Arrow Left Arrow Right Camera icon set icon set Ellipsis icon set Facebook Favorite Globe Hamburger List Mail Map Marker Map Microphone Minus PDF Play Print RSS Search Share Trash Twitter Video Camera Youtube
Venezuela: A Regional Solution to the Political Standoff
Venezuela: A Regional Solution to the Political Standoff
People line up to buy toilet paper at a supermarket in downtown Caracas, on 19 January 2015. REUTERS/Jorge Silva

Venezuela: Unnatural Disaster

Alongside Venezuela’s growing political tension, the collapse of the country’s economy and health care system are leading to an equally dangerous social crisis. To stave off a humanitarian disaster that could well turn today’s polarisation violent, Venezuela needs an emergency program, careful reform of price controls, political consensus, and international support.

  • Share
  • Save
  • Print
  • Download PDF Full Report

I. Overview

The accelerating deterioration of Venezuela’s political crisis is cause for growing concern. The collapse in 2014 of an incipient dialogue between government and opposition ushered in growing political instability. With legislative elections due in December, there are fears of renewed violence. But there is a less widely appreciated side of the drama. A sharp fall in real incomes, major shortages of essential foods, medicines and other basic goods and breakdown of the health service are elements of a looming social crisis. If not tackled decisively and soon, it will become a humanitarian disaster with a seismic impact on domestic politics and society, and on Venezuela’s neighbours. This situation results from poor policy choices, incompetence and corruption; however, its gravest consequences can still be avoided. This will not happen unless the political deadlock is overcome and a fresh consensus forged, which in turn requires strong engagement of foreign governments and multilateral bodies.

As the 12th largest oil producer in the world, with the largest reserves, and a beneficiary of the most sustained oil price boom in history, Venezuela ought to be well placed to ride out the recent collapse of the international price of crude. The oil boom, combined in the early years at least with the government’s redistribution policies, produced a significant decrease in poverty under the administration (1999-2013) of the late Hugo Chávez. The economy was showing signs of strain, however, well before the 50 per cent fall in prices at the end of 2014, a year in which GDP shrank by more than 4 per cent and inflation rose to 62 per cent. Expropriations of private land and businesses, stringent price and exchange controls and inefficient, often corruptly-run state enterprises undermined the nation’s production of basic goods and services. Having incurred massive debts, spent most of its international reserves and emptied a stabilisation fund set up for such contingencies, the government faces a critical shortage of hard currency and the prospect of triple-digit inflation this year and can no longer afford to make up domestic shortfalls of consumer goods with imports.

The impact has naturally been felt most keenly by the poor, who rely on increasingly scarce supplies of price-controlled food, medicines and other basic goods for which they must often queue for hours, with no guarantee of success. Those with ailments such as cancer, HIV-AIDS or cardiovascular disease can go months without medicines they require to survive. Hospitals and even private clinics cannot maintain stocks of medicines and other basic supplies, including spare parts to repair equipment. The hospital crisis is exacerbated by government failure to complete a rebuilding program begun in 2007 or fulfil promises to construct new facilities. Thousands of doctors and other medical personnel have resigned due to low wages and unsafe working conditions. Surgery waiting lists are growing, and staff vacancies go unfilled.

Some economists predict a sudden collapse in food consumption and widespread hunger, and public health specialists already say that some surveys are showing chronic malnutrition, although the country is not yet on the verge of famine. The collapse of the health service, however, can have pernicious short-term effects, including uncontrolled spread of communicable diseases and thousands of preventable deaths.

Aside from purely humanitarian concerns, Venezuela’s neighbours and the wider international community have pragmatic reasons for acting. If a solid institutional and social welfare framework can be restored through a negotiated settlement, and economic measures taken to deal with inflation and scarcity, a humanitarian crisis can be averted. If not, the collapse of the health and welfare infrastructure is likely to make political conflict harder to manage and could lead to a further erosion of democracy and an increasing likelihood of violence.

This in turn would have an impact beyond Venezuela’s borders. Potential risks include large-scale migration, the spread of disease and a wider foothold for organised crime. Without a change of economic policy, the country is heading for a chaotic foreign debt default, probably in 2016. An unstable Venezuela unable to meet its international commitments could destabilise other countries in the region, particularly Caribbean nations that have come to rely on subsidised energy from Caracas. It would also have a direct impact in Colombia, along a border already under multiple threats.

