International Reports

Run Down

by Henning Suhr

Venezuela’s Road to Ruin

Venezuela is facing economic and social collapse, but the government is clinging to its failed course as much as it is clinging to power. Consequently, there is not much hope left for success for either the recall referendum initiated by the opposition or international efforts to initiate a dialogue. If no political solution can be found, the country is at risk of facing catastrophic consequences in view of the deepening crisis.

Human rights violations, an economy of scarcity, looting, violent crime, the breakdown of the healthcare system, power cuts, shortage of drinking water, mass emigration, three-figure inflation, a record deficit and insolvency looming: there has not been any good news coming out of Venezuela for quite some time, and all indications are that things could get even worse. Instead of a robust economy and a prospering welfare state, a mirage that the outside world had been duped into believing for a long time, the country now appears to be a prime example of a fragile state. Incapable of conducting economic reforms, President Nícolas Maduro continues to pursue the policies of his predecessor and former standard bearer of the International Left, Hugo Chávez Frías, ignoring the risk of the country’s economic as well as social collapse. While the government denies the historical crisis with the usual propaganda and even rejects offers of urgently needed aid supplies from abroad, the population is suffering increasing hardship. Considering the disastrous policies, it is hardly surprising that international solidarity with the Caracas government is dwindling. With its wealth of oil and other natural resources, the country could in actual fact play a considerably more important role, both in the region and at international commodity exchanges. How did it come about that Venezuela – previously an influential actor in Latin America – managed to deteriorate into a disruptive and destabilising factor in the region?

The Rise of Hugo Chávez

Prior to 1999, Venezuela had a two-party system for four decades, in which the social-democrat party Acción Democrática (AD) and the Christian-social party Comité de Organización Política Electoral Independiente (COPEI) alternated in power. Matters of state were no longer dominated by the military but by a civilian elite, based on a representative democracy. In 1975, the social-democrat President Carlos Andrés Pérez nationalised the oil industry and set up the oil company Petróleo de Venezuela S.A. (PDVSA), which became one of the most profitable state-owned companies in the world. This then allowed major infrastructure projects and social programs to be funded – thanks to steady oil revenues – and won Venezuela the reputation of a Latin American star pupil in matters of economic policy and democratic standards.

However, the nationalisation of the oil sector caused an even greater integration of political and economic powers, which reinforced the “rentier mentality” and brought about significant changes in society. State inefficiency as well as corruption, embezzlement and nepotism among a party elite, which became increasingly remote from the electorate, resulted in inadequate attention being paid to social issues in the country. The dissatisfaction boiled over for the first time in 1989 in a brutally suppressed riot, which entered the history books as the Caracazo (roughly translated “great Caracas riot”). Subsequently, the traditional parties came under increasing pressure as they did not succeed in resolving the economic crisis and regaining the trust of the electorate. In 1992, Hugo Chávez, who was an officer at the time, saw the chance of mounting a coup for the first time; however, this attempt was a miserable failure and the later president was convicted to a jail term. In 1998, Chávez, who had been pardoned by then, sought another route. He entered the presidential race as an independent and emerged the winner. Many Venezuelans, who were longing for change, were impressed by his purposefulness and biting rhetoric condemning the democratic party system that had become discredited. Unlike his competitors, Chávez came from the predominantly dark-skinned lower class and he was adept at using rhetoric and emotions to gain the support of this part of the electorate in particular. He deployed classic populist tools, such as simple language, simplification, stressing the role of victims, as well as distinctive friend/foe images. A long-time companion of Hugo Chávez once described him as “primitive and not well-read”, but as a leader with “keen perception and great emotional intelligence”, who “acted independently, even when dealing with the Castro brothers”.

From the beginning, Chávez pursued the goal of restructuring the state, initially somewhat haphazardly, but as the years went on with greater planning and a more radical approach. The systematic destruction of institutions, the creation of new institutions for his own and party-political purposes as well as the increasing marginalisation of dissidents provided the foundation.

