SOC300 Honors Case Profile                                (400 points)

The Collapse of Venezuela

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1. Overview 

Home to 29 million people, Venezuela plays an important role in South America, and through its energy wealth, the global economy.  As the seventh largest country by land mass in Latin America, it shares more than three thousand miles of borders with its neighbors Brazil, Colombia, and Guyana and its economy is powered by the world’s largest known oil reserves.

For the United States, Venezuela poses difficult policy choices.  Despite Venezuela’s sending one-third of its oil exports to Texas refineries, its politics have become increasingly anti-American, first under Hugo Chavez, a leftist leader who governed Venezuela from 1998 until his death in 2013, and then under his successor, Nicolas Maduro.

Years of high oil prices combined with easy access to international markets enabled Chavez to redistribute wealth to his supporters through expansive domestic social spending. This brought immediate benefits to Venezuela’s marginalized populations, reducing poverty, improving access to health care, and expanding education.  Chavez also launched foreign policy programs such as PetroCaribe, which distributes subsidized oil to Central American and Caribbean neighbors.

Yet a heavy statist (see glossary; this is an important term to know — Dr. Cronin) hand, from increasing market interventions to outright expropriation of numerous businesses, led to steep declines in investment and production in the non-oil economy. And even oil began to falter as underinvestment and mismanagement at the state-owned energy company, Petróleos de Venezuela, S.A. (PDVSA), led to production declines. At the same time, populist economic policies spurred inflation. And even as poverty indicators improved, crime — especially homicide rates—rose.

The Venezuelan government lost domestic political support after Maduro, Chavez’s long-time deputy, took over as president in 2013.  Maduro’s administration repeatedly responded to challenges by cracking down on dissent.  It arrested opposition leaders and decried alleged meddling by the United States.  Starting in 2014, the plummeting price of oil, the country’s only major export and principal source of foreign reserves, drove the economy into crisis.  With high debt levels, an economic recession, and rising inflation, the government saw international reserves dwindle, curtailing imports of even basic goods such as milk and toilet paper.

Meanwhile, crime escalated in many forms. In urban areas including Caracas, kidnappings, murder, and robbery plague not just poor neighborhoods but also affluent ones.  The United States has confirmed that terrorist organizations such as the Fuerzas Armadas Revolucionarias de Colombia (FARC, or the Revolutionary Armed Forces of Colombia) and the National Liberation Army (ELN) use the rural Venezuelan-Colombian border as a safe haven and drug trafficking corridor.

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1. Case Assessment

While reading the case material, you should keep in mind:

1. What the current situation in Venezuela is and what contributed to its emergence?  What kind of threat to the country, its people and the overall region does this situation pose? 
2. What are the U.S. policy options in this case, and what are their advantages and disadvantages?
3. What U.S. interests are at stake in this case?  As a policymaker, how would you prioritize these various interests, and why?
4. Who (were) (are) Hugo Chavez, a leftist leader who governed Venezuela from 1998 until his death in 2013, and his successor, Nicolas Maduro and what is the basis of their ideological compatibility?
5. What is the significance of oil to Venezuela and to this political situation specifically?
6. What are the economic, security, political and other challenges that Venezuela faces internally and how do these difficulties affect its crisis and any international response to it?

1. Main Concepts in the Case

• Economic collapse
• Political uncertainty
• Humanitarian catastrophe
• A weak or failed state
• Possible civil war

IV.   Your Assignment  

Bear in mind that this is a theoretical case study only and the current Maduro government in Venezuela is still in power.  What we are examining is here are the actions the U. S. MIGHT take IF his government fell and he fled the country.

You will be senior member of the National Security Council (NSC) who advises the president about security developments on a global level, and it is your job to decide whether American interests are involved and/or threatened as situations arise around the world.  In this case, you are to write a five-page paper assessing the economic, military and humanitarian situations in Venezuela.  Your paper will be numbered and divided into three sections in which you decide:

(1)  If any national interests of the U.S. are involved, then what are they?  If no interests are involved, then why not?

(2)  Describe briefly how the Venezuelan economy is statist, and then answer whether the U.S. has a responsibility to protect (R2P) the people of Venezuela or intervene in any way?

(3) If action is called for, then what policy options are available to the U.S.?  (See the following section).  If no action is recommended, why not?

The specific requirements for this assignment are in the Case Requirement attachment on the course information page in Blackboard.

The national security advisor (NSA) has a full range of viable policy options available and coordinates those options to make certain that the prospects for success and failure have been identified for the president.

• In your summary you must include factors such as: (1) should the U.S. intervene or not, and if so, what form of intervention do you recommend? and (2) In addition, if you do recommend intervention, then should it be unilateral or multilateral? 
• I will hold one conference call in the first two weeks of the course to discuss this assignment and answer questions, so it is imperative that you try to attend it.  If you absolutely cannot do so, I will record the call so you can refer to it for any clarification.

Ø

V.    About the Case (Remember: this is a theoretical overview)

Its reserves depleted, Venezuela’s government defaulted last month on a large package of foreign loans, and the ensuing financial panic precipitated a true economic collapse. Their bolivars suddenly worthless, and with food and basic necessities in short supply, protestors stormed the Miraflores Palace, causing President Nicolas Maduro to flee the country.  (Again, Maduro has not as of yet left the country, but for the purposes of this case study, he has).

Two members of the Partido Socialista Unido de Venezuela (PSUV, or United Socialist Party of Venezuela) have since claimed the presidency, but neither has been able to rally the disparate parts of the party, stabilize the economy, or establish control over most of the country’s territory. Meanwhile, protests continue and factions of the military have abandoned the government. Violence is escalating, led in part by the colectivos, autonomous armed community groups that Chávez created. Venezuela’s borders and coasts are increasingly unpatrolled, leading to rising reports of activity by drug traffickers and the FARC, the guerrilla group and U.S.-designated terrorist organization that has long battled the government of neighboring Colombia. Although some oil exports continue, PetroCaribe has abruptly ended, depriving countries including Cuba, Nicaragua, Jamaica, Guyana, and Belize of some two hundred thousand subsidized barrels of oil per day.

The disorder in Venezuela poses economic, political, and security challenges to the United States, but also offers potential opportunities. The chaos has immediate socioeconomic consequences for Venezuela’s people and those of neighboring countries. If prolonged, the crisis could cause oil prices to rise and criminal and terrorist activity in Venezuela to intensify, and possibly lead to a failed state in the Western Hemisphere.

The United States has a strong interest in supporting the return of democratic institutions to Venezuela. The current political crisis provides an opening to reinvigorate democracy in Latin America’s sixth most populous country, bolster Venezuela’s ties with other countries in the region, and improve U.S.-Venezuela and U.S.-Latin America relations.  The National Security Council (NSC) will need to recommend a course of action to the president.  This entails considering how to prioritize and pursue the U.S. interests at stake, including economic stabilization, regional security, a stable flow of oil, protection of human rights, and restoration of democratic governance and the rule of law. 

The president has asked the NSC for options on whether and how the United States could pursue any form of intervention in Venezuela.   The NSC will need to consider the pressure on the United States to act, including the responsibility to protect (R2P), as well as the significant costs, benefits and risks of a unilateral or multilateral intervention.

VI.    Approach

• There is no right or wrong way to write up your research, but the better prepared you are, the more you will get out of the experience.
• Ensure that you carefully weigh the consequences of various decisions.
• You cannot win or lose in this assignment.  Instead, you should aim to offer a well-reasoned articulation of your position.
• Your individual grade on this assignment will depend exclusively on the five pages you write about your assessment of the situation and the quality of your recommendations to the president about whether he should take action on climate change.

VII.        The Interagency Process (The National Security Council)

Whether it aims to meet an acute national security threat or to advance a long-term objective, a successful foreign policymaking process starts with the clear articulation of U.S. interests and goals.  The NSC plays a critical role in this effort by serving as the president’s principal forum for considering national security and foreign policy matters with his senior national security advisors and cabinet officials.  Its mission is to help the president effectively use a variety of instruments, whether military or diplomatic, to forge policies that advance U.S. national security objectives.  The NSC and its staff try to even-handedly manage the policymaking process so that the president can receive a full spectrum of advice from the agencies involved in national security.

•  The National Security Advisor

You, as the national security advisor (NSA), have a special role in crisis management by serving as the “honest broker” for the national security policy process.  Although the president makes final decisions, the NSA is responsible for ensuring that he or she has all the necessary information, that a full range of viable policy options has been articulated, that the prospects for success and failure have been identified, that any legal issues have been addressed, and that all members of the NSC have had the opportunity to contribute.

IX.   The Role of the United States

The United States has strong interests in ending the current instability in Venezuela and ensuring that a new government operates in a lawful and democratic manner. Indeed, Venezuela’s collapse is an opportunity for the United States to improve the situation in an important country that has spiraled into crisis.  The United States has long been concerned with advancing democratic values in Venezuela.  It has provided tens of millions of dollars in assistance to Venezuela for democracy projects through the U.S. Agency for International Development (USAID) and the National Endowment for Democracy.  Additionally, U.S. officials have criticized the Chavez and Maduro governments for the deterioration of democratic institutions and threats to freedom of speech and the press, as well as imposed sanctions for human rights violations.

The broader implications of Venezuela’s complete economic and political collapse could also harm U.S. interests. The spread of drug trafficking organizations could seriously undermine U.S. efforts — including Plan Colombia and the Merida Initiative in Mexico — to disrupt the drug trade in the Western Hemisphere. It could also undermine Colombia’s peace negotiations with the FARC. Some worry too that other terrorist groups such as al-Qaeda, Hamas, or Hezbollah could inhabit these ungoverned spaces. Some evidence indicates that between 1999 and 2003, Islamic extremist groups used the Tri-Border Area (TBA) between Argentina, Brazil, and Paraguay, known for its lawlessness, to plan operations, launder money, and traffic drugs. Venezuela’s economic breakdown could also have global economic consequences. The country is the world’s twelfth largest producer of crude oil and provides 10 percent of U.S. oil imports. An interruption in Venezuelan oil flows could raise both global oil prices, driving up costs for U.S. manufacturers and consumers at the pump. PetroCaribe countries, many U.S. allies, risk more severe economic effects from Venezuela’s disorder.

Policy Options

In this context, the United States has four major policy options to consider. These options are not mutually exclusive, and most can be combined.

1. Direct military intervention

The United States could mount a direct military intervention, either multilaterally or unilaterally.  The goals of such an intervention would be to restore and maintain order, facilitate an agreement among competing political groups, and oversee a political process leading to free and fair elections.  Accordingly, intervention in this case would look more like a policing than a combat effort.  Between eight thousand and fifteen thousand troops would be required.

2. Containment

The United States could aim to limit the repercussions of the crisis for itself and the region through containment. This would mean working with Venezuela’s neighbors — Brazil, Colombia, and Guyana — to secure Venezuela’s borders and prevent the spread of criminal and terrorist activity, and to help refugees fleeing the violence. Building on Vice President Joseph Biden’s Caribbean Energy Security Summit held January 2015, the United States could also help PetroCaribe beneficiaries — in particular allies such as the Bahamas, the Dominican Republic, and Jamaica — cope with the oil price shock generated by the program’s collapse.  Assistance to other beneficiaries, specifically Cuba, could help move the traditionally antagonistic relationship in a more positive direction, coinciding with the broader bilateral policy shifts under way.

