Octavian Report: What is next for Nicolás Maduro as he faces a massive internal crisis?
Harold Trinkunas: I think there are two top things that Maduro has to be worried about, and you’ll be surprised to hear that neither is the economy.
The first is that the elections highlighted, via a large-scale abstention, the weakness of the governing party’s hold on the population at this point. Probably half as many people voted as normally vote in a presidential election in Venezuela. Presidential elections usually have about 80 percent turnout. And despite the government’s efforts to mobilize voters — providing transportation, offering food at checkpoints to people who could prove that they voted, even making cash payments to people for voter registration at so-called “red points” — there was a very large-scale abstention, and I think it has to be concerning to Maduro that he can no longer mobilize people the way that his government used to be able to do.
The second point is he has got to be worried about the military. Maduro never had the kind of relationship with the military that Hugo Chávez had, but he is much more reliant on them than Chávez was. This is a double whammy for him. The military has been suffering from the same economic crisis as everybody else. There’s been a sharp spike in the number of officers and soldiers arrested and accused of conspiring against the government. And the military, which is in charge of protecting elections, got a massive display on May 20th of how little popular support this president has.
Obviously, the third thing is the economy. Venezuela relies almost entirely on oil for its export earnings; about 95 percent derives from oil exports. It is a country that imports almost everything. Even a couple years ago, 70 percent of the basic goods it needed came from outside the country. Oil production has been dropping rapidly. It’s now about 1.4 million barrels per day. By way of reference, it was around 3.4 million barrels a day when Hugo Chávez first came to power about 20 years ago. This new rate is lower than at any time in Venezuela’s history since 1950. This is really a dramatic fall, and some people think it will be below a million barrels per day by the time we get to the end of the year. That means that even though oil prices are rising worldwide, Venezuela can’t take advantage of that the way Maduro would like.
OR: How can Maduro remedy the collapse in political authority he saw on May 20th? Can you talk more about how the military — headed by Defense Secretary Vladimir Padrino — might be the source of a potential challenge to his power?
Trinkunas: On the first front, it’s not exactly clear what Maduro can do to re-solidify his base. It’s not just the traditional ruling party, the PSUV, that’s a problem. He started a new, more personal political project that really didn’t pick up many votes in the election. Most of the votes went to the Chávez-created party, the PSUV. The things Maduro traditionally did — patronage, privileged access to foreign exchange — are not that available anymore. I suspect he’s going to try to go that route. He’s going to try to see if he can rely on his relationships with Russia, with Turkey, with China to import things that he can dedicate to his base. But with dwindling oil supplies, it’s a lot harder. He doesn’t have a whole lot of options on that front.
He relies heavily on his own military intelligence and on Cuban intelligence to monitor the populace. He has also, much like what has occurred in Russia, developed quite a sophisticated social-media operation integrated with traditional media and community radio and television, to manipulate public opinion.
On the military: I think he trusts Padrino more than others. Venezuela’s general officers are selected for their party loyalty. Venezuela is shockingly over-officered. There are 2,000 general officers and admirals in Venezuela. By way of comparison, the United States has less than 1,000. This is a select group of people that have been picked for their political loyalty. The military junior ranks, the cadets and the second lieutenants and so on, are heavily ideologized through the Bolivarian Military University. There’s a lot of political indoctrination at that level. But then there’s this middle layer that entered the military before politicization became really mainstream. They’re the majors and lieutenant colonels. The problem for Maduro is that those are the guys who are actually in charge of tactical units, who can actually seize a road or a bridge or take the presidential palace.
As I mentioned, there’s been an uptick in the tensions around those officers. The issue in Venezuela is that a classic military coup where the senior leadership overthrows the president is quite unlikely. Just like the general population, the military is heavily infiltrated and watched. The Cubans play a major role in watching them, too. What you’re more likely to see are these small, spontaneous uprisings that don’t require much planning but can be messy and dangerous in this very unpredictable situation where you have an immiserated population, rising levels of malnutrition, and lack of access to medicines. It’s quite volatile, and so it becomes increasingly unpredictable what will happen. This is why Maduro is focusing on trying to keep the middle ranks of the military from conspiring.
OR: Are there other factions within the government that might be sources of palace coups, or is that also unlikely?
Trinkunas: There’s a couple other “name brands,” so to speak, in Venezuelan politics. Diosdado Cabello, former president of national assembly for the ruling party, is one that comes up frequently. But Maduro has been pretty good about getting rid of these name-brand types and pushing them aside or sending them into exile.