A Military Man in Power

With the new 1999 constitution, Chávez initiated fundamental changes aimed at centralising the political system, in line with the military logic of its initiator. The executive was strengthened considerably, for instance by giving extensive powers to the National Electoral Council, the Supreme Court, the General Comptroller and the Chief Public Prosecutor. The Senate was scrapped as the second parliamentary chamber, thereby eliminating the possibility of the president being impeached by this body. While Chávez did not seek to introduce a socialist model from the beginning, he did take an interest in socialist ideas and made no secret of his admiration for Fidel Castro, who provided him with substantial support in return.

The political opposition Chávez elicited culminated in 2002 in a failed coup attempt led by Pedro Carmona, who by no means had the support of all opposition representatives. This was quickly followed by the paro nacional, essentially a general strike of the oil industry, which was aimed at deposing Chávez. The president responded by organising strikebreakers and sacking 20,000 PDVSA employees. The events of 2002/2003 would change Chávez and are still referred to by those in power to legitimise their suppression and marginalisation of the opposition, comprised predominantly of liberal-democratic groups, parties and activists.

A so-called recall referendum initiated by the opposition in 2004 was not successful either. Chávez took his revenge by sacking voters who had voted against him in the referendum from public sector jobs. At least 65,000 Venezuelans demonstrably lost their jobs. Due to these experiences, many Venezuelans fear repression during elections until this day.

Retaining Power above Ideology

It was not until after the 2004 referendum had been won that the presidential administration began to develop a concept-based ideological foundation for the “Bolivarian Revolution”. Before that time, the direction in which Chávez wished to develop the state had not been clearly defined. With their military background, he and his allies had always had an extremely nationalist outlook. Socialist ideas, which Chávez had never been averse to, flowed in from left-wing ideologists. It was during this period that the definite reorientation towards socialism took place, which was given an ideological underpinning by the concept of el salto adelante(“The step forwards”) put forward by Chávez’s mentor Haiman El Troudi. A new “unprecedented” socialism was announced using flowery language and vague wording. While it remains unclear how this utopia is to be achieved, the basic concept describes in concrete terms how power can be concentrated, consolidated and defended against the enemies of the “revolution”. The raison d’état is predominantly about securing power rather than pursuing social and economic progress. The document explicitly praises the political benefit of pragmatic action, as long as it serves to retain power.

When the demoralised opposition parties refused to take part in the parliamentary elections of 2005 by way of protest, it was no surprise that the Chavistas took advantage of this opportunity for their own purposes. The majority in parliament allowed Chávez to expand his power even more and claim democratic legitimacy. He also won the 2006 presidential election by a large margin. During the election campaign, he had made it abundantly clear that he would pursue a socialist model of government.

The expansion of state welfare and measures to give the existing social programs a new red overtone to win popular support allowed enthused Chávez supporters at home and abroad to indulge in dreams of having found a new alternative socialist model after the demise of the Soviet Union and the Eastern Bloc. Of course, historically high oil prices helped the new government to fund its welfare handouts. Instead of investing the oil revenues in safeguarding the future, Chávez encouraged consumption purposefully, yet by no means sustainably. Particularly the lower class, which had previously been neglected, benefited from state handouts and thanked Chávez with their loyal support. Redistributive measures created large-scale dependence on social programs, which líder máximo Chávez was able to greatly capitalise on. He consequently did not have to fear elections.

Immediately after his election victory of 2006, Chávez used his overwhelming power to announce that he was introducing the “Socialism of the 21ˢᵗ Century” in Venezuela. The announcements were followed by a wave of aggressive expropriation of properties and businesses, particularly in the media sector and in the agricultural and food industry. These sectors were of particular strategic importance for the social and political control of the poor strata of the population. In most cases, loyal members of the military were appointed to manage the businesses; they did not know much about business, but quickly developed a strong mentality of personal enrichment. While Chávez was not able to push through his constitutional reform, which envisaged (his own) unlimited re-election by means of a referendum, the “Socialism of the 21ˢᵗ Century” prescribed the future government line. All political action was subordinated to central government control and to the goal of retaining power.

Bringing the Public and the Media in Line

The media landscape was gradually taken over by the state, be it by expropriation, the revoking of licences or other forms of obstruction. The aim was not only to control television and the press, but also to enforce a homogenised language and specific forms of communication reminiscent of an Orwellian regime. The increasing focus on Chávez in the media took on messianic overtones.

