is underway.  Conservative forces’ recent victories are better understood as a reinforcement of the post-neoliberal left-right programmatic structuring of political competition in Latin America than a unidirectional political shift to the right.  That said, Brazil wields significant political and economic influence in the region and, traditionally seen as an “early mover” in the region, may be a bellwether of the future.  The ability of President Bolsonaro and his model of governance to deliver the results that Brazilians want—and to operate within the parameters of democratic institutions—will be key factors in determining the direction and strength of the region’s rightist wave.

January 9, 2019

*Santiago Anria is Assistant Professor of Political Science and Latin American Studies at Dickinson College, and Kenneth Roberts is Professor of Government and Director of Latin American Studies at Cornell University.

Bolivia: The Exceptional Case of the MAS

By Santiago Anria*

MAS rally in Bolivia

A rally celebrating the nineteenth anniversary of the MAS in Bolivia. / Tercera Información / Wikimedia Commons

Bolivia’s Movement Toward Socialism (MAS) is one of the most important and electorally successful new parties in Latin America because it has succeeded in achieving and maintaining high levels of internal grassroots participation and bottom-up influence, even after assuming national power.  Unlike the ad hoc electoral vehicles created to sustain the support of a single charismatic leader like Hugo Chávez in Venezuela or Rafael Correa in Ecuador, the MAS has maintained autonomous forms of social mobilization by popular constituencies that have contributed to keeping party vibrancy and served as a check on concentrated executive power.

  • A “party of movements,” the MAS began as a largely indigenous coca growers’ union, but after 20 years of existence and more than a decade in power, it still deviates from the conventional wisdom that such parties inevitably become oligarchic in their operation. Compared to most other movement-based parties, the MAS remains responsive to the interests, demands, and preferences of its social bases – propelling its leader, Evo Morales, to the presidency but also, at times, limiting his authoritarian tendencies.  My research, recently published in a book entitled When Movements Become Parties, reveals that Bolivia is a rare example in which a party’s social movement origin not only facilitated party-building but also enabled the party to preserve high levels of grassroots participation in the selection of candidates and the crafting of public policies, with “bottom-up” correctives to hierarchy and concentrated executive authority.
  • While institutional checks and balances can be (and have been) weakened by an ambitious leader like Morales, governing parties more open to bottom-up input preserve opportunities to establish checks on decisions and constrain strategic behavior and hierarchical control. Channels to exert “voice” provide incentives for the social bases to shape important decisions, as these bases become de facto veto actors within the organization.  At the broader regime level, when a governing party establishes and upholds well-developed opportunities for bottom-up grass-roots participation, instances of bait-and-switch policy-making are less likely – a condition conducive to policy stability and ensuring the “continued responsiveness” that is central to democratic representation in between election cycles.  Finally, when governing parties are more open, they may generate opportunities and incentives for the political empowerment of traditionally marginalized groups by boosting the input that those groups have in the political power game.

The MAS has avoided extreme forms of professionalism and “top-down” control.  While the party as a bureaucratic organization remains weak after 20 years, that reality has allowed the social bases to act autonomously and continue to influence, constrain, and hold the party’s leadership accountable.  This has enabled the party to maintain unusually strong ties with the country’s major popular movements, which still provide a formidable mass base and coalition of support.  Today, 12 years after it gained power for the first time, the MAS remains the only truly national party in Bolivia and is that country’s dominant party.  The ongoing strength and relative autonomy of social mobilization in Bolivia not only explains much of the MAS’s continued success but also sets the Bolivian case apart from the Brazilian PT, where social mobilization withered, and from Venezuela under Chávez and Nicolás Maduro, where mobilization is strong but largely controlled from above.

The system is far from perfect.  Poised to seek a fourth term in 2019 after a legally dubious maneuver, polls show that Morales may not be unbeatable.  The party lacks a viable successor, and another reelection can open the door to further abuses and greater personalization of power – all of which can undermine the development of the democratic regime.  This could also atrophy the links between the party and segments of its movement base, a process already under way.  Power is already concentrated in an executive administration that too often treats opponents and the press with raw hostility.  Institutions are inefficient, liberal rights are poorly safeguarded, and courts are feeble and politicized.  Even if checks and balances on presidential authority have weakened, however, autonomous grassroots participation, inclusion, and accountability are highly robust.  Inclusion has created a “new normal” in the Bolivian political arena, with larger numbers of Bolivians enjoying rights of citizenship and greater input into political decision-making and into determining who gets what, when, and how – with the MAS at the center.  Seen from the long arc of Bolivian history, this is an exceptional change in a society characterized by social and political exclusion.

