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Venezuela: “Zero hour”
Venezuela: “Zero hour”
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.

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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: “Zero hour”

As the Venezuelan government prepares to create an all-powerful constituent assembly to replace the country’s democracy, unrest is likely to reach new levels of violence. In this excerpt from the Watch List 2017 – Second Update early warning report for European policy makers, Crisis Group urges the European Union and its member states to support regional actors’ efforts to bring about genuine negotiations while insisting on the restoration of constitutional rule.

This commentary is part of our Watch List 2017 – Second Update.

Venezuela approaches a key moment in its protracted political crisis: the government is preparing to replace the country’s ailing democracy with a full-fledged dictatorship by means of an all-powerful constituent assembly, due to be elected on 30 July under rules that effectively exclude the opposition. Nearly 100 people have died in over three months of street demonstrations across the country, many of them shot dead by police, national guard or civilian gunmen. Beginning a week before polling day, the army will be deployed on the streets to guard against any disruption. There is a grave danger of violence on a scale so far unseen, and a fresh wave of emigration is probably imminent. The accelerating breakdown of health services and other vital infrastructure, growing hunger and shortages of basic goods, along with surging rates of violent crime, pose an evident threat not only to Venezuelans but to neighbouring countries and the international community generally.

Democracy Dismantled

In December 2015, the opposition Democratic Unity (MUD) alliance won a two-thirds majority in the single-chamber National Assembly, but the government has used its control of the Supreme Court to block every move by parliament since then. When the opposition responded by attempting to trigger a recall referendum against President Maduro, this too was blocked, using the courts and the government-controlled electoral authority (CNE). Elections for state governors, due in December 2016, were suspended. Some opposition leaders have been banned from holding office and/or banned from leaving the country. Others have had their passports annulled and some have been imprisoned. In late March, the Supreme Court attempted to transfer to itself all the assembly’s powers, causing the once loyal attorney general, Luisa Ortega, to declare that constitutional rule had been interrupted and the Organization of American States (OAS) to invoke the Inter-American Democratic Charter, devised to deal with the breakdown of democracy in a member state.

The opposition alliance launched a campaign of mass demonstrations to demand the restoration of democracy, but the response from the government has been violent. In addition to the deaths, thousands have been injured and thousands more arrested; security forces and civilian gunmen have invaded private residences, destroying and stealing property and carrying out warrantless detentions. Hundreds have been subjected to trial by military courts, and the legal aid organisation Foro Penal puts the number of political prisoners at around 400. On 1 May, Maduro announced he was convening an assembly to rewrite the constitution. The assembly, to be elected on 30 July, will be supra-constitutional and there is no time limit on its authority. Government leaders have said it will be empowered to close down parliament, stripping members of their parliamentary immunity, and “turn upside down” the attorney general’s office, which has declined to prosecute peaceful demonstrators and charged senior military figures with human rights abuses.

With millions of illegal weapons in private hands, arming urban guerrillas might not be difficult.

Around two fifths of constituent assembly members will be elected by “sectors” (including trade union members and “communes”) largely controlled by the government. The remainder will be elected by municipality, under a system that vastly over-represents the rural areas where the government is strongest. The MUD is boycotting the election, which it says the president has no right to convene without a prior referendum. Polls suggest only around 20 per cent of the electorate intend to vote. Fringe elements in the opposition (collectively referred to as La Resistencia), frustrated with the MUD’s non-violent approach, talk in private of armed resistance. With millions of illegal weapons in private hands, arming urban guerrillas might not be difficult. Nor is the MUD itself united: while some parties support a negotiated transition, others are opposed. Despite abundant evidence of discontent in military ranks (including dozens of arrested officers), there has so far been no split in the armed forces. The officer corps would nonetheless be faced with a dilemma if the army were called on to restore public order. Such a move would inevitably bring much higher casualty figures and some would be reluctant to obey.

A ray of light came on 16 July with a massive turnout for a “consultation” of voters ordered by the National Assembly. Over seven million voted to reject the constituent assembly, call on the armed forces to obey the constitution, not the government, and mandate parliament to appoint a new Supreme Court and electoral authority and form a government of national unity. While the government sought to downplay the event, it strengthened demands both internal and external for a last-minute u-turn.