It was and still is important to the government to gain sole power to define certain terms or to establish new terminology and bring it to life. Over the following few years, the persecution of critical journalists increased, which led to self-censorship that is still widespread today. Censorship also exists insofar as certain events are no longer being reported or are not allowed to be reported. Critical media coverage remains to be found, which the government allows to operate undisturbed as they are mostly irrelevant to its own electorate and as this maintains the illusion to the outside world that there is an independent free press in Venezuela. Over the years, the media has turned into a gigantic propaganda machine in the government’s service. The “Bolivarian Revolution” was depicted as a grand spectacle. In a type of “politainment”, supposed “revolutionary achievements” of the government are described in overblown terms or invented with the aim of painting a distorted picture of Venezuelan reality. The information or more correctly manipulation broadcasts of the state, which are tailored to the poorly educated strata of the population, have taken on grotesque forms, such as the several-hour-long cadenas, seemingly interminable direct transmissions of ad-hoc speeches by the president, the weekly live broadcast by Chávez entitled ¡Alo Presidente!or that by his successor entitled En Contacto con Maduro and finally the TV broadcast Con el Mazo Dando (“Giving with the truncheon”), in which the former President of the National Assembly Diosdado Cabello reads selected secret service reports about members of the opposition, voices threats, tells sentimental stories about the late leader Chávez or spouts propaganda on class concepts. The government rhetoric involves the usual idealisation of the lives of the lower classes, which has tradition in Venezuela and is more likely to help cement rather than overcome existing social conditions.

Autocracy at All Levels

The socialist communal state, which was already mentioned in the salto adelante concept, was introduced step by step by means of a slew of laws in 2009 and 2010. Under the guise of “political participation”, numerous socialist communes were established. These are institutions which exist in parallel with the democratically elected local councils and mayors and receive state funding. Without attracting a great deal of attention, the government thereby succeeded in developing a structure at the local level that is directly dependent on it and that serves to exert social and political control at the base. In the new communal state, the “people”, in government propaganda generally interpreted as supporters of Chavism and set against “right-wing bourgeoisie”, supposedly makes decisions in matters relevant to its own interests while it is, in fact, dependent on government handouts. The extensive use of state funds for party-political purposes or for Chavist groups was underpinned in legislation and is extremely important for voter mobilisation. Political scientists such as Ángel Álvarez and Benigno Alarcón Deza therefore class Venezuela as a “competitive autocracy”. The election process still plays a crucial role for legitimisation, but dishonest means are used to bring about a decision in favour of the Chavist side if the outcome is in doubt.

Petro-Diplomacy the Chavist Way

While Venezuela used to conduct traditional regional politics with its vast reserves of oil, Chávez subordinated petro-diplomacy to his ideological goals and to securing his power in the region. In addition to a number of bilateral agreements, Venezuela also forged some regional alliances. In most cases, the cooperation involved oil deliveries at favourable prices in turn for political support for the Caracas regime. In collaboration with Cuba’s Castro brothers, Chávez pursued the aim of forming a broad anti-U.S. alliance. Caracas makes regular efforts to paralyse regional forums with a strong U.S. influence, such as the Organization of American States (OAS), while establishing new ideological alliances at the same time. These include first and foremost the “Bolivarian Alliance for the Peoples of Our America” (ALBA), which is dominated by Venezuela. Venezuela has also cleverly leveraged its influence in other alliance s in the past, including the “The Union of South American Nations” (UNASUR) and the “Southern Common Market” (Mercosur).

The anti-U.S. stance has dominated Venezuelan foreign politics since 1999. This has also involved the Caracas government cooperating with other states critical of the USA, such as Russia, Belarus, Iran and China. The cooperation with China has gone so far as to establish a joint development fund. Venezuela pays for most Chinese development projects with oil deliveries; however, due to falling oil prices, these are increasing more and more in volume, which reduces the revenues of the Caracas government. Since 2005, the country has amassed a huge debt of some 65 billion U.S. dollars to China.