November 14, 2018

*Santiago Anria is Assistant Professor of Political Science and Latin American Studies at Dickinson College.  His new book, When Movements Become Parties: The Bolivian MAS in Comparative Perspective (Cambridge Studies in Comparative Politics, 2018), studies the internal politics of Latin America’s three most innovative leftist parties: Bolivia’s MAS, Brazil’s PT, and Uruguay’s FA.

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.

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.

Summit of the Americas: Awkward Agenda, Dim Prospects

By Eric Hershberg

Large group of men and women stand awkwardly while waving to a crowd

Leaders from the hemisphere during the last Summit of the Americas in 2015. / Maria Patricia Leiva / OAS / Flickr / Creative Commons

Preparations for the 8th Summit of the Americas, scheduled for April 13-14 in Lima, face a number of challenges.  Trump Administration measures have upended longstanding assumptions throughout the hemisphere about Washington’s agenda in the region and beyond.  No less distracting is the wave of ongoing corruption scandals in Latin America and impending elections in numerous countries.

  • The three presidential summits attended by President Barack Obama (2009, 2012, and 2015) arguably were shaped by the standing of the United States in the region. Emphasizing “change we can believe in” at his first presidential summit, in Trinidad, Obama pledged that the United States would be a partner rather than an embodiment of hubris.  Leaders across the ideological spectrum applauded.  Yet the second, three years later in Cartagena, was a disaster for Washington, with even friendly heads of state lambasting the President for continuing an unacceptable Cold War line on Cuba and rigid drug control policies.  It was in the wake of this embarrassment that Obama finally moved to change policy toward Cuba.  This watershed, supplemented by advances in other areas overseen by Vice President Biden, made Obama’s third summit, in Panama in 2015 – attended by Cuban President Raúl Castro – a much more positive experience.

This year’s Summit seems unlikely to produce advances – substantive or symbolic – and indeed has the potential both to highlight conflicting agendas and even to provoke widespread ridicule.

  • Under normal circumstances, the partial but damaging reversal of Obama’s Cuba opening would elicit hostility from Latin American leaders, but tensions over Trump’s dramatic departure from traditional U.S. positions on trade and climate, and his caustic posturing on immigration policies that especially impact Mexico and Central America, may overshadow regional bewilderment at Washington’s renewed hostility towards Havana. Latin American countries that Trump jilted at the altar when he summarily withdrew the United States from the Trans-Pacific Partnership (TPP) have begun moving on – negotiating trade deals with China while uniting with Canada and seven Asian countries to form “TPP 2.0.”  That chauvinism and race, not security, are at the heart of Trump’s “Great Wall” proposal is widely understood and resented in Latin America.
  • Trump’s postures and policies are by no means the only strain on the summit agenda. Venezuela’s meltdown and impending elections are of grave concern to virtually all leaders who will attend, whether President Maduro does or not, yet there is no consensus on what to do about the problem and the humanitarian emergency it has spawned.  Questions about the legitimacy of Brazilian President Michel Temer diminish the standing of the hemisphere’s second largest democracy.  Tensions swirling around the Summit’s host – Peruvian President Pedro Pablo Kuczynski (PPK) – are also intense.  PPK is but one of numerous incumbent and recent Latin American presidents under siege by corruption allegations.  Strong evidence of corruption among presidents of Latin American countries big and small will hardly be news to anyone, but the scope of the problem – and the strength of public rejection of it – means many governments will come to the Summit wounded and distracted.

The irony that the theme of this year’s Summit is “Democratic Governance against Corruption” will be lost on no one, as the Lava Jato investigations and lesser inquiries reveal the venality of government after government.  OAS Secretary General Luis Almagro, a co-host of the Summit, has done his fair share to rescue the region from authoritarian and corrupt leaders – challenging both Maduro and the tainted reelection of Honduran President Juan Orlando Hernández – but few others in the hemisphere have lived up to the lofty rhetoric about democracy and anti-corruption at previous summits.  The Peruvian national host is hardly in a position to steer the Summit to take on Trump on matters such as TPP.  If he were not so badly tainted by recent events, he could have represented the globalists in the Americas who are convinced that a misguided America First posture issuing from Washington amounts to a U.S. abdication of leadership on trade, climate, and other pressing matters.  Yet it is now doubtful whether he will be able to say anything more than “Welcome to Peru.”  The smiling faces in the protocol photos will conceal the striking disjuncture between the Summit agenda and its protagonists.

 February 6, 2018

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.

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.