3. Diplomatic and economic interventions

The United States could use various diplomatic and economic means to help reestablish basic order and support the reemergence of democratic institutions and economic stability in Venezuela.  At the individual level, it could freeze the assets of major government officials.  In addition, the United States could support organizations providing assistance to Venezuelans and facilitate or support negotiations toward a democratic transition.  Economically, the United States could offer funds or other assistance to keep Venezuela’s oil flowing, work to provide emergency loans, and help Venezuela renegotiate its debt.

4. No action

This means what it says: the United States will observe events in Venezuela but take no direct action against the state or its government officials.

The Tools at America’s Disposal

The United States could decide that the costs and risks of any of the above steps outweigh the benefits and are disproportionate to the U.S. interests at stake. In this case, policymakers could decide to take none of the actions above — an option that deserves as much consideration as the others. However, this option would still require NSC members to consider certain decisions that might arise as the situation in Venezuela evolves.

The United States plays a critical role in establishing and maintaining international order in an increasingly globalized world. The range of foreign policy issues that require its attention or involvement is vast. From conflicts in Afghanistan, Iraq, and Syria to tensions with North Korea and Iran; from longstanding alliances with European and Asian powers to complex, evolving relationships with Brazil, China, India, Russia, and South Africa; from the stability of global finance to the promotion of economic opportunity in low-income countries; from climate to health to nuclear proliferation to terrorism — there is little around the world in which the United States does not have a vested interest. Furthermore, issues such as immigration, trade, and cybersecurity underscore the fading distinction between domestic and international matters.

U.S. leaders use a range of tools to pursue a foreign policy that they believe will protect national security and achieve U.S. goals. These tools include:

• diplomatic tools, such as bilateral or multilateral consultations and negotiations, treaties, defense and security agreements, resolutions in global and regional bodies such as the United Nations (UN), and public diplomacy to promote U.S. views and culture;
• economic tools, such as trade and investment agreements, tariffs, sanctions, embargoes and boycotts, bilateral and multilateral development assistance, loans for the purchase of U.S. exports, and sales of arms, equipment, and technology;
• military tools, such as missile strikes by manned or unmanned vehicles, nuclear deterrence, ground force deployments, ship and submarine patrols, blockades, unilateral or partnered military exercises, foreign military training, and special operations forces;
• unconventional tools, which are actions, sometimes secret, taken by the U.S. government and its proxies, such as training and assisting foreign intelligence services, supporting armed nonstate actors, private security contracting, and cyberwarfare.

Effective policymaking and policy implementation require the deft use of different combinations of these tools, depending on the circumstances. To accomplish this, policymakers must clearly define U.S. interests and gauge the interests, resources, and motivations of foreign governments and nonstate actors. The U.S. intelligence community helps policymakers in their work by collecting and analyzing a vast range of information, including satellite images, communications records, documents, data, and personal observations.

Foreign policy successes and failures are often associated with decisions made by presidents. Less explored is the decision-making apparatus that helps the president make those critical choices and coordinate their implementation. This guide will help you understand the system through which the United States creates and implements its foreign policy.

• Context

After decades of rule by the military and other strongmen, Venezuela’s experience with democracy—albeit with significant weaknesses — began in 1958. That year, three major political parties, Acción Democrática (AD, or Democratic Action), the Comite de Organizacion Politica Electoral Independiente (COPEI, or Political Electoral Independent Organization Committee), and Union Republicana Democratica (URD, or Democratic Republican Union), came together to create the Punto Fijo Pact. The URD would later abandon the agreement.  Between 1963 and 1988, COPEI and AD effectively traded the presidency every five years. The Punto Fijo Pact ensured the continuation of partidocracia (particracy), as each accepted its losses, waiting until the next election. During this time, the two parties extended their influence to all aspects of life — jobs, sports teams, even beauty pageants — using the public largesse from oil production to benefit supporters and loyalists.

Through this crony patronage system, they maintained political stability even as many other Latin American governments fell into authoritarianism. But the alternation of power between the parties eventually bred skepticism about the electoral process and whether elections truly represented the will of the people. Additionally, this political duopoly was vulnerable to a decline in the government resources that funded party patronage networks.

During the mid-1980s, oil prices plummeted. As government revenue dwindled, Venezuelan leaders implemented austerity measures as part of a funding arrangement with the International Monetary Fund (IMF). The measures sparked popular unrest, which reached a peak in February 1989, when the popular former President Carlos Andres Perez came back into office and deepened the cost-cutting reforms. After he announced a program to hike bus fares, chaos ensued. Several days of protests, riots, and looting in the capital Caracas resulted in nearly three hundred deaths.  In 1992, unhappiness with the economic and political situation led a young lieutenant colonel named Hugo Chavez to attempt a coup d’état. Although unsuccessful, it brought Chavez to prominence on the national stage.

Economics

Venezuela began extracting oil in 1917, and since 1930 it has been the primary driver of Venezuela’s economy. In recent years, oil has represented upward of 95 percent of total exports. In response to the oil price spike in the 1970s, the Venezuelan economy grew dramatically and Venezuelans enjoyed one of the highest standards of living in Latin America. When the government nationalized the oil industry in 1976, creating PDVSA, federal revenues from oil tripled. From 1974 to 1979, the Venezuelan leadership spent more than in the previous 143 years combined. The government poured money into modernization efforts including roads, railways, schools, housing projects, industrial parks, and hundreds of state-owned enterprises. Much of the influx was squandered, though, in mismanagement and corruption.

The sharp oil price declines of the 1980s led to a decade of unprecedented economic crises. Severe inflation and growing unemployment led to discontent among Venezuela’s poor. The country’s historically high living standards also dropped significantly. Between 1984 and 1995, poverty rates increased from one-third to two-thirds of the population. Extreme poverty rates tripled, from 11 to 36 percent. The Venezuelan economy, which had grown upward of 7 percent a year during the 1970s, contracted sharply. In 1989, GDP fell by 8 percent and inflation reached 89 percent. These economic problems unraveled the traditional political system.

Pre-Chavez Foreign Relations

Starting in the mid-twentieth century, Venezuela held an influential position on the world stage as an oil-rich and relatively democratic country. In 1960, it helped found the Organization of Petroleum Exporting Countries (OPEC), increasing its weight in global markets. As a regional player, the country has often leveraged its influence within the United Nations (UN), Organization of American States (OAS), and other organizations. Venezuela has mediated crises in Latin America, including that in 1990 when, along with Colombia, Mexico, and Panama, it pushed Daniel Ortega and the Sandinistas in Nicaragua to allow democratic elections, a shift from its previous support of the regime.

The U.S.-Venezuela relationship before Chavez’s 1998 election was largely positive. The United States was, as it is today, Venezuela’s largest trading partner. For decades, Venezuela supported the United States in the Cold War and voted alongside the United States on several notable issues in the OAS, including the controversial expulsion of Cuba from the organization in 1962. Venezuelan leaders at times spoke out against the United States; for instance, Romulo Bentancourt — President John F. Kennedy’s contemporary — criticized U.S. courtship of autocrats as part of its anticommunist policies. But overall the two countries enjoyed a friendly relationship and pursued shared interests in the region. 

Recent History

Chavez’s Degradation of Public Institutions

Chavez came to national attention in 1992 when he led an unsuccessful coup against President Andres Perez. As a condition of his surrender, Chavez addressed his co-conspirators on national television.  His now infamous “Por Ahora (For Now)” speech inspired Venezuelans tired of cronyism, corruption, and austerity policies. After a presidential pardon, Chavez ran for president in 1998 under the banner of his newly created political party, which called for an end to corruption, more spending on social programs, and redistribution of oil wealth. Chavez won the election with 56 percent of the vote, bringing puntofijismo to an end and ushering in what he called twenty-first century socialism, or Chavismo.

Chavez used both democratic and antidemocratic tactics to maintain power. Following his election, he quickly moved to rewrite the constitution.  Approved by referendum in 1999, the new constitution called for special elections in 2000.  The public reelected Chavez and his coalition increased its ranks in the National Assembly, which then passed an Enabling Act, granting the president the power to implement laws by decree for one year.  Chavez used this power to announce forty-nine laws on issues such as land reform and oil industry regulation.

Early on, Chavez faced resentment from segments of Venezuelan society. In 2002, these groups supported a short-lived coup that removed Chavez from power for several days. In the wake of the attempt, PDVSA management led a major strike from 2002 to 2003 to protest the president’s efforts to control the company. Chavez stifled this dissent by firing nearly 50 percent of PDVSA employees, replacing them with loyalists, and allegedly blacklisting the instigators, making it difficult for them to find new jobs. Similarly, he responded to the attempted coup by undermining civil liberties. He cracked down on freedom of expression with a 2004 law enabling government censorship of opposition media. In 2007, he revoked the license of the antigovernment network RCTV, and other networks, afraid of being shut down, reduced their criticism of the government.

Chavez successfully undermined the opposition’s attempts to compete in the electoral realm during his presidency. In 2005, opposition leaders, frustrated with perceived unfairness of the electoral process, boycotted parliamentary elections. Instead of prompting any changes, their strategy gave pro-Chavez parties complete control of the National Assembly. In 2008, hundreds of opposition candidates were banned from participating in regional elections, among them opposition leader Leopoldo Lopez, who faced unsubstantiated accusations of corruption. By February 2009, Chavez secured a referendum abolishing term limits for elected officials. He then ran and won a fourth presidential term in 2012 — the most successive terms of any Venezuelan president.

Worsening Security

Security eroded during the Chavez years. With institutions to ensure the rule of law weakened, petty crime, homicide, and kidnapping rates increased.  Other criminal and terrorist organizations operated more openly in the ungoverned border region between Venezuela and Colombia, which became a significant conduit for drug trafficking.  Beginning in the 1990s, Colombian traffickers, often in collusion with corrupt elements of the Venezuelan military, began to move shipments of cocaine to the United States and Europe. In 2005, the U.S. government declared Venezuela uncooperative in the fight against drug trafficking, and in 2009 concluded that drug trafficking through Venezuela had increased fourfold between 2004 and 2007.

In the last decade, Venezuela’s ungoverned border region became an operating zone for terrorist organizations such as the FARC and ELN.  The expansion of their activities in this refuge could destabilize the ongoing peace talks among the two groups and the Colombian government. Some security reports place Iran-backed terrorist organization Hezbollah in the area as well.

Economic Restructuring

During his presidency, Chavez restructured the economy and significantly increased spending. The erosion of the non-oil economy, declining production at PDVSA, and years of excess spending laid the foundation for an economic crisis.

Chavez took control of PDVSA, Venezuela’s main revenue stream, early in his tenure. Once run independently by professional technocrats, the company’s operations quickly became politicized. His administration took complete control of the oil industry in 2007 when he expropriated foreign operations in the Orinoco belt. Chavez consistently used oil revenues for social programs rather than reinvestment in PDVSA. By 2013, crude oil production had fallen to 2.5 million barrels per day from a high of 3.3 million in 1997. PDVSA officials also face a corruption investigation led by the U.S. Department of the Treasury.