The USA is still one of the most important buyers of Venezuelan oil and one of its most significant trading partners. The anti-U.S. stance does not bring any benefits as far as international politics is concerned; but domestically, it fulfils the important role of presenting the people with a fake scenario of a foreign threat and of winning over leftist groups at home and abroad. The Venezuelan government regularly uses the political wrangling between Caracas and Washington to divert attention from its own failures or to fend off international criticism, for instance in connection with the serious human rights violations in the country. Thanks to a number of traditional supporters, including Bolivia, Ecuador, Cuba and Nicaragua, some states whose silence was bought, first and foremost the Caribbean states, and some relativists, including Brazil under Lula and Rousseff until very recently, Caracas has managed to fend off international pressure. The more the regime got into hot water due to economic problems and the louder the protests within the country became, the stronger the repression. Under the eyes of the international community, 2014 saw the brutal crushing of some protests that had been initiated mostly by university students. Instead of sending clear signals to the Venezuelan government, the Latin American as well as European governments lost themselves in debates about the correct interpretation of the protests and effectively let President Maduro and the military carry on unchallenged.

The Military as a State within the State

With the concept of a “civilian-military union”, Chávez aimed at letting the military spearhead his “Bolivarian Revolution”. This resulted in the military becoming politicised and aligned to the government so that Chávez no longer had to fear any threat from that quarter. However, when he fell ill with cancer in 2011, increasing numbers of military personnel pushed their way into political offices. While the military had felt sufficiently well represented by Chávez, this did not seem to apply to the same extent in the case of his successor Nícolas Maduro. As someone who did not come from the ranks of the military himself, securing their loyalty cost Maduro dearly and he had to grant them greater influence. This explains why roughly a third of all cabinet minister posts and significantly more deputy minister posts are now held by people with a military background. Members of the military can also be found at the head of state-run businesses and in the diplomatic service. The historian Luis Alberto Buttó, an expert in the correlations between the military and civil society, comments that the Venezuelan generals – contrary to their self-image – frequently have no idea about how to run affairs of state or a business and manage things extremely inefficiently.

Not only does the military have its own supply systems of food and medicine, frequently to the detriment of the general population, it also has a newly founded bank at its disposal, a TV station and since the beginning of this year also its own oil and mining company, the Compañía Anónima Militar de Industrias Mineras, Petrolíferas y de Gas (CAMIMPEG), over which the military has exclusive control, including its revenues. To the director of the NGO Control Ciudadano, Rocio San Miguel, it is clear that Maduro has bought greater support from the military with this step. She also maintains that the constitution does not permit the military to be involved in oil production or mining because that would only encourage corruption within the military.

During the years of government under Chávez and Maduro, the militarisation of Venezuelan society has increased significantly. Members of the military are omnipresent not only in government circles but also in everyday life and they frequently perform police functions. The military leadership likes being celebrated as “Simón Bolívar’s heirs” in folkloristic scenes on state television and occasionally organises exercises intended as dubious deterrents to the U.S. “Empire”. The claim to power and the preferential treatment of the military are ubiquitous and accepted by the population even in the case of rank and file soldiers, for instance where food allocation is concerned; consequently, people forget that a civilian republic had existed for almost four decades up to 1999. Besides politically motivated intervention by the military, a significantly greater threat these days emanates from the generally feared colectivos. These are mostly motorised gangs armed by the government. Where it is deemed necessary, these groups spread fear and terror among opposition activists and dissenters. As the colectivos also perform some “social work” in their neighbourhood, they are talked up and idealised by Chavists and left-wing ideologists. However, over the years many colectivos have transformed into criminal organisations that operate outside the law and are mainly engaged in illegal activities. The government is letting the colectivos act with impunity for political reasons. The same applies to the all-powerful military and security apparatus, which has a hold on the government. In a climate of lawlessness and impunity, there have also been many links established to the “classic” Mafia, with the result that Venezuela seems to be hopelessly stuck in the quagmire of organised crime these days.

The concept of justice as understood by the ruling elite in the state and the military and their stooges is fast losing any similarity with Western-style rule of law. This manifests itself in a number of different ways. In Venezuela, there is virtually no oversight of the executive any longer, which is why it is hardly surprising that acts of state despotism benefiting those in power are happening everywhere. In this context, the culture of embezzlement and corruption is taking on endemic proportions. Transparency International therefore places Venezuela among the ten most corrupt countries in the world.

