Photo Jonathan Blair

Thursday, March 13, 2014

Venezuela: Dark present, darker future

Venezuela is in bad shape. Daily demonstrations, barricades and fights with the police are adding yet more chaos to the country’s economic mess and violent crime wave. But if you assume that things can’t get worse, just wait. Here is a grim, and unfortunately quite likely scenario.The political dynamics in the country are intractably poisoned. The two sides are deeply entrenched while hatred, not rivalry, rules. Even the start of a dialogue is made difficult by the internal divisions that plague each side, with radicals ready to denounce compromise as treason. Leopoldo Lopez, the now jailed opposition leader that led the early demonstrations in Caracas, has become the face of the street protests and he wants nothing less than President Maduro’s resignation. This leaves no room at all to manoeuvre for Henrique Capriles, the opposition candidate in last year’s elections. In the government’s aggressive campaign against the “fascist” opposition, the President, Nicolas Maduro, tries not to be outdone by National Assembly President, Diosdado Cabello, who has been keeping some distance since the very night of the Maduro’s disastrous and razor-thin electoral victory.

Economic problems complicate developments even more. High inflation (already greater than 50 percent in 2013), decaying infrastructure, regular power blackouts and shortages of a wide range of basic commodities cannot be tackled without deep economic reforms. Most of these issues emerged under Chavez, but growing oil revenues previously enabled the government to patch things up. The problems are now much worse, and  oil revenues are not keeping up as prices do not increase any more while production—given chronic under-investment and continuing brain drain at PDVSA, the national oil company—declines. This will leave the government in Caracas increasingly powerless to protect its political base among the poor, especially if anything is done to tackle inflation and address shortages.  Both already hit the poor the hardest: they are the ones with little access to dollars, the worst protection against financial inflation, and the narrowest range of options for buying basic necessities. But government action to fight these plagues will hurt them even more. Higher interest rates and lower government spending, critical to reducing inflation, will make unemployment, still remarkably low, shoot up, while dropping price controls, a crucial step to address shortages, will make inflation worse for a while at least, something the poor can ill-afford.

The current discontent, in other words, will likely seep into the chavista base. Given the polarization between the two sides, however, this won’t reinforce the opposition. Expect instead a growing, amorphous and violent mutiny, expressing itself in spontaneous looting and haphazard acts of violence, very much along the lines of the 1989 Caracazo. This will aggravate an already frightful security situation with, once again, the most vulnerable as the primary victims of the unrest.

Here, too, government action is more likely to make things worse than better: as a consequence of past and current policy, the country is rife with guns, gangs and poorly controlled chavista militias. Even government forces appear to be only notionally under control as demonstrated by the recent arrest of state security agents following the killing of demonstrators. Reestablishing any semblance of monopoly over the means of violence, in the context of growing popular discontent, necessitates a massive use of force and a degree of unity and coordination among government and military leaders that is clearly not present at this time.

Amid such deepening tensions and anarchy, the most logical exit is a military coup. Given years of chavista cleansing within the armed forces and with the opposition essentially bereft of weapons, the game would play out within the regime itself. In such a scenario, options are many but two look most likely: Maduro himself could find inspiration in Alberto Fujimori’s “auto-coup,” closing the political system to introduce harsh reforms and clean up the security mess. With that said, National Assembly President Diosdado Cabello, a former lieutenant widely felt to have much tighter links with the military, is in a better position, especially as he could blame Maduro for the crisis and, given the reservations he has expressed in the past, present himself as a true alternative. In either scenario, foreign players, especially Cuba, will likely play an important role. This is another story, however. For now, the domestic game is most prominent, and prospects most depressing.

[This commentary was first published on the CIC blog:]