Chavez also nationalized other sectors of the economy, such as telecommunications, electricity, steel, and cement, which hurt domestic businesses, reduced local entrepreneurship, and weakened the non-oil economy. In the 1990s, nearly 25 percent of Venezuelan exports were non-oil products (including agricultural and manufactured goods); today the proportion is less than 5 percent. Western companies grew wary of investing in Venezuela, and Chinese investment, mostly in energy, has only partly offset steep declines.

Chavez used oil proceeds and debt to boost government spending on social programs, an integral part of his populist appeal. Social spending rose to 21 percent of GDP in 2006, four times the 1998 figure. The number of primary care physicians increased more than tenfold between 1998 and 2008; emergency rooms nearly doubled. The government also subsidized food items, enlarged school food programs, and expanded special programs for the poor. The number of public schools rose by 20 percent from 2000 to 2005, and enrollment systematically increased across all levels.

Fuel subsidies giving Venezuelans some of the cheapest pump prices in the world raised government spending dramatically.  In 2013, when global oil prices topped $100 a barrel, these subsidies cost Venezuela more than $12 billion.  In 2005, Chavez created a $100 billion National Development Fund for public works and heavy industry. Many projects remain unfinished.  Military spending also increased.  Venezuela spent more than $4 billion on fighter jets, attack helicopters, and tens of thousands of Kalashnikov assault rifles in 2005 and 2006 combined.  Between 2004 and 2011, the government bought $13 billion in arms, more than any other Latin American country.  To fund these expenditures, Venezuela borrowed heavily.  The country’s public debt increased to $216 billion in 2012 from $31 billion in 1999.  Debt servicing became the largest component of Venezuela’s budget.

Foreign Relations

From the start, Chavez took an anti-American stance, spearheading opposition to the United States and seeking to undermine U.S. interests in the region. Following the 2002 coup attempt, blaming the United States for not warning him, Chavez ratcheted up anti-U.S. rhetoric. By 2006, he was referring to President George W. Bush as the devil during a UN speech. In 2008, Chavez declared the U.S. ambassador persona non-grata and expelled him.  Both the Chavez and the Maduro governments have continuously blamed the United States for Venezuela’s economic woes and political unrest to distract attention from their own mismanagement.  Nonetheless, Venezuela continued to sell its oil to the United States — eight hundred thousand barrels per day in 2013.

Within the region, Chavez reached out to Cuba. In 2004, the two countries formalized an exchange of Cuban medical and educational resources for Venezuelan oil and military training. Venezuela also spearheaded the creation of the Bolivarian Alliance for the People of Our Americas (ALBA), a regional bloc of ten like-minded countries. In 2005, Chavez created PetroCaribe, a program to supply subsidized petroleum to Cuba and twelve other Central American and Caribbean countries. The program charges between 5 and 50 percent of the cost up front — depending on the current market price — allowing recipients to pay the rest over time at low interest rates.

Globally, Chavez pursued strategic alignments with authoritarian powers that included Russia, Iran, and China. Venezuela signed a major weapons deal with Russia in 2005 and soon became one of its most important customers. Iran also invested in the Venezuelan oil industry and sold arms to the government. Venezuela’s relationship with China is mostly based on trade, foreign investment, and oil. All of this contributed to Venezuela’s position as a regional font of anti-Americanism.

Transition of Power and Continuing Problems Under Maduro

Chavez, battling cancer, defeated opposition candidate Henrique Capriles in the 2012 presidential elections, but died two months into his fourth term in 2013.  His hand-picked successor, Nicolas Maduro, narrowly won the special election following Chavez’s death but was immediately plagued by a lack of legitimacy. Capriles called for a recount, citing voting irregularities.  Lacking Chavez’s charisma and military ties, Maduro had less influence on the disparate PSUV party factions and leadership and was unable to mitigate the worsening economic and political crisis. With oil prices falling, the economy contracted 10 percent in 2015 and inflation officially topped 180 percent that same year; private analysts believed the inflation was even higher.  Facing $10 billion in debt payments in 2016, and with few possibilities of loans from traditional creditors, Venezuela had little money to pay for even basic food imports.  Maduro’s approval rating tanked.

Increasingly hostile to the opposition, Maduro jailed its leaders, including Leopoldo Lopez and Caracas Mayor Antonio Ledezma.  As economic and political pressure mounted, Maduro accused the United States of attempting coups.  In March 2015, President Barack Obama declared Venezuela an “extraordinary threat to the national security” and the United States froze the assets of seven Venezuelan officials deemed to be egregious human rights offenders. In response, the Venezuelan National Assembly passed the Anti-Imperialist Law for Peace, granting Maduro the power to rule by decree until the end of 2015. 

In December 2015, Venezuela’s opposition Democratic Unity coalition won 112 of 167 National Assembly seats in legislative elections, the first time the opposition controls congress since Chavez’s rise to power in 1999.  The supermajority gives the opposition the power to remove central bank directors, supreme court judges, and cabinet members.  In April 2016, the opposition began a process to recall Maduro through a referendum. This process was suspended by Venezuela’s electoral council in October 2016 after alleged instances of fraud in the campaign’s preliminary petition.

Root Causes

Three major issues have shaped the crisis in Venezuela: economic mismanagement, an escalation of crime and the breakdown of democracy.

1. Economic Mismanagement

Government spending — on social programs, the military, gasoline subsidies, and economic development projects — helped many marginalized Venezuelans. Inequality (measured by the GINI coefficient) decreased from 0.5 in 1998 to 0.39 in 2011, and the proportion of people living below the poverty line halved.  But it left the country with an unsustainable debt burden, the servicing of which consumed some 20 percent of the budget in recent years. Other programs were also expensive. Arms purchases from Russia alone cost Venezuela several billion dollars.

The social and other spending undercut reinvestment in PDVSA production, leading to long-term declines in oil production and current and future oil revenues.  This in turn made government finances even weaker. Heavy-handed government policies and at times outright expropriation undermined private-sector investment and production.

The downturn in oil prices in 2014 precipitated a financial crisis. Because it had no new funding sources, Venezuela faced potential default on its sovereign and PDVSA debt obligations.  Rapid inflation wiped out personal savings of Venezuelans and, because less money was flowing into the country, international reserves tanked. Tight import restrictions leading to goods shortages were not enough.  Millions of Venezuelans lost their jobs and the economy entered a recession.

2. Escalation of Violence

Violence has long been on the rise. Homicides in the country rose from five thousand in 1998 to twenty-five thousand in 2013.  That same year, Caracas ranked as the second most dangerous city in the world.  According to a 2013 Gallup poll, Venezuelans reported the lowest security levels in the world: 19 percent were afraid to walk alone late at night and 22 percent said they or a family member had been robbed in the past year.

Such extreme levels of violence reflect the breakdown of the rule of law in Venezuela. According to The Economist, the judicial system is corrupt and overstretched, and the police are poorly trained.  As a result, the vast majority of crimes go unpunished. Easy access to firearms and a dysfunctional prison system further aggravate the situation.

The growth of organized crime and drug trafficking has also contributed to the problem.  In 2009, the U.S. Government Accountability Office (GAO) identified Venezuela as a hub for drug trafficking. In an annual White House report, President Obama identified Venezuela as having violated international counternarcotics agreements in 2012, 2013, and 2014.  As the government’s reach wanes in the mountainous border region Venezuela shares with Colombia, drug trafficking organizations have expanded their operations.

Government-sponsored repression also escalated. Colectivos intimidate members of the opposition, send death threats to journalists, and assault staff from opposition television networks.  During the February 2014 protests, colectivos attacked protestors, and police were accused of using excessive force and even torture to quell the opposition.  Forty-three people died and hundreds more were injured. In January 2015, anticipating future repression, the Venezuelan congress passed Resolution 8610, authorizing police to use deadly force to control public demonstrations.

3. Democratic Breakdown

Chavez’s erosion of democratic institutions helped lay the foundation for the current political crisis. During his tenure, he undermined the trademark institutions of successful liberal democracies, including the Supreme Court, the CNE, and the free press.  His government also harassed and repressed opposition leaders and critics.  In 2004, pro-Chavez legislators expanded the number of Supreme Court justices from twenty to thirty-two.  The newly appointed justices were pro-Chavez, effectively eliminating this check on presidential power.

The CNE, the public agency in charge of ensuring free and fair elections, consistently ruled in Chavez’s favor despite substantial evidence against the government.  An analysis of the electoral registry revealed many inconsistencies: an improbable growth in the total number of voters, voters lacking addresses or identities, thirty-nine thousand voters over the age of one hundred, and individuals listed dozens of times under different identity numbers.

Since 2003, Freedom House has consistently ranked Venezuela’s press as “not free.”  The 2004 Law on Social Responsibility in Radio, Television, and Electronic Media allowed Chavez greater power in censoring opposition press.  The Chavez regime successfully took television stations such as RCTV off the air and closed dozens of radio stations.  Independent newspapers were bought by those with ties to the government.

Today, few functioning democratic institutions remain from which to build consensus and work to solve the economic and security crises.  This has pushed the opposition into the streets. 

Other Interested Parties

Neighbors: Leaders of Venezuela’s neighboring countries—Brazil, Colombia, and Guyana—have clear economic, political, and security interests in Venezuela. Because they do, they may be important U.S. partners in restoring stability, as described in the context of the options above.

Colombia would likely be the most affected by Venezuela’s collapse because such an event could upend the current peace negotiations between the Colombian government and the FARC. Venezuela’s ungoverned spaces could provide greater refuge and leverage to the guerilla group in negotiations. Already a close U.S. ally, Colombia would likely cooperate with U.S. efforts.

PetroCaribe: Those countries receiving subsidized oil through the PetroCaribe program have a vested interest in Venezuelan stability. Terminating PetroCaribe would have ripple effects throughout the Caribbean, opening an opportunity for the United States to reaffirm support for long-standing allies and change the tenor with historical adversaries, including Cuba and Nicaragua. Some nations have already taken steps to lessen their dependency on Venezuelan support.  Guatemala withdrew itself from the program, and the Dominican Republic and Jamaica have securitized their debts owed to Venezuela.  Cuba has begun normalizing relations with the United States.

OPEC: Venezuelan oil coming off the market could raise world prices, benefiting OPEC. Still, having one of its founding members in crisis weakens the already fragile cohesion of the cartel and its influence on a global stage.

China: Like other creditors, China would suffer from a Venezuelan default. Venezuela owes China at least $20 billion. This could be an incentive for China to support multilateral debt negotiations and perhaps efforts to restore stability, such as a UN peacekeeping operation. 

• Notes

(1) The paper must be at least five pages long, not including graphics, which works out to approximately one page for each question in Section VI, Your Assignment, plus a page each for the introduction and the conclusion.

(2) You must double-space your lines in 12-point font and not have any extra spacing between sections or paragraphs.

(3)  You don’t have to cite the articles I have given you below, but if you use any outside sources, they must be listed in a bibliography and cited in the text in the APA style.

(4)  Do not capitalize any of the positions in the NSC, including that of the president unless the person’s name follows. (i.e., The president was in Florida.   We saw President Truman in Florida.)