On the Path to Economic Ruin

Chávez initiated his country’s economic ruin with waves of expropriation, which were reported on state television with populist fanfare. Further measures, such as the capping of the prices of thousands of products and particularly the fixing of the exchange rate, added significantly to the economic downturn. Displaying total ignorance of economic correlations, Chávez and his allies also turned out to be very incompetent economists.

Even the most essential goods need to be imported in Venezuela.

In Venezuela, which had had a diversification problem for decades because of the strong focus on oil production in the economy, the dependence on oil increased further after 1999. In 2015, oil accounted for an unbelievable 96 per cent of total exports. The generation of foreign currency revenues is as a consequence in the hands of the state and is therefore control over virtually all imports.

Production levels of many nationalised companies have fallen or the businesses have shut down entirely. This also affects particularly important sectors such as agriculture. Supplying the population with many essential products therefore requires imports, which only the state is capable of transacting as hardly anybody else generates foreign currency revenues. And this effect is exacerbated by a system of different exchange rates. The true value of the currency deviates increasingly from the fixed exchange rate, which is why a black currency market has developed. Due to continuously increasing state expenditure and inefficiency, the budget deficit has grown steadily, reaching some 20 per cent of GDP in 2015. The government had to plug the hole in the budget by diverting further funds from the state-owned company PDVSA, dipping into currency and gold reserves and printing money in the domestic currency of the bolívar. These measures have fuelled inflation. The government has not been able to cover the demand for foreign currency with the U.S. dollars from the oil revenues for some time. In 2016, the black market rate for the U.S. dollar reached over one hundred times the fixed exchange rate. Manufacturing costs in Venezuela have consequently risen continuously for years, partly because some input materials have to be imported at high cost while the price capping of the products by the government hardly keeps pace. Thousands of private and state-run businesses are finding it very difficult to make any profit under the present circumstances. This is resulting in business closures and job losses, making the country even more dependent on imports that the government can no longer finance. The slowdown in domestic production fuels inflation further and increases the gap between the official and the black market U.S. dollar exchange rates. The International Monetary Fund forecasts an inflation rate of 500 per cent for Venezuela for 2016, and it is expected to rise as high as 1,700 per cent in 2017.

Maduro as the Steward of a System in Crisis

Even before Hugo Chávez’s death in 2013, he had nominated Nícolas Maduro as his successor. Maduro was elected president on the basis of dubious election results in April 2013 and has been conducting the affairs of the state since then in the same vein as his predecessor without implementing any genuine reforms.

The majority of the population can only afford goods these days that are imported by the state at the fixed exchange rate or produced by state-owned companies and sold in state shops. Every day, people stand in lengthy queues outside many supermarkets in the hope of getting hold of some price-regulated and affordable goods that are in short supply. Millions of people make a living purchasing these goods and selling them on, which earns them more than their regular jobs as their wages are eroded by inflation. To the government, this system-generated dependence is in fact opportune as it also serves social control. That said, the shortages – particularly of food and medicine – have reached such proportions over the last few months that looting is becoming an ever more frequent occurrence. To feed a family of four required 4.7 times the minimum wage back in 2013. Now, in 2016, this ratio has risen to around 17.

Venezuela is facing economic ruin. Economists are already warning of serious consequences for the country in the event of insolvency. Opposition MPs are already raising the alarm: most medical supply imports can no longer be funded due to a lack of foreign currency. Every day, there are more news reports of people dying in hospitals and of people in the slums facing starvation. A humanitarian catastrophe is looming, although the government denies this vehemently. The loss of grip on reality and ideological stubbornness have even resulted in the Catholic charity Caritas being refused permission to import aid supplies from abroad into Venezuela.

Dire Prospects

Having won the parliamentary elections in December 2015, the democratic opposition, which had joined forces in the “Democratic Unity Roundtable” (MUD), hoped to have come one step closer to Nícolas Maduro being replaced in office. But instead of recognising the huge victory of the MUD as a sign of the times, the reform-averse president chose the path of even greater repression. The parliament was effectively disempowered by each of its decisions being declared null and void by the Supreme Court, which is controlled by the government. The new parliament passed more bills in the first six months of 2016 than the previous parliament had done in its entire legislative term. However, in disregard of the constitution, not only were the law amendments scrapped, President Maduro in fact issued additional regulations whereby he granted himself unrestricted rights, cynically invoking the constitution. While Chávez was at least able to claim democratic legitimacy, Maduro is now utilising the power pragmatism inherent in Chavism to secure his own position and political survival.