This briefing is the product of research conducted between April and July 2015, which included field trips to Zulia state and the greater Caracas area. Among a wide variety of sources consulted were many grassroots sympathisers of the government and several mid-ranking officials. Unfortunately, the ministers of food and health did not answer requests for interviews.

To forestall the severe consequences of a humanitarian crisis in Venezuela:

  • The government must acknowledge the problem. Concealing true statistics and harassing those who publish or demand access to data must cease.
     
  • Any political dialogue or agreement must prioritise concerted action to guarantee supplies of scarce goods, including medicines, medical supplies and basic foodstuffs, for the neediest, and a social safety net without partisan intervention or manipulation that incorporates as providers non-governmental actors, including the Catholic Church and humanitarian organisations.
     
  • The current unworkable system of price and exchange controls that fosters corruption, smuggling and the black market and fuels inflation and scarcity needs to be carefully dismantled and replaced with mechanisms that provide a safety net for the poor without stifling production.
     
  • The government should seek broad support for an emergency program that restores economic equilibrium and protects the most vulnerable from the consequences of the necessary adjustment, rather than blaming the opposition and foreign governments for an imaginary “economic war”.
     
  • The opposition should resist the temptation to score political points, acknowledge there is no painless solution and present a clear economic and social reform agenda.
     
  • Venezuela’s neighbours and the broader international community must abandon their reluctance to act, and explicitly press for restoration of the rule of law and of institutional checks and balances, beginning with close oversight of the December parliamentary elections.
     
  • They should also help alleviate the social costs of the current crisis by offering food and medical aid and helping Venezuela cope with and control existing epidemics and prevent future ones.

Caracas/Bogotá/Brussels, 30 July 2015

Venezuela: A Regional Solution to the Political Standoff

Facing social and economic collapse, Venezuela is likely to continue to be Latin America's most urgent crisis in 2017. In this excerpt from our Watch List 2017 annual early-warning report for European policy makers, Crisis Group urges the European Union and its member states to work closely with governments in the region, particularly Caribbean nations with close ties to Caracas, toward the restoration of democracy in Venezuela.

This commentary on the worsening crisis in Venezuela is part of our annual early-warning report Watch List 2017.

The dismantling of Venezuelan democracy, together with the country’s acute social, economic and humanitarian crisis, represents South America’s biggest challenge for regional institutions and the wider international community in 2017. The failure, thus far, to achieve a peaceful, democratic solution to Venezuela’s political conflict risks provoking severe civil unrest and possible divisions in the armed forces, with uncertain consequences. Venezuela’s neighbours – especially Colombia, only now emerging from decades of guerrilla war – have good reason to fear possible spillover in the form of mass emigration and the proliferation of non-state armed groups on their borders, as well as uncontrolled epidemics as Venezuela’s health services break down.

A Political Standoff

The presidency of Nicolás Maduro, an elected civilian whose cabinet is nevertheless packed with military officers, has entered its final two years amid widespread unpopularity. By using its control of the judiciary and the electoral authority (CNE) to block a presidential recall referendum in 2016, the administration has ensured that there is no constitutional means of removing it from power ahead of presidential elections scheduled for December 2018. Ruling by decree, Maduro has stripped the opposition-led National Assembly of its powers and threatened to close it down. Parliament has responded by declaring that Maduro has “abandoned” the presidency in constitutional terms by failing to fulfil his duties.

The appointment in early January of Aragua state governor (and former Interior Minister) Tareck el Aissami as vice-president is perhaps the clearest sign that hardliners now have the upper hand within the government. Charged by Maduro with heading a so-called “Anti-Coup Command”, Aissami immediately deployed the national intelligence service, SEBIN, to pursue and arrest opposition politicians, picking up six of them in the first week alone. He has also hinted at banning opposition parties. In short, the new vice president’s interest in a negotiated transition appears slim.