(5)  Do not use the personal pronoun “I” in your analysis and stay away from writing in short, choppy sentences.

• Glossary

Alliance: an official partnership between two or more parties based on cooperation in pursuit of a common goal, generally involving security or defense.

Austerity: strict economic measures, such as tax increases and cuts to social spending, intended to reduce government deficits and debt.  Such programs are common as a condition of bailout funds, including in Europe’s financial crisis in recent years.  Austerity’s champions, such as Germany, view it as an essential step for indebted governments to rein in their spending. Detractors, such as the United States and countries receiving bailouts, such as Greece, argue that austerity compounds human misery and stymies the growth necessary for countries to eventually pay down their debts. 

Blockade: an act of war wherein a foreign military cuts off access to a specific location, usually a port, to impede deliveries of supplies.  In 1962, President John F. Kennedy ordered a blockade of Cuba — calling it a “quarantine” to avoid the implication of declaring war — in response to Soviet missile activity on the island.

Bolivarian Alliance for the Peoples of Our America (ALBA):  a regional organization of eleven countries in Latin America and the Caribbean grounded in an ideology of South American integration and opposition to the liberal economic model espoused by the United States.  Formerly called the Bolivarian Alliance for the Americas, the bloc was formed by Venezuela, under Hugo Chavez, and Cuba, under Fidel Castro, in December 2004. 

Hugo Chavez:  the leftist president of Venezuela from 1999 until his death in 2013. Chavez first came to national attention as an army officer when he led a failed coup d’état in 1992.  After running for president on a socialist platform, he restructured the economy, increased social spending, pursued regional cooperation with leaders sympathetic to his ideology, and expressed vehement anti-American views.

Chavismo: Hugo Chavez’s ideology of twenty-first century socialism.  Though not precisely defined, Chavismo tended to include a populist focus on providing social and economic benefits to the masses, as well as anti-corporate and anti-American sentiments. Chavez also emphasized popular political participation, though in practice he sought to strengthen his personal political control.

Colectivos: armed community groups created during Hugo Chavez’s presidency to support and enforce his government’s policies. Colectivos have been responsible for violence as well as improvements in various communities.  

Coup d’état: a government takeover, often led by the military, that does not use the country’s codified mechanisms for changing power (such as elections).

Debt service: payments on debt made by a borrower, such as an individual, company, or government

Default:  failure to make a payment on a bond or loan as scheduled

Expropriation:  government acquisition of private property for public use without the consent of the owner, often with little or no compensation. Chavez often expropriated business operations in Venezuela. In the United States, the government may take private property for public use under the principle of eminent domain, but only with fair compensation. 

Foreign direct investment (FDI): an investment in an enterprise in one country made by a party from another.

Foreign reserves:  assets held in reserve by a country, often in the form of major foreign currencies such as the U.S. dollar, but also potentially in gold or other forms. These reserves can be used for such purposes as paying the country’s foreign debts, buying foreign goods to import, meeting the country’s needs in a crisis, and intervening in foreign exchange markets to affect the value of the country’s currency.  Some countries, including Venezuela, accumulate reserves through the international sale of oil or other commodities.

Fuel subsidy:   a government payment intended to lower the cost of fuel for drivers and other consumers. The payment can take various forms but typically compensates producers for charging less than market price.  Though often criticized for burdening government budgets while encouraging wasteful consumption, subsidies are tremendously popular among consumers and therefore difficult for governments to remove.

Fuerzas Armadas Revolucionarias de Colombia (FARC, or Revolutionary Armed Forces of Colombia):  aleft-wing, nominally Marxist guerrilla group that has fought against the government of Colombia since it was established in 1964. Designated by the United States as a terrorist organization in 1997, the FARC derives most of its revenue from kidnapping and drug trafficking, for which it uses the Venezuelan-Colombian border region as a safe haven.  The Colombian government and the FARC have been conducting peace negotiations since 2012, though some unrest has continued.

Hezbollah (The Party of God):  a Shi’a militant group and major political party in Lebanon.  

International Monetary Fund (IMF):   a multilateral financial institution established in 1944 that exists to foster stability and growth in the international monetary system, in part by observing countries’ monetary and currency exchange policies and providing them with technical assistance. As the global economic crisis firefighter, the IMF offers loans to struggling countries, usually conditional on the adoption of certain policies to manage their economies and return them to sustainable growth. 

Multilateral:  undertaken among three or more entities, usually countries. The term frequently describes organizations such as the United Nations (UN).

National Liberation Army (ELN):  a guerilla group, founded in 1964 by radical Catholics inspired by Cuba’s communist revolution, whose principal adversary is the Colombian government. Smaller than the Revolutionary Armed Forces of Colombia (FARC), the ELN has nonetheless mounted deadly attacks and earned significant revenue from kidnapping, extortion, and, more recently, drug trafficking.

Nationalization:   a process in which a private business or industry becomes a public one operated by a national government.  Nationalization may or may not involve compensation to the previous owners.  Leaders may nationalize businesses or industries in order to seize greater control of profits or natural resources, but may also do so for other reasons, as when the United States nationalized the provision of airport security after the September 11, 2001, attacks. 

Nicolas Maduro: the president of Venezuela since 2013 and Hugo Chavez’s longtime deputy and handpicked successor.  Many Venezuelans and observers see Maduro as less charismatic than Chavez, and his tenure has suffered from a shortage of legitimacy and decreased influence on party leadership, the military, and government institutions, compounded by Venezuela’s worsening economic crisis.

Nonstate actors:  individuals or groups that do not belong to or act on behalf of a state. This may refer to nongovernmental organizations such as Amnesty International, media outlets such as The New York Times, or terrorist groups such as Hezbollah, ISIS and al-Qaeda.

Oil price shock:  a large and rapid change in the price of oil.  The term typically refers to a price increase, which tends to hurt consumers and countries that import oil.  However, the price of oil can also quickly decline, reducing the income of oil-producing countries such as Venezuela.

Organization of American States (OAS): a regional organization whose membership consists of the thirty-five countries of the Americas.  Founded in 1948 to strengthen peace, democracy, and cooperation among its members, the OAS today works on such issues as human rights, security, development, and democratization.  

Organization of Petroleum Exporting Countries (OPEC):  an organization of twelve oil-producing countries seeking to coordinate their policies to keep oil markets stable and advance their interests as producers.  In particular, OPEC often seeks to affect oil prices by increasing or decreasing production, though its ability to do so is imperfect.  Venezuela was among five founding members of OPEC in 1960.

Orinoco belt: an area in north-central Venezuela that contains most of the country’s oil reserves. The belt is one of the richest oil deposits in the world. 

Partido Socialista Unido de Venezuela (PSUV, or United Socialist Party of Venezuela): the ruling party of Venezuela, founded by Hugo Chavez in 2007 through a merger of coalition parties.

persona non-grata: a designation given by a government to a foreigner, often a diplomat, signifying that the person is unwelcome.  People declared persona non-grata must leave the country if they are present and will not be allowed to enter. 

PetroCaribe: a program established by Hugo Chavez in 2005 in which Venezuela provides subsidized oil to thirteen Central American and Caribbean countries. 

Petróleos de Venezuela, S.A. (PDVSA):  Venezuela’s state-owned energy company. Long a massive source of government revenue, PDVSA’s operations began to falter as Chavez sought greater control over the company and failed to reinvest enough money to keep its production steady.  

Public debt: the debt held by a government. The term is often used interchangeably with “national debt.” 

Puntofijismo:  the governing system that emerged from the Punto Fijo Pact signed by the three major Venezuelan political parties in 1958.  Two of those parties followed through on the pact and came to trade the presidency every five years between 1963 and 1988.  The system provided considerable stability as the parties accepted election results and rewarded their supporters through patronage. However, many later grew to doubt puntofijismo’s democratic character. 

Referendum: a vote, typically organized by a government, in which participants approve or reject a certain policy proposal.  This is a form of direct democracy, in which citizens themselves (as opposed to elected representatives) make a policy decision. 

Sanctions: a tool of statecraft, frequently involving economic measures such as asset freezes and trade restrictions, used to exact a certain behavior or outcome from another party.  The U.S. and EU sanctions against Russian companies and individuals that aim to encourage Russia to end its interference in Ukraine are an example. 

Statism:  This is a fascist doctrine that holds that sovereignty is not vested in the people but in the nation state, and that all individuals and associations exist only to enhance the power, prestige and well-being of the state.  It repudiates individualism and the family and exalts the nation as an organic body headed by the Supreme Leader (in this case, Nicolas Maduro) and nurtured by unity, force and discipline.   Thus, the state is greater than the sum of its parts and that individuals have a moral obligation to serve the state.  In sum, it is the practice of concentrating economic and political power in the state, by giving a centralized government control over economic planning and policy, resulting in a weak position for the individual or community with respect to the government. 

Unilateral: undertaken by only one entity, generally a country

Tariff: a tax on goods arriving from a foreign country, generally used as a tool of trade and foreign policy to penalize adversaries or favor allies or domestic producers

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• Background Articles

Exodus Leaving Venezuela Without Professionals

Anthony Faiola and Rachelle Krygier ‖ June 3, 2018

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This collapsing socialist state is suffering one of the most dramatic outflows of human talent in modern history, offering a glimpse into what happens when a nation begins to empty out. Vast gaps in Venezuela’s labor market are causing a breakdown in daily life and robbing this nation of its future. The exodus is broad and deep — with an outflow of doctors, engineers, oil workers, bus drivers, electricians and teachers. 

So far this year, 48,000 teachers — or 12 percent of all staff at elementary and high schools nationwide — have quit, most joining a stampede of Venezuelans leaving the country to escape food lines and empty grocery store shelves. 

NOTE FROM DR. CRONIN – Venezuela’s 1 Million Percent Hyperinflation

There are two types of inflation: (1) demand-pull, where people have too much money and are trying to purchase too few goods and services that are available in the market; and (2) cost-push, where the costs of manufacturing inputs like raw materials and labor rise, and so the producers have to pass their costs along to the consumer.   Venezuela falls closer to the cost-push side.  Therefore, a 100% annual inflation rate means that the price of a good doubles, say, from $1 to $2 over the course of a year; but in Venezuela’s case, the government‘s terrible economic policies mean that it has no money to import goods and so they are very scarce.  Thus, a 1 million% inflation rate would mean that if a pencil cost $1 on January 1^st, it would cost $10,000 by December 31^st. 

Principals have tried and failed to find qualified replacements.   As droves of teachers leave, some grades in Venezuelan schools have gone months without classes.  The value of local salaries is falling by the day.  In the middle of 2017, an average teacher’s salary was worth nearly $45, but today, it’s worth about $4.  “If we continue like this, Venezuela won’t even be a Third World country anymore,” said one school principal.  

The crisis in Venezuela has hit hospitals hard, with doctors fleeing the country and medicines difficult to find.  Think of Venezuela like one big factory where the societal assembly line no longer works — partly because there are fewer and fewer people to run it.  During the first five months of the year, roughly 400,000 Venezuelans have fled the country, following 1.8 million who left over the last two years, according to the Central University of Venezuela.  Yet even those numbers may not fully capture the scope of the exodus.  Aid workers dealing with the crisis in bordering nations say an average of 4,600 Venezuelans a day have been leaving since January 1st — putting the outflow during this year alone at nearly 700,000.