Alarmed by the worsening situation in Venezuela, the Secretary General of the OAS, Luis Almagro, attempted to invoke the Inter-American Democratic Charter. This would have facilitated collective action against the continuing human rights violations, the gradual dismantling of democracy and the catastrophic humanitarian situation. In his 130-page report addressed to the Chairman of the Permanent Council, Almagro describes the dramatic situation in Venezuela in great detail, accusing the government of placing individual above collective interests. He urgently calls upon the American states to act jointly in the dealings with the Caracas government. Venezuela’s political alliances, differences of opinion in assessing the seriousness of the crisis and the view that confrontation and sanctions are not always successful have meant that the OAS did not invoke the Democratic Charter with respect to Venezuela, but instead called for dialogue in a conciliatory declaration. President Maduro and Foreign Minister Delcy Rodriguez celebrated the declaration as a diplomatic victory, as was to be expected.

Note: Only affirmative asylum cases shown. Fiscal year starts in October. Source: Pew Research Center.

Deprived of the capability to take effective action in parliament, the opposition initiated a recall referendum in April 2016. The constitution stipulates that at least one per cent of all the voters on the electoral register in each federal state must have put their name on signature lists to express their support for activating the recall referendum. This hurdle was passed after just one day. In a second step, the signatures of some of the voters were validated personally in the regional centers of the National Electoral Council (Consejo Nacional Electoral, CNE). The majority of the voters’ signatures were not accepted for validation wi thout any reasons being given. The third step now envisages a countrywide voting process where at least 20 per cent of those eligible to vote, some four million voters, must express their support for a recall referendum. The actual recall referendum then follows in a fourth step, in which more Venezuelans will have to vote for Maduro to leave office than had voted him into office at the last election – some 7.6 million. If the referendum is not held by 10 January 2017, there will be no new elections in the event of Maduro resigning or being voted out; instead, the vice president would take over as president for the last two years of the legislative term. It is abundantly clear that this represents a tactic pursued by Maduro, who has already declared unashamedly on television that there would be no referendum this year. Considering the dishonest practices of the government camp, it is entirely possible that the referendum on Maduro remaining in office will be delayed until next year, although there is no administrative or technical reason for this and it would run counter to the rules set out in the constitution.

Parallel to the recall referendum, various attempts at establishing a dialogue were made at an international level. The Vatican, for instance, has made efforts to mediate between the government and the opposition behind the scenes for quite some time. Then there is an initiative by UNASUR, headed by the social-democratic former heads of state Zapatero, Torrijos and Fernandez. The opposition is not averse to dialogue in principle, but fears that the government does not wish to engage in a genuine dialogue, and merely wants to win time to be able to delay the recall referendum until next year. Considering the last attempt at setting up a dialogue between opposition and government after the unrest in 2014, this is not an unfounded suspicion. At that time, the Chavist leadership already made fun of the opposition on social media while conducting a “dialogue” at the same time. Years of denigration, political persecution, use of violence and psychological harassment – a number of opposition politicians are still in jail without reason or after show trials – have left their mark on the MUD and elicited great distrust. The prospect of any meaningful dialogue is therefore probably poor.

As the government clique and the top echelon of the military would probably have to expect being prosecuted above all for the embezzlement of tax funds and illegal personal enrichment, they feel compelled to cling to power to preserve their ill-gotten gains. Neither the recall referendum nor a serious dialogue represents a desirable option for them. If international pressure continues to remain relatively modest, the government will not feel the need to engage in serious negotiation. In fact, the Chavist leadership appears to be considering removing Maduro from office prematurely next year and installing a president who cannot become a threat to it. However, this approach is not without risk either. The suffering population needs prompt assistance and fundamental reforms as hunger will otherwise drive it onto the streets. While politics is taking its time, time is running out for the country.


Henning Suhr is Head of the Konrad-Adenauer-Stiftung’s office in Venezuela.

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Men rest after salvaging metal on the 30th floor of the "Tower of David" skyscraper in Caracas February 3, 2014 Jorge Silva/Reuters