Venezuelan Vortex Deepens With No End in Sight

As Venezuela grapples with a national crisis, there is greater international pressure and condemnation. Peace and democratic order remain a far cry for the country.

A message written on a Venezuelan national flag that reads, "Venezuela don't give up," is seen during a gathering in Venezuela.  Credit: Reuters

A message written on a Venezuelan national flag that reads, “Venezuela don’t give up,” is seen during a gathering in Venezuela. Credit: Reuters

Venezuela’s kaleidoscopic history encompasses most Latin American stereotypes. Its politics careened from military rule in the mid-twentieth century to partisan politics thereafter, culminating in the twenty-first century socialism of former President Hugo Chavez. Excessive dependence on its immense natural resource base, including the largest hydrocarbon reserves in the world, is an exaggerated version of the region’s traditional economic models.

The new political paradigm forged by Chavez consolidated presidential power, backed by the military and community organisations. The United Socialist Party of Venezuela, created from parties loyal to Chavez in the 2006 election, held an unchallenged majority in the unicameral national assembly (parliament). Chavez’s death in March 2013 and the slender election victory of his anointed successor, Nicolas Maduro, emboldened a hitherto tattered opposition, especially newer players untainted by past misgovernance.

The Democratic Unity Roundtable, an opposition coalition formed in 2008, comprises parties of varying sizes and histories without a unified leadership or common programme. The two-third majority it won in elections to the assembly in December 2015 would normally have entitled its leaders to a greater say in running the country. They claim their demands for the release of political prisoners, greater transparency and, above all, a referendum to recall Maduro have been