At the Jose Manuel de los Rios Children’s Hospital in Caracas, 68 doctors — or 20 percent of the medical staff — quit and left the country over the past two years.  The hospital’s cardiology department is now only open for a morning shift, since three of its six specialists are gone.  There are 300 vacant nursing positions.  Personnel shortages are so bad that the facility can only staff two of its seven operating rooms.  “It now takes eight months to a year for a surgery appointment,” said a senior staff pediatrician. 

The Venezuelans are running from a nation broken by failed socialist policies, mismanagement, corruption and lower global oil prices — the country’s principal source of cash.  “It’s not just about a few doctors leaving anymore,” said Tomas Páez, a migration expert at the Central University of Venezuela.  “It’s about understaffed hospitals closing down whole floors.”

Tens of thousands of Venezuelans — especially from the upper classes — began leaving the country following the rise of left-wing firebrand Hugo Chávez, who became president in 1999.  But in the past year, Venezuela’s economy has fallen off a cliff, prompting a more drastic exodus.  Experts say the outflow is set to surge in the aftermath of the reelection of President Nicolás Maduro on May 20.  Denounced internationally as illegitimate, the election removed any real chance for change.  Amid food shortages, hunger is pervasive and growing in a country that was once Latin America’s richest per capita.  Without medicines, treatable diseases such as HIV and malaria have become rampant.  With hyperinflation soaring toward 14,000 percent, it now takes five days’ work at the minimum wage to buy a dozen eggs. 

Residents in many residential complexes are using light from cellphones or candles during a partial blackout in neighborhoods.  Massive gaps in the labor force are undercutting critical services here.  Inside the darkened halls of a Caracas subway station on a recent afternoon, for instance, passengers climbed broken escalators and filed past closed ticket booths.  The conditions reflect the shrunken workforce; last year, 2,226 subway employees — more than 20 percent of the staff — abandoned their posts, according to Familia Metro, a Caracas-based transit watchdog group.  “There’s a huge lack of people in operations and maintenance now,” said Ricardo Sansone, head of Familia Metro.  “They have no people to sell tickets at many stations, so passengers are often not even paying to use the subway.”

This year, thousands of blackouts have hit Venezuela, darkening cities for weeks at a time.  A lack of imported spare parts to fix the poorly maintained power grid is one problem.  But so is “the flight of our trained workers,” said Aldo Torres, executive director of the Electricity Federation of Venezuela, an association of labor unions.  “Every day, we’re receiving dozens of calls from colleagues saying they’re going to Colombia, Peru and Ecuador,” Torres said.  “They’re being replaced by people who are mostly not qualified.”  

Seven miles down the road from Aquiles Nazoa Elementary School, the campus of Simón Bolívar University is oddly quiet.  Once considered the MIT of Venezuela, a university that churned out some of the best Latin American engineers and physicists is now in danger of becoming a ghost town.   In 2017, 129 professors — nearly 16 percent of the staff — quit, the vast majority to leave the country. It’s no surprise, officials here say.  Using the black market rate for dollars, a professor’s salary here now tops out at about $8 a month, because of hyperinflation.

Thirty professors retired last year but have not been replaced, in part because of a lack of qualified candidates.  The university is so short-staffed that three departments — languages, philosophy and electronic engineering — are about to close.  Yet as Venezuela’s young people depart in droves, Simón Bolívar also does not have the demand it once did.  Three years ago, electronic engineering had nearly 700 students.  Now, it’s down to 196.

Opinion by the Editorial Board ‖ October 17, 2017

Hopeful Change in Venezuela Suffers a Blow

HOPES THAT Venezuela could emerge from its catastrophic political and economic collapse by democratic means suffered a crushing and perhaps terminal blow on Sunday. Having abolished the National Assembly, crushed street demonstrations, jailed nearly 500 opposition activists and all but wiped out independent media, the government of Nicolás Maduro staged elections for provincial governors. Polls showed the opposition, which reluctantly agreed to participate, would win up to two-thirds of the races — which was logical, since only about a fifth of Venezuelans still say they support the government. Yet the results announced by pro-regime election authorities were nearly the opposite: Seventeen of 23 governorships were awarded to Mr. Maduro’s party, which was said to have collected 54 percent of the vote.

Stunned opposition leaders were unable to immediately point to tangible evidence of fraud in the vote count, though some of the results beggared belief: In the province covering greater Caracas, a longtime opposition stronghold, polls showed its candidate ahead by nine points, but the official count had him losing by six. Still, the pre-rigging of the election was clear enough. Among other measures, election authorities abruptly moved the polling places of more than half a million voters in anti-government neighborhoods to regime-friendly areas and printed ballots including multiple opposition candidates, including those who had been defeated in primary voting.

The electoral travesty was quickly denounced by the State Department, while the secretary general of the Organization of American States, Luis Almagro, said, “The results of an election in a country with no guarantees for the effective exercise of democracy cannot be recognized.” But the damage has been done. Mr. Maduro and his shrinking circle of international supporters, centered in Cuba and Russia, are claiming that his regime has proven it has a democratic mandate. In reality, it has all but shut down peaceful avenues for rescuing the country.

That Venezuela needs help is beyond question. In addition to the regime’s violent repression of dissent, the country is paralyzed by shortages of food and medicine so severe that most of its citizens say they have lost weight, and hundreds of thousands have taken refuge in other countries. The inflation and murder rates are probably the highest in the world. Mr. Maduro and his clique, including senior military leaders, have set new standards for Latin American corruption, pocketing millions in graft and bribes and trafficking cocaine to the United States.

The Trump administration has rightly broken with a long history of U.S. passivity. Most of the regime’s elite are banned from visiting the United States, and tough financial sanctions could eventually force a default on its huge foreign debts. But with military intervention not a workable or politically acceptable option, U.S. options are limited. Drastic measures, such as an embargo on oil imports from Venezuela, would only inflict even more misery on its 31 million people.

Mr. Maduro has been a spectacular failure at governing, but under the tutelage of his Cuban overseers he has succeeded in closing off almost all avenues for change. The best of those was a free and fair democratic election. Sunday’s result suggests that such a vote is no longer possible.

 Council on Foreign Relations

Venezuela in Crisis

President Nicolas Maduro’s efforts to consolidate power amid a deepening economic and humanitarian crisis have drawn widespread international condemnation.

Backgrounder by Claire Felter and Danielle Renwick ‖ Last updated August 1, 2017

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Venezuela is in the midst of an unprecedented economic and political crisis marked by severe food and medicine shortages, soaring crime rates, and an increasingly authoritarian executive. Critics of President Nicolas Maduro and his predecessor, Hugo Chavez, say Venezuela’s economic woes are the fruit of years of economic mismanagement; Maduro’s supporters blame falling oil prices and the country’s “corrupt” business elites.  In 2016, opposition lawmakers took a majority in the legislature—the National Assembly—for the first time in nearly two decades. However, the Maduro government has taken steps since to consolidate the president’s power, including usurping some of the legislature’s authorities. Maduro’s actions have been met with massive protests and international condemnation.

Chavez’s ‘Bolivarian Revolution’

Chavez, a former military officer who launched an ill-fated coup in 1992, was elected president of Venezuela in 1998 on a populist platform. As a candidate, he railed against the country’s elites for widespread corruption, and pledged to use Venezuela’s vast oil wealth to reduce poverty and inequality. During his presidency, which lasted until his death in 2013, Chavez expropriated millions of acres of land and nationalized hundreds of private businesses and foreign-owned assets, including oil projects run by ExxonMobil and ConocoPhillips.

Chavez, whose rhetoric often drew inspiration from Simon Bolivar, the Venezuela-born revolutionary of the nineteenth century, aimed to align Latin American countries against the United States. He led the formation of ALBA, a bloc of socialist and leftist Latin American governments, and established the Petrocaribe alliance, in which Venezuela agreed to export petroleum at discounted rates to eighteen Central American and Caribbean states.  Chavez also greatly expanded the powers of the presidency. Shortly after he took office, voters approved a new constitution that allowed him to run for another term, removed one chamber of Congress, and reduced civilian control over the military. In 2004, two years after he was briefly removed from office in a coup, Chavez effectively took control of the Supreme Court by expanding its size and appointing twelve justices. In 2009, he led a successful referendum ending presidential term limits.

Venezuela’s Chavez Era (1958–2013)

Chavez remained popular among the country’s poor throughout his presidency, expanding social services including food and housing subsidies, health care, and educational programs. The country’s poverty rate fell from roughly 50 percent in 1998, the year before he was elected, to 30 percent in 2012, the year before his death.  Maduro, who narrowly won the presidency in 2013, pledged to continue his former boss’s socialist revolution. “I am ensuring the legacy of my commander, Chavez, the eternal father,” he said after the vote.

An Oil-Based Economy

Venezuela is highly vulnerable to external shocks due to its heavy dependence on oil revenues.  Oil accounts for about 95 percent of Venezuela’s export earnings and 25 percent of its gross domestic product (GDP), according to figures from the Organization of the Petroleum Exporting Countries (OPEC). The state-run petroleum company, Petroleos de Venezuela, S.A. (PDVSA), controls all the country’s oil exploration, production, and exportation.  Critics say PDVSA is grossly mismanaged and suffers from cronyism, a bloated payroll, underinvestment in infrastructure, and a lack of budgetary oversight.

As global oil prices fell from $111 per barrel in 2014 to a low of $27 per barrel in 2016, Venezuela’s already shaky economy went into free fall.  That year, GDP dropped 10 to 15 percent and inflation soared to 800 percent.  By early 2017, the country owed $140 billion to foreign creditors while it held only $10 billion in reserves, raising fears of a default.  By early 2017, the country owed $140 billion to foreign creditors while it held only $10 billion in reserves.

Many critics fault the Chavez government for squandering years of record oil income.  During the oil boom years from 2003 to 2013, “they were spending as if the price of oil was $200 per barrel,” said Ricardo Hausmann, a professor at Harvard Kennedy School and a former minister of planning in Venezuela, in a CFR interview.

Price Controls and Shortages

Venezuela’s economic crisis is marked by soaring inflation and shortages of food, medical supplies, and staples like toilet paper and soap. Experts say the government’s strict price controls, which were meant to keep basic goods affordable for the country’s poor, are partly to blame.  Many manufacturers in the country cut production due to limits on what they could charge for their goods.

Another policy contributing to the country’s economic problems, many experts say, are currency controls, which were first introduced by Chavez in 2003 to curb capital flight.  By selling U.S. dollars at different rates, the government effectively created a black market and increased opportunities for corruption. For instance, a business that is authorized to buy dollars at preferential rates in order to purchase priority goods like food or medicine could instead sell those dollars for a significant profit to third parties. In July 2017, the official exchange rate was ten bolivars to the dollar while the black market rate was more than eight thousand bolivars to the dollar.

Imports reportedly fell to $18 billion in 2016, down from $66 billion in 2012, as foreign-made goods became increasingly expensive. Many consumers are faced with the choice of waiting for hours in line for basic goods or paying exorbitant prices to so-called bachaqueros, or black market traffickers.