Growing Hunger

Economists project that by the end of 2017 the Venezuelan economy will have shrunk by around 30 per cent in three years. Manufacturing industries are producing at 20-30 per cent of capacity and the main farmers’ federation says only about a quarter of the normal acreage will be planted, due to lack of seeds, fertilizers and pesticides, as well as agricultural equipment. Outbreaks of mass looting in many cities have badly hit wholesale and retail food outlets, while imports of food have slumped. The government’s failure to provide enough emergency rations through its CLAP (Local Provision and Production Committee) system of food parcels has led to protests in many poorer areas. Studies show half the population living in extreme poverty. Rare official figures show an alarming increase in infant and maternal mortality. Child malnutrition rose by over 11 per cent from 2015-2016 and nutritionists are beginning to predict famine if trends continue. Shortages of essential medicines continue at critical levels and hospital infrastructure is collapsing. A shortage of vaccines has contributed to outbreaks of formerly eradicated diseases such as diphtheria, while farmers warn that livestock too is vulnerable to epidemics due to the lack of veterinary vaccines.

In the medium term there is a possibility that the Venezuelan government might collapse under the burden of an unpayable foreign debt and domestic ungovernability, although without necessarily triggering a restoration of democracy. While most analysts believe Caracas can make this year’s debt service payments, it faces a severe challenge in October/November, when around US$3.5 billion come due.

Responding to the Emergency

The OAS has so far failed to reach consensus on how to approach the crisis. A handful of mostly Caribbean states, beholden to Caracas for cheap energy supplies and other benefits, have blocked what they call an excessively “interventionist” approach. Without a split in the government (and in particular the military), the constituent assembly plan appears unstoppable, and further violence is likely; the 8 July release into house arrest of opposition leader Leopoldo López notwithstanding, the government’s attitude does not appear to have changed.

Still, concerned governments nonetheless should prepare a negotiating structure for when conditions change. In this context, the European Union (EU) should back a proposal by a large group of OAS members, including the U.S., Canada, Mexico, Peru and Colombia, to form a “contact group” comprising four or five governments agreed on by both sides to the conflict; its goal would be to promote negotiations aimed at averting more violence and restoring democracy. This group probably would have to be created outside the formal framework of the OAS. The EU and EU member states with close ties to the region (in particular to the Caribbean) should use their influence to widen support for this proposal, especially among OAS countries close to the Maduro government.

In addition, the EU, with regional governments in the lead, should develop a concerted response and attempt to bring Russia and China on board insofar as they have greater leverage over Caracas and hold large quantities of Venezuelan debt. Involvement by either or both of these countries in a plan to avert violence and promote genuine negotiations would have a major positive impact. On 16 July, Colombian President Juan Manuel Santos reportedly sought Cuban government support for a regional plan to resolve the crisis. As Venezuela’s closest ally, Cuba is in a unique position to influence the outcome, and Santos’ initiative should be supported by the EU and member states.

The EU should make plain that free and fair elections and the restoration of constitutional rule are essential pre-requisites for normal relations.

As an immediate response, the EU and the wider international community should assist front-line states in dealing with the humanitarian and security consequences of the crisis. Colombia, with its delicate post-conflict situation, is highly vulnerable to refugee flows, possible border clashes if the Caracas government seeks an external distraction, and increased activity of non-state armed groups. Although the Venezuelan government has consistently rejected humanitarian aid, some NGOs have been permitted to provide small-scale humanitarian assistance on condition it is not publicised. The EU should seek ways to facilitate this process even as it continues to press publicly for aid to be allowed in.

The EU should make plain that free and fair elections and the restoration of constitutional rule are essential pre-requisites for normal relations as well as for emergency financial support. The EU and member states also should be prepared to offer advice and technical assistance to a transitional government, should one be set up. There is no quick fix for the multi-layered crisis Venezuela is facing. But inaction is no longer an option.