But there’s another dynamic going on that I think helps hold them together. As Ben Franklin once said, “We must, indeed, all hang together or, most assuredly, we shall all hang separately.” This inner circle, and this includes the military, are all guilty of something. It could be drug trafficking, it could be corruption, it could be human-rights abuses. They know, or at least they believe, that they have no future in Venezuela if they’re not in power. Conversely, the idea of a future in which somebody else is in power and they would still be okay is not something they can envision. And comments from U.S. administrations and from the opposition in exile about bringing them all to trial of course contribute to this dynamic. I think this is what helps hold them together: the sense that they’re trapped, that there’s no place else to go.
I think it’s possible to envision that there might be a transition in Venezuela, but not to democracy. It would be simply pushing Maduro aside and bringing some other figure into power from the ruling elite, someone seen as more competent, more capable of undertaking needed economic reforms. That is possible, because that’s just another one of their own who can still protect the inner circle but do a better job of managing the country.
OR: What are the real warning signs that the situation in Venezuela is about to move from a crisis to an actual catastrophe?
Trinkunas: We’re already seeing some of them. The very dramatic refugee flows, for example — perhaps as much as between five and 10 percent of the country has emigrated at this point. That is certainly a warning sign. You’re still not seeing many spontaneous demonstrations, but those do happen on occasion. If they became more frequent, I think that would be an issue. Last year there was a big protest movement and a lot of oppression. Now the ranks of the military and police have been thinned by emigration and desertion, so that apparatus is less solid. We already have hyper-inflation: some estimates put it at 13,000 percent inflation this year. There’s also the plummeting oil production.
Maduro has been completely unable to reverse these trends in declining oil production, inflation, declining imports with a lack of access to foreign exchange. That really makes the situation quite dramatic. Part of the problem in Venezuela is that there’s very few sources of foreign exchange that are not in government hands, unlike, for example, Zimbabwe or Argentina. Their private-sector producers had access to foreign exchange and could keep the economy more or less supplied and moving. That’s proven to be very difficult to do in Venezuela, in part because the government prioritized paying debt over everything else until this past year, and that meant a huge contraction in economic production and a contraction in imports. And the government has relied on simply printing money at an astonishing rate to try to be able to make payments domestically, which fuels the hyperinflation.
I think the only silver lining to the present situation — and it’s not even really a silver lining — would come if the government were to swallow its pride and go to the IMF for a bailout and agree to economic reforms. This is very unlikely, but if Maduro did this Venezuela probably would not experience what so many people fear about IMF structural adjustment plans: an economic contraction and a spike in prices. Venezuela has already gone through all that under Maduro, so the new money coming in would actually have the effect of restoring production and restoring levels of consumption in the country.
OR: How strong is Venezuela’s position at the moment within regional geopolitics?
Trinkunas: On this front there has been a rather dramatic change from the time of Hugo Chávez. Chávez did a very good job of shielding Venezuela from the ability of the region and even the United States to really influence what was going on inside the country’s borders. In fact, he built a network of alternative regional institutions based around Venezuela’s oil wealth to support Venezuela abroad and shield it from pressure as it became less democratic. Most of the inter-American mechanisms for defending democracy — like the Inter-American Democratic Charter and the Organization of American States — work by consensus. Chávez made sure that there were countries that would prevent consensus happening: small Caribbean states that got preferential financing for their oil imports or subsidies or loans from Venezuela. He did that very well.
That has been peeling away as Venezuela’s oil wealth has declined, but it still is enough to make most of the regional mechanisms completely inoperable, while other nations in the region have been so irritated with Venezuela that they’ve made the Venezuelan-designed mechanisms inoperable. Basically, regional institutions are not working. This is why you’re seeing coalitions of the willing, like the Lima Group, taking up this issue.
The Lima Group comprises 12 countries (including Canada) but it embraces something like 90 percent of the region’s population and GDP, so it’s a pretty significant group. But still, other than diplomatic pressure, recalling the ambassadors, and coordinating on refugee issues, they haven’t really been able to put much pressure on Venezuela.
The U.S. and the European Union have imposed some sanctions, but they’ve been uncoordinated and out of sync. What we know from previous experiences with sanctions, for example against Iran and North Korea, is that you really need broad, coordinated sanctions against a country for that kind of pressure to work. Of course, the worry in Venezuela is that you already have a situation where the economy has collapsed and there’s large pressure for economic migration, and countries in the region are understandably reluctant to make that more acute: they’re the ones receiving most of the refugees. And Maduro still continues to maintain relationships with authoritarian governments around the world: Turkey, Russia, China, Syria, Cuba. This also means that even global mechanisms like the United Nations are basically inoperable when it comes to Venezuela. Russia and China will veto anything involving Venezuela. The world doesn’t have a whole lot of options.