Experts say widespread expropriations have further diminished productivity. Transparency International, which ranks Venezuela 166 out of 176 on its perceived corruption index, reports that the government controls more than five hundred companies, most of which are operating at a loss.  (By comparison, Brazil, which is more than six times as populous as Venezuela, has 130 state-run companies.)

A Humanitarian Crisis

Observers have characterized the situation in Venezuela as a humanitarian crisis. In 2016, the head of the Venezuelan Pharmaceutical Federation estimated that 85 percent of basic medicines were unavailable or difficult to obtain. Hospitals reportedly lack supplies like antibiotics, gauze, and soap. Infant mortality in 2016 increased 30 percent and maternal mortality 65 percent over two years prior, according to government figures.  Diseases like diphtheria and malaria, which had been previously eliminated from the country, have reemerged.

Poverty has also spiked.  In 2016, a local university study found that more than 87 percent of the population said it did not have enough money to buy necessary food. Another study by a local nutrition organization found that 30 percent of school-aged children were malnourished.  According to a 2016 report from Human Rights Watch, the Maduro administration “has vehemently denied the extent of the need for help and has blocked an effort by the opposition-led National Assembly to seek international assistance.”

Infant mortality in 2016 increased 30 percent and maternal mortality 65 percent.  Poverty and lack of opportunity are exacerbating Venezuela’s high rates of violence. Long one of the world’s most violent countries, in 2016 Venezuela experienced its highest-ever number of homicides: 28,479, or roughly 91.8 homicides per 100,000 residents, according to the Venezuelan Violence Observatory, an independent monitoring group. (The U.S. rate, by comparison, is 5 per 100,000.)  Maduro’s administration has deployed the military to combat street crime, but rights groups and foreign media have reported widespread abuses, including extrajudicial killings.

The humanitarian crisis has spilled across Venezuela’s borders, with thousands of desperate people crossing into neighboring Brazil and Colombia; others have left by boat to the nearby island of Curaçao.  By some estimates, as many as 150,000 Venezuelans left the country in 2016 alone.

Political Turmoil

Amid the crisis, the Maduro administration has become increasingly autocratic. Opposition lawmakers, under the Democratic Unity Roundtable coalition, took the majority in the National Assembly in 2016 for the first time in sixteen years, but Maduro has taken several steps to undermine them.

In September 2016, Venezuela’s electoral authority, which is considered loyal to Maduro, ordered the opposition to suspend a campaign to recall the president, sparking protests and international condemnation. In March 2017, the judicial branch briefly dissolved the National Assembly. The court revised its order days later following an international outcry, but kept the legislature in contempt, effectively preventing lawmakers from passing laws. A week later the government barred opposition politician Henrique Capriles, who narrowly lost to Maduro in the 2013 presidential election, from running for office for fifteen years.

On July 30, Maduro’s government held an election for a new constituent assembly with sweeping authority to rewrite the country’s laws and constitution. Supporters of Maduro won all 545 seats in the election, in which the electoral authority said more than eight million people voted. The opposition, which boycotted the election, and independent observers have disputed the results.

More than one hundred people have been killed in clashes between police and demonstrators since early April. Government security forces have attacked journalists, and several foreign reporters have been detained and, in some cases, expelled, according to the Committee to Protect Journalists. In 2017, Freedom House rated Venezuela as “not free,” making it one of two countries in the Western Hemisphere, along with Cuba, with the democracy watchdog’s lowest ranking.

The Region Reacts

U.S. policy under President Trump appears to resemble that of former President Barack Obama, writes CFR Adjunct Senior Fellow Matthew Taylor.  The Trump administration imposed sanctions on Vice President Tareck El Aissami and eight members of the Supreme Court in the first half of 2017, and days before the July election it added to that list more than a dozen current and former officials.  After the vote, the United States sanctioned President Maduro, making him just the fourth foreign leader to receive such a penalty. Despite tensions between Washington and Caracas, the United States remains Venezuela’s largest trading partner.

Meanwhile, the Maduro administration retains the support of allies in Bolivia, Ecuador, and several Caribbean nations.  China has lent Venezuela more than $60 billion since 2001, and is the South American country’s largest creditor. Meanwhile, Venezuela has sought significant ties with Russia.  Before oil prices fell in 2014, Venezuela was set to become the largest importer of Russian military equipment by 2025.  In February 2017, Russian Foreign Minister Sergey Lavrov reaffirmed Moscow’s support for the Maduro government, saying bilateral relations “are on the rise.”

 Council on Foreign Relations

Can Venezuela Resurrect Its Economy?

President Nicolas Maduro has neither the desire nor the capacity to institute the market reforms and debt restructuring needed to revive Venezuela’s sinking economy, says economist Ricardo Hausmann.

Interview by Sebastian Pellejero ‖ July 26, 2017
Ricardo Hausmann, Interviewee, Professor, Harvard University

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The misguided policies of President Nicolas Maduro and his predecessor, Hugo Chavez, along with falling oil prices, have destabilized Venezuela’s economy and triggered shortages of vital supplies, says Ricardo Hausmann, a professor at Harvard Kennedy School and a former minister of planning in Venezuela.

Hausmann argues that it will almost certainly take new leadership in Caracas to introduce the market reforms and debt restructuring he says are needed. “A recovery would require a greater availability of foreign exchange, so Venezuela must restructure its debt and ask for international financial assistance,” he says.

P:  Venezuela is experiencing its worst-ever economic crisis. How did it get to this point?

H: The two causes of the Venezuelan disaster are a full-fledged assault on market mechanisms and a crazy macroeconomic policy. The assault on market mechanisms by former President Hugo Chavez and his successor, Nicolas Maduro, has undermined society’s capacity to organize itself in order to produce and satisfy consumer needs. Imports are restricted and exchange rate operations are severely regulated. In addition, there is a draconian system of price controls with very heavy penalties for those who violate it. These price controls distort economic incentives and lead to shortages.  Furthermore, there has been a generalized insecurity of property rights: over 1,400 companies and nearly four million hectares of arable land have been expropriated.

Finally, there has been a massive process of financial repression, with inflation upwards of 500 percent and a maximum annual interest rate on credit cards of 29 percent. All of that has created a destruction of the market mechanism. All the policies the regime has announced would worsen the crisis.

The government simultaneously adopted a macroeconomic policy that sextupled the public external debt during its 2004–2013 oil boom; in 2012 — when oil averaged $100 per barrel — the state ran a public sector deficit of 17.5 percent of GDP, which means that they were spending as if the price of oil was $200 per barrel. The debt build-up caused Venezuela to lose access to voluntary debt markets in 2013. This was followed in 2014 by declining oil revenues as the price of oil collapsed.  The Maduro regime responded to this situation by stopping payments on imports and then halting imports altogether. That collapse of imports—now down 75 percent relative to 2012 — has contributed to a collapse in output and a shortage of supplies. That is what triggered this incredible humanitarian crisis.

P: How does President Maduro plan to manage shortages and currency instability?

H:   I don’t think that the Maduro regime has a strategy.  They have tried to remain current on foreign debt, prioritizing servicing its debt to Wall Street above other policy objectives. They have been trying to issue debt to pay their maturing obligations at fire-sale prices.  The last known operation was to Goldman Sachs at an interest rate of 48 percent, demonstrating the government’s willingness to mortgage the future in order to allow the system to live an extra day.  Rather than pursue anything significant on the economic policy front, it has focused on eliminating the political power of society by convening an unconstitutional constituent assembly.

P:   Why has Maduro focused on debt repayment?

H:   That is a mystery to most people. It would sound like the policies of a financial elite that prioritizes its own welfare over anybody else’s.  In part it is because many well-connected Venezuelans own part of the debt. They may also have the perception that if the government were to default or restructure its debt, it would lose legitimacy.  In the meantime, people starve.  It’s a puzzle; there is no easy explanation for such awkward behavior.

P:  How would default or the restructuring of debt affect the regime?

H: The stability of the regime is compromised by things beyond financial considerations, mainly the fact that it can only hold power by systematically violating the constitution. The constitution empowers the Venezuelan people through their democratically elected institutions.  Maduro’s government realizes it can’t live with the elected National Assembly, nor call for elections because it would lose.  Instead, it relies on pliant institutions — the armed forces and the Supreme Court — to preserve power.  This led to a large majority of Venezuelans finding the situation unacceptable — Maduro’s approval rating has fallen below 20 percent.  I would say that beyond anything that would happen on the financial front, it is the people’s outrage that threatens the stability of the regime.

P:   Can the government resolve the crisis?

H:  What people have focused on is changing the regime, rather than lobbying to change the policies of the current regime, because it’s clear that it has neither the ideological desire nor the administrative capacity to address the crisis. The interesting questions are how the opposition can change the government, and what a new government would have to do.

All the policies the regime has announced would worsen the crisis, such as using the constituent assembly to nationalize the remaining private activities in the oil industry, the only part of the oil industry that is growing as Petroleos de Venezuela (PDVSA) — the state-owned oil and gas company — collapses at double-digit rates. Nothing it is planning to do will address the crisis, so the interesting questions are how the opposition can change the government, and what a new government would have to do to recover Venezuela’s living standards and economy.

P:   What would a new leader have to do?

H:  A recovery strategy would have to involve significant policy reform and the support of the international financial community.  Policy reform will need to reintroduce free market mechanisms so that society can self-organize and start producing again.  A recovery would require a greater availability of foreign exchange, so Venezuela must restructure its debt and ask for international financial assistance — similar to the recent support for Greece. The current levels of debt are unaffordable: Venezuela holds the largest debt-to-export ratio in the world, along with the highest interest burden.  Trying to recover the economy with that burden would be impossible, as this debt overhang would make Venezuela unattractive for new domestic or foreign investment.  Venezuela does not have the productive capacity to recover and service this debt at the same time.

P:   How has the Trump administration positioned itself toward Venezuela?  What can the United States do to ameliorate the situation?

H:  The United States has demonstrated concern about Venezuela and Maduro’s democratic violations, having said so explicitly at the recent Organization of American States (OAS) special assembly.  What the United States would do in the context of a Venezuelan transition to democracy and a market economy is still an open question.  I hope the United States will convene foreign actors in support of a strategy such as the one I have outlined, creating a consensus that Venezuela requires policy reform, international financial support, and debt restructuring.

P:   How has the current crisis affected Venezuela’s relationships with other Latin American states?

H:   A failed proposition put forth by five OAS member states condemning Maduro’s democratic charter violations received twenty votes, representing nearly 90 percent of the Latin American population and more than 95 percent of the region’s GDP.  This charter places a legal responsibility on OAS member states to collectively defend democracies in the region.  The Maduro government is thus almost entirely isolated, relying on the support of Bolivia, Ecuador, Nicaragua, the Dominican Republic, and some islands in the Caribbean.

Regional actors are worried that Venezuela’s humanitarian catastrophe is expressing itself across its borders via massive Venezuelan immigration — northern Brazil and Peru have been overwhelmed by the arrival of Venezuelan nationals, and Venezuela leads in asylum seekers in the United States.