Talks which began at the end of October between the government and the opposition Democratic Unity (MUD) alliance, brokered by the Vatican and a team from the Union of South American Nations (UNASUR), quickly broke down, and there seems little prospect of reviving them in the short term. For the MUD the talks proved costly in terms of popular support and exacerbated deep divisions within the alliance over the way forward: one very vocal wing favours mass direct action while others advocate dialogue or the electoral route.

The government, having lost its electoral base (Maduro’s popularity stands at around 10 per cent, the ruling United Socialist Party of Venezuela (PSUV) around 25 per cent), shows little interest in appealing to voters, perhaps in the belief it can bypass them at least in the short term. Elections for state governors due in December 2016 were postponed on a promise to hold them in mid-2017, but the CNE has yet to set a date. Political parties have been ordered to renew their registration, in a complex process which may be used as a pretext for further delay and/or to proscribe some parties.

Economic and Humanitarian Meltdown

Venezuela’s economy shrank considerably in 2016 – some estimates suggest by as much as 18 per cent – with annual inflation running at several hundred per cent and real wages shrinking fast. Imports have collapsed from over $60 billion in 2012 to under $18 billion in 2016, which combined with the slump in domestic production means acute shortages of food, medicines and other basic goods. About a fifth of the population eats only one meal a day. Malnutrition and preventable diseases have risen sharply, and the health service is close to collapse.
 

The broad contours of a lasting solution will require negotiations between the government and opposition, facilitated by external actors

In mid-2016 shortages, particularly of food, led to rioting and looting in a number of cities. The government responded by replacing a large part of the retail food distribution network with Local Supply and Production Committees (CLAPs), using both the military and political organisations affiliated to the PSUV. The private sector is now legally obliged to sell 50 per cent of its production to the government for distribution through this network. The scheme appears to have reduced looting, not because it has satisfied demand (the CLAPs are plagued by corruption and inefficiency) but because it reduced the number and length of queues, a frequent trigger for riots. The scheme also enables the government to use food as a political weapon, favouring its supporters and the politically docile.

Getting Out of the Mess: The Elements for Long-term Stability

The broad contours of a lasting solution will require negotiations between the government and opposition, facilitated by external actors, and will probably involve a transitional phase with a degree of power-sharing and economic reforms, leading to free and fair presidential elections under international supervision. High-profile civilian and military leaders, probably including the president, will need to be offered credible guarantees regarding their physical and financial well-being should they lose these elections, possibly including offers of exile. Such an arrangement would offer the best hope of restoring democracy and also stability. To avoid talks for talks’ sake, these negotiations will need to quickly establish a clear calendar for the way forward.

Toward this end, the European Union (EU) should work with regional governments to encourage the application of the Inter-American Democratic Charter, especially its procedures for taking “diplomatic initiatives, including good offices, to foster the restoration of democracy” where this has broken down. They should reserve as a last resort sanctions such as the suspension of Venezuela’s membership of the Organization of American States (OAS).

In forging regional and international cooperation, particular attention should be paid to securing the support of Caribbean nations currently receiving subsidised Venezuelan energy. They will need to be reassured that they will be offered international financial assistance to make up for any loss of access to cheap oil that may accompany a transition in Caracas. In particular Cuba, Venezuela’s closest ally, plays an important role in shoring up the Maduro government through the provision of intelligence and other advisory services, and could potentially contribute to a solution. Economically reliant on dwindling shipments of cheap Venezuelan oil, Havana is unlikely to support a political transition unless its interests are protected. Looking north, meanwhile, it remains unclear whether the new U.S. administration will be willing to continue its predecessor’s approach to working in a multilateral fashion.

The transition process is likely to be protracted, and donors need to identify creative means of alleviating the suffering of ordinary Venezuelans.

The transition process is likely to be protracted, and donors need to identify creative means of alleviating the suffering of ordinary Venezuelans, both in terms of hunger and lack of medical supplies and facilities. EU member states are among the largest contributors to the UN’s humanitarian and specialist agencies, and should encourage them to scale up their response to the crisis commensurate with its severity, and explore with partners ways of overcoming government resistance to outside aid.

The presidential elections scheduled for December 2018 will be crucial, and it will be important to apply early and sustained pressure for the government to relax its current ban on professional observation missions. If the EU is unable to obtain permission for its own observers it should seek to work with those from credible regional organisations, in particular the OAS.