Interestingly, I think, the one entity that has put the most pressure on Venezuela is ConocoPhillips. They have been making efforts to go after Venezuelan assets abroad after Venezuela’s nationalization of their own assets about a decade ago; they now have the ability thanks to a judgment in their favor to enforce these efforts in court and to seize oil shipments and tankers that enter jurisdictions where they are able to file suit. Since Venezuela relies on two Dutch islands, Curaçao and Bonaire, for refinery and tanker facilities, ConocoPhillips has been able to use Dutch courts to go after them. It’s almost like a private sanctions regime that made the Venezuelans very reluctant to export. They’re keeping their tankers really close to home, which means that they’re making even less money than they otherwise would at these reduced production levels.
This issue of not being able to make foreign payments is really quite difficult for Venezuela. People have to realize that Venezuela has to import oil products to be able to export oil products. Its crude oil production is increasingly heavy and sour, coming from the Orinoco Belt in the south of the country. It needs to be blended with lighter crude to make it marketable for international export. Venezuela typically has to import that lighter blend of oil, and it typically mixes it in these Dutch islands. So this is already getting incredibly complicated for them to try to keep operating, which explains partially why production is dropping.
They also aren’t able to pay the international companies that provide support to the drilling operations in Venezuela, companies like Schlumberger. And so that’s made it very difficult for them to keep production up as well.
OR: Where do you think Maduro went so wrong on a pragmatic level in comparison to Hugo Chávez? Does he still possess any legitimacy as a leader of the Bolivarian Revolution?
Trinkunas: Chávez was more pragmatic than Maduro. He was more secure in his relationships with key actors like the military. He was a former military officer. He understood the military very well. The generals that were coming up through the ranks were either from his cohort or people he had taught at the military academy. So he was more willing to let technocrats run, for example, the national oil company (even though he made sure he had his political figures there are well).
Chávez also had the good fortune to die at the right time. He died at the peak of Venezuela’s oil boom. I think this made Chávez’s legacy in the popular imagination look rosy compared to Maduro’s.
Maduro had much less legitimacy from the get-go. He was an unlikely choice. Chávez chose him as his successor towards the end of his life. Chávez was always very careful never to allow other figures in the regime to shine too brightly. In Venezuela, you would say he would never allow anybody else to cast a shadow over him. Maduro was a figure who was close to Chávez, was loyal, but wasn’t overly popular or otherwise threatening.
After Chávez passed away and Maduro was elected, he became almost a caretaker managing a coalition among the elites inside the government. Maduro was slowly able to push off other people from other centers of power, send them into exile. Rafael Ramírez, who had run the oil industry for a long time, was sent off to the U.N. and then he was fired. Same thing with former planning minister Jorge Giordani. Maduro was able to slowly accumulate bureaucratic and even political power within Chavismo. But he was still not a particularly popular figure and he had to rely increasingly on handouts to loyalists and on more and more authoritarian mechanisms to surveil people, guide people, and keep people on the dole.
He was also — and this may be a reflection of his weaker political position — never willing to change course on the economy, especially on the fixed exchange rate. The fixed exchange rate is one of the greatest scams in history. Venezuela received during the oil boom the equivalent of three Marshall Plans in present dollars. All of this, nearly, has been frittered away. Less than 10 billion of it is left. Part of the reason is the fixed exchange rate. It hovered between five and 10 bolívars to the dollar — which you could immediately resell into the black currency markets for 100, 1,000, or 10,000 times that much. It created this huge incentive for people in the government to take dollars at the fixed exchange rate and put them into the black market and keep the earnings (now they keep the dollars, because the bolívar is worthless). This really undermines the entire economy.
The other part — which began under Chávez, to be fair, but continued under Maduro — is the treatment of the private sector as a political threat, because the private sector was funding the opposition. So their way of going after the opposition was to deny them a basis of financial support by nationalizing companies. All were run very badly afterwards. That also affected the economy. And ultimately printing currency like there’s no tomorrow, flooding the economy with these increasingly worthless bolívars — well, the bad money drives out the good. And all this is still locked into a corrupt clique at the top. Maduro has been relying on those people to stay in power, so he can’t really change the system.
I think that’s why he hasn’t just made some sensible changes to the economy to restore oil production, restore food production, get the economy going again. It’s a very difficult situation.