Venezuela is also a public-health concern for the region.  The collapse in health care has caused an increase in infectious diseases such as AIDS.  Endemic diseases formerly eradicated in Venezuela, such as malaria and diphtheria, have also reappeared.  A collapsing Venezuela also poses a risk for countries in the region because it entails the loss of a relevant trading partner.

P:  Venezuela has played an important role in the Caribbean, so how would this change?

H:   Venezuela has a hugely expensive subsidy scheme with Cuba, giving away some one hundred thousand barrels of oil a day. When Venezuela tries to stabilize itself, it will need to revisit that agreement.   A country that needs international financial assistance and debt restructuring cannot simultaneously transfer to Cuba almost 10 percent of Cuba’s GDP — these things are incompatible. 

How to Clean Up the Mess in Venezuela

President Trump should assemble a diplomatic effort to stop the crisis under Maduro’s repressive regime.

By Shannon O’Neil, Opinion Contributor ‖ April 28, 2017

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Venezuela announced this week that it will withdraw from the Organization of American States, deepening its isolation and intensifying the sense of crisis there. In recent months, Venezuela has descended into economic, political and moral chaos, punctuated by the arrests of hundreds and the deaths of dozens of protesters during marches on Caracas and surrounding cities.

Venezuela is a test for the new Trump administration, which has declared it “a mess.” To stop the worst hemispheric crisis in decades, President Donald Trump needs a policy that includes not only tough words but also concrete actions.  But the United States can’t do it alone.  To help rather than hurt U.S. interests, the United States – the historic regional hegemon – needs to tread carefully and build a supportive coalition.

How did Venezuela come to this point? An oil-rich nation of 30 million, it is now in its third year of a steep recession, its gross domestic product has shrunk 18 percent in the last year alone, while inflation has spiraled into triple digits. Many Venezuelans have involuntarily been put on what has become known as the “Maduro diet,” shedding pounds as they slowly starve due to food and medicine shortages.

Politically, the government led by leftist President Nicolas Maduro has destroyed the remnants of a once proud democracy, overriding the legislature, canceling regional elections, stifling the press and filling cells with political prisoners.  Widespread corruption and criminality permeate the administration, with officials absconding with tens of billions of dollars from public coffers.  Other officials shepherd Colombian cocaine and other illegal drugs through Venezuela’s airports and ports, taking their cut as the products head to American and European markets.

How can the United States help change Venezuela’s course?   First, there are things the U.S. administration should not do. Condemnatory and inflammatory tweets will only provide fodder for Maduro’s conspiracy theories.  Countrywide sanctions cutting off Venezuela’s access to U.S. refineries, a la Russia in 2014, will inflict even greater costs on the nation’s desperate population. Worse, they would drive away potential allies, and provide Maduro an enemy on which to blame his failures. Unilateral actions in general will be ineffective, if not counterproductive, confirming long held regional suspicions of U.S. imperialist designs. America in this case cannot “come first.”

To succeed, the Trump administration must galvanize the international community against Venezuela’s increasingly repressive regime.  The best hope for change is careful and consistent diplomacy.   This begins with Venezuela’s neighbors, who are most affected by its disintegration. Recent political changes make such unity more likely. New presidents in Peru, Argentina and Brazil have already suspended Venezuela from the Mercosur trading block and have vocally questioned its claims to democracy.  The Trump administration should work to expand the number of anti-Maduro allies.

Beyond the region, other democratic nations, particularly in Europe, need to stand up for what is right. Pope Francis, who played an important though ultimately doomed role in creating a dialogue between the Venezuelan administration and the opposition, should join these voices and denounce the Maduro government’s authoritarianism.  This broader group should raise its voice within the United Nations, naming and shaming the Maduro regime even while heeding his call for humanitarian relief.

Concrete actions, particularly for Venezuela’s kleptocrats and criminals, must follow multilateral words. In 2015 then-President Barack Obama declared seven high-ranking government and military officials persona non-grata for human rights abuses and widespread corruption. The executive order denied them visas, froze their U.S. assets and accounts, and forbade them from doing business here.  Trump recently added Venezuelan Vice President Tareck El Aissami to the list for his ties to narcotraffickers.  Dozens of other officials have been denied visas for human rights and other abuses.

These targeted sanctions will be more economically, politically and morally effective if other nations also adopt them, ensuring that these individuals cannot move their ill-gotten gains through the international financial system and that they are refused the comfort of life away from the economic devastation they have wreaked at home.

As the Trump administration builds a coalition of nations for change, it needs to prepare with them for the possibility of Venezuela’s deeper collapse.  This means readying for a surge in refugees into neighboring Colombia, Brazil, Guyana and nearby Caribbean islands.  It also means preparing to help a future receptive government deal with the economic and financial chaos, bringing together the International Monetary Fund, creditors and others to restructure and restart Venezuela’s failed economy.  Venezuela’s future should be added to bilateral talks with China, the South American nation’s largest outside creditor.

In short, Venezuela’s undoing threatens to undermine economic stability, security and democracy in the Western Hemisphere.  The Maduro government’s willingness to permit drug traffickers, organized crime networks, and potential terrorists to operate within its borders undercuts regional and global security efforts.  And Venezuela’s authoritarian turn contradicts the long-standing foreign policy ideals and goals held by so many.   The United States has an unmatched ability to pressure other nations.  Yet to have any real hope of positive change in Venezuela, Trump and his team will need diplomatic patience, persuasiveness and perseverance. 

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Shannon O’Neil is the Nelson and David Rockefeller senior fellow for Latin America at the Council on Foreign Relations.

World Order 2.0: The Case for Sovereign Obligation

By Richard Haass, January – February 2017

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For nearly four centuries, since the Peace of Westphalia, which ended the Thirty Years’ War, the concept of sovereignty — the right of nations to an independent existence and autonomy — has occupied the core of what international order there has been.  This made sense, for as every century including the current one has witnessed, a world in which borders are forcibly violated is a world of instability and conflict.  The globe’s traditional operating system — call it World Order 1.0 — has been built around the protection and prerogatives of states. It is increasingly inadequate in today’s globalized world. Little now stays local; just about anyone and anything, from tourists, terrorists, and refugees to e-mails, diseases, dollars, and greenhouse gases, can reach almost anywhere. The result is that what goes on inside a country can no longer be considered the concern of that country alone.  Today’s circumstances call for an updated operating system — call it World Order 2.0 — that includes not only the rights of sovereign states but also those states’ obligations to others.

From the late 1990s onward, a new liberal idea gained ground: that governments that mistreat their populations and foment instability in their neighborhoods forfeit their sovereign right to rule.  The International Criminal Court, which encroaches on sovereignty in the name of justice, was established in 1998.  One year later, British Prime Minister Tony Blair laid out his doctrine of liberal interventionism in Chicago, declaring that, in a world of growing interdependence, “the principle of non-interference must be qualified in some important respects.”

Sovereign Obligation

From the late 1990s onward, a new liberal idea gained ground: that governments that mistreat their populations and foment instability in their neighborhoods forfeit their sovereign right to rule.  The International Criminal Court, which encroaches on sovereignty in the name of justice, was established in 1998.  One year later, British Prime Minister Tony Blair laid out his doctrine of liberal interventionism in Chicago, declaring that, in a world of growing interdependence, “the principle of non-interference must be qualified in some important respects.”

Sovereign obligation is about what a country owes to other countries. It stems from a need to expand and adapt the traditional principles of international order for a highly-interconnected world. Sovereign obligation thus retains a respect for borders and an opposition to their being changed through coercion or force.  It supports actions to enforce the norm against aggression, whether the incident involves Iraq invading Kuwait or Russia invading Crimea.  And it retains a respect for governments’ rights to act generally as they wish within their borders, subject to the constraints of broadly accepted provisions of international law, such as the Universal Declaration of Human Rights and the Genocide Convention.  Sovereign obligation does not reject or replace the traditional approach to order — one that remains necessary but is no longer sufficient — so much as it builds on it.

The Responsibility to Protect

However, in 2005, the UN General Assembly endorsed the responsibility to protect doctrine, the concept that when a state fails to prevent atrocities, foreign governments can intervene to do so.  Such a concept of “sovereign obligation,” it is worth pointing out, differs from the notion of “sovereignty as responsibility,” which lies at the heart of the legal doctrine known as “the responsibility to protect,” or R2P.  R2P refers to the obligations a government has to protect its own citizens — commitments that, if ignored, are supposedly enforceable by other states through measures up to and including military intervention. 

Specifically, the R2P doctrine acknowledges that the international community has a secondary responsibility to protect human rights whenever states are unable or unwilling to do so.   (Instructor’s emphasis)

In Chávez, Maduro Trusts, Maybe to His Detriment and Venezuela’s

By William Neuman ‖ March 9, 2015

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CARACAS, Venezuela — He thunders about conspiracies and assassination plots. He says that he sleeps with both eyes open.  Few Venezuelans even know where he lives.  But no matter the dangers, President Nicolás Maduro says that no one will scare him, fool him or divert him from carrying out the mission that the “eternal Commander Chávez” has given him “until the end of the end of the roads, now and forever.”

Mr. Maduro came into office seeking to imitate his charismatic predecessor and mentor, Hugo Chávez, in nearly every way: the way he talked, the way he dressed and in his fulminations against American imperialism.   But now, two years after the death of Mr. Chávez, with his country sinking deeper into an economic crisis, what was once Mr. Maduro’s greatest advantage — his absolute loyalty to the former leader — may have become his greatest handicap.

“The government inaction, the inertia, comes from a belief that you find in Nicolás Maduro and his government about defending Chávez’s legacy, as if nothing that Chávez left can be touched, nothing can be changed or corrected because that would be considered a betrayal,” said Victor Álvarez, a leftist economist and former government minister under Mr. Chávez.   Well before Mr. Chávez’s death on March 5, 2013, it became clear that many of his policies needed to be revised or even discarded to set the nation’s economy on the right track, Mr. Álvarez said.

But wary of breaking from his mentor’s course, Mr. Maduro, who repeats Mr. Chávez’s name like a mantra and calls himself the son of Chávez, has doubled down on the same policies, which economists say have contributed to a storm of economic problems, including recession, soaring inflation and chronic shortages of basic goods.

“Maduro has a tragic destiny,” said Alberto Barrera, a newspaper columnist and novelist.  He argued that Mr. Maduro has to blame the United States and other enemies for the country’s problems because to do otherwise would recognize that Mr. Chávez’s legacy is flawed.  “Maduro knows that he has to confront a very big crisis, but to accept and recognize the crisis is to recognize that Chávez and the revolution failed,” Mr. Barrera added.

While Mr. Maduro sticks to Mr. Chávez’s legacy in economic matters — including price controls and government ownership of major companies that have stagnated and been mismanaged — many Venezuelans argue that he may have surpassed Mr. Chávez in one area: his attacks on the political opposition.

After dispatching troops during protests last year, Mr. Maduro has jailed a succession of prominent politicians. Last month, the intelligence police raided the office of Antonio Ledezma, the mayor of Caracas, and hauled him off to jail. He has been accused of taking part in one of the many coup plots Mr. Maduro has alleged.

Mr. Ledezma now sits in the Ramo Verde military prison, along with Leopoldo López, the leader of a political party who championed last year’s protests, and Daniel Ceballos, a former mayor.  Another former opposition mayor, Enzo Scarano, was recently released.

Mr. Chávez also sought regularly to intimidate the opposition, and he drove some opposing politicians into exile with threats to have them arrested. But opposition leaders say that being politically active is much riskier today.  “Maduro’s problem is that he does not project leadership, so he has to make up for it by trying to look strong,” said Stalin González, an opposition legislator.  “People laugh at him; they don’t take him seriously. It’s like a bully at school. They laugh at him, and he resorts to violence so that they will respect him.”

Mr. Maduro, a civilian with no military background, has loaded his government with military officers to a greater extent than Mr. Chávez, a former paratrooper who celebrated the trappings of military life.  The ministers of finance, the interior and food and Mr. Maduro’s chief of staff are military officers, as are numerous other cabinet members.  “The ministerial positions that manage the greatest economic resources are in the hands of military officers,” said Rocío San Miguel, president of Control Ciudadan o, a group that monitors the military.  She said that more than a quarter of government ministers were now current or former military officers, compared with one in five near the end of Mr. Chávez’s presidency.

Mr. Maduro has also lavished perks on the military, giving the armed forces their own television station, a bank and other prizes.  That has raised questions of whether Mr. Maduro has drawn the military close to build alliances, whether he is a captive of interests beyond his control, or both.  Mr. Maduro was handpicked by Mr. Chávez, who was sick with cancer, to succeed him, and Mr. Maduro won a presidential election by a narrow margin in 2013.

Yet to many he still seems stuck in Mr. Chávez’s shadow. Even his backers describe him in relation to his mentor.  “He learned from Chávez to look at reality straight on and attack it as it is,” said Roy Daza, a member of Mr. Maduro’s United Socialist Party in the Latin American Parliament, a regional body.  Critics say that attack typically focuses on the symptoms, not the roots, of longstanding problems.  Faced with huge lines and shortages of basic items like corn flour or sugar, Mr. Maduro has jailed retail executives while steadfastly maintaining the price controls that many economists say cause the problem.

“Instead of attacking the structural causes that create these problems, they are attacking the consequences,” Mr. Álvarez, the former minister under Mr. Chávez, said of Mr. Maduro’s government.  Mr. Maduro has shown a talent for juggling internal pressures and factions within the movement left behind by Mr. Chávez, sidelining some rivals and accommodating others.

He pushed Jorge Giordani, a close adviser to Mr. Chávez, out of government and then suppressed a mini-revolt by Mr. Giordani’s supporters in his party’s left wing. And he has marginalized Rafael Ramírez, the powerful former head of the government oil company, PDVSA, removing him from that post and other crucial positions before finally packing him off as ambassador to the United Nations.

But Diosdado Cabello, the president of the National Assembly and a former military officer, is considered Mr. Maduro’s main rival for power and also the government figure with the greatest influence within the armed forces.  All that has led to a kind of Kremlinology here, with observers speculating on who is behind government actions and whether Mr. Maduro is fully in control.

“There is a lot of internal division.  Does Diosdado have more power than Maduro, does someone else?” said Daniel Cuevas, a government worker who voted for Mr. Maduro but is unhappy with the country’s direction. “In the end, that hurts the people.”  Despite his tough talk, Mr. Maduro has also earned a reputation for Hamlet-like indecisiveness. He has spoken for over a year about raising gasoline prices, the world’s lowest, but has taken no action.  A long-promised foreign exchange reform last month turned out to be a tweak.  “He is an enigma for Venezuelans,” said Mr. Barrera, the columnist, pointing to the mystery around Mr. Maduro’s residence as a metaphor for his presidency.

The official presidential mansion, known as La Casona, is still occupied by one of Mr. Chávez’s daughters, Rosa Virginia, and her husband, Vice President Jorge Arreaza. Mr. Maduro has said the house is for the use of the late president’s family, for their protection.  “He hasn’t even moved into the house that corresponds to him” as president, Mr. Barrera said.  “He says that he is going to stand up to the gringos, but he hasn’t even been able to stand up to Chávez’s daughter so that he can occupy the presidential mansion.”  A government official, who spoke on the condition that he not be identified, said that Mr. Maduro lives in a residence inside a Caracas military base, Fort Tiuna.

Mr. Maduro spends many hours each week on television denouncing his enemies inside and outside the country, including opposition politicians and the United States, in the style of Mr. Chávez.  Last month, he ordered the American Embassy to sharply cut its staff.  On the air, he describes himself as the victim of international machinations.  The evidence he offers is often colorful but far from convincing to many Venezuelans, including many supporters. He rarely appears in public without his wife, Cilia Flores, a former legislator whom he calls the First Combatant.

At 52, his thick brush of hair and mustache often appear jet black, as if painted on, barely showing signs of gray. Vice President Joseph R. Biden Jr. was quoted as commenting on Mr. Maduro’s lustrous hair when the two met recently in Brazil during President Dilma Rousseff’s inauguration, saying, “If I had your hair, I’d be president of the United States.”  Recently, Mr. Maduro has focused on former President Obama, sometimes pretending to speak directly to him during his speeches.  He often describes Mr. Obama as a decent man unaware of the sinister forces in his government intent on attacking Venezuela.  But in a recent speech, Mr. Maduro sounded hurt that Mr. Obama had not returned the attention.

Podcast About Venezuela

http://www.bbc.co.uk/programmes/p03vny34

YouTube Videos About Venezuela

XIV.    Reading List

The Issue

William Neuman, “In Chavez, Maduro Trusts, Maybe to His Detriment and Venezuela’s,” The New York Times, March 9, 2015, which can be found at http://www.nytimes.com/2015/03/10/world/americas/in-chavez-maduro-trusts-maybe-to-his-detriment-and-venezuelas.html?_r=0.

Shannon O’Neil, “How to Clean Up the Mess in Venezuela,” U.S. News, April 28, 2017, https://www.usnews.com/opinion/world-report/articles/2017-04-28/how-donald-trump-should-manage-the-crisis-in-venezuela-under-maduro. 

Context

Eve Conant, “Behind the Headlines: Venezuela’s Crisis,” National Geographic, March 2, 2014, http://news.nationalgeographic.com/news/2014/03/140302-venezuela-chavez-oil-protests-inflation-history-geography/.

William Finnegan, “Venezuela, a Failing State,” The New Yorker, November 14, 2016, http://www.newyorker.com/magazine/2016/11/14/venezuela-a-failing-state. 

Jennifer McCoy, “Chavez and the End of ‘Partyarchy’ in Venezuela,”  Journal of Democracy Vol. 10, No. 3 (July 1999), which can be found at https://muse.jhu.edu/journals/journal_of_democracy/v010/10.3mccoy.html.

Root Causes

Patrick Gillespie, “Five Reasons Why Venezuela May be the World’s Worst Economy,” CNN Money, February 20, 2015, which can be found at http://money.cnn.com/2015/02/20/news/economy/venezuela-economy-inflation/?iid=EL.

Jon Lee Anderson, “Postscript: Hugo Chávez, 1954-2013,” The New Yorker, March 5, 2013, which can be found at http://www.newyorker.com/news/news-desk/postscript-hugo-chvez-1954-2013.

Nick Robins-Early, “What’s Behind The Economic Chaos In Venezuela,” Huffington Post, June 02, 2016, http://www.huffingtonpost.com/entry/venezuela-economic-crisis-explainer_us_57507abde4b0eb20fa0d2c54.

The Role of the United States

Moises Rendon, “Why Venezuela Should Be a U.S. Foreign Policy Priority,” Center for Strategic and International Studies, August 14, 2017, which can be found at https://www.csis.org/analysis/why-venezuela-should-be-us-foreign-policy-priority.

Mark P. Sullivan, “Venezuela: Background and U.S. Relations,” Report no. R43239, Congressional Research Service, April 1, 2015, which can be found  at https://www.fas.org/sgp/crs/row/R43239.pdf.

Other Interested Parties

Ben Blanchard, “China Says Sanctions Won’t Help as Trump Targets Venezuela,” Reuters, August 28, 2017, https://www.reuters.com/article/us-usa-venezuela-sanctions-china-idUSKCN1B811D.

Further Reading

Al Jazeera, “Venezuela: What is Happening Today?,” August 1, 2017, which can be found at http://www.aljazeera.com/indepth/features/2017/04/venezuela-happening-170412114045595.html.

BBC News, “Timeline: Venezuela,” August 1, 2012, which can be found at http://news.bbc.co.uk/2/hi/americas/1229348.stm. 

Chris Arsenault, “Venezuela Looks to China for Economic Boost,” Al Jazeera, March 12, 2013,  which can be found at http://www.aljazeera.com/indepth/features/2013/03/201331271053389351.html.

Javier Corrales, “Don’t Blame It on the Oil,” Foreign Policy, May 7, 2015, which can be found at http://foreignpolicy.com/2015/05/07/dont-blame-it-on-the-oil-venezuela-caracas-maduro/.

Patrick Gillespie, “Venezuela’s Currency Isn’t Worth a Penny,” CNN, June 3, 2015, http://money.cnn.com/2015/06/03/investing/venezuela-bolivar-currency-imploding/.  

Stephen Kinzer, “Venezuela Resisting I.M.F. Rein,” The New York Times, July 25, 1983, http://www.nytimes.com/1983/07/25/business/venezuela-resisting-imf-rein.html.

Brianna Lee and Danielle Renwick, “The Organization of American States,” CFR.org Backgrounder, April 9, 2015, which can be found at http://www.cfr.org/latin-america-and-the-caribbean/organization-american-states/p27945.

Nicolas Maduro, “Under My Presidency, Chavez’s Revolution Will Continue,” The Guardian, April 12, 2013, which can be found at http://www.theguardian.com/commentisfree/2013/apr/12/my-presidency-chavez-revolution-continue.  

Carl Meacham, “Venezuela’s Desperate Times and Nicolas Maduro’s Desperate Measures,” Center for Strategic and International Studies, March 2, 2015, which can be found at http://csis.org/publication/venezuelas-desperate-times-and-nicolas-maduros-desperate-measures.

__________, “Will the Venezuelan State Fail?” Center for Strategic and International Studies, May 19, 2015, which can be found at http://csis.org/publication/will-venezuelan-state-fail.

Don A. Schanche, “Despite Riots, Venezuela Will Stress Austerity,” The Los Angeles Times, March 3, 1989, which can be found at http://articles.latimes.com/1989-03-03/news/mn-253_1_austerity-measures.

Mark P. Sullivan, “Hugo Chávez’s Death: Implications for Venezuela and U.S. Relations,” Report no. R42989, Congressional Research Service, April 9, 2013, which can be found at https://www.fas.org/sgp/crs/row/R42989.pdf.

Jamila Trindle, “Are U.S. Sanctions a Gift to Venezuela?” Foreign Policy, March 12, 2015, which can be found at http://foreignpolicy.com/2015/03/12/are-u-s-sanctions-a-gift-to-venezuela/.  

“Venezuela After Chavez,” The Christian Science Monitor, March 25, 2015, which can be found at http://www.csmonitor.com/Photo-Galleries/In-Pictures/Venezuela-after-Chavez#799163.  

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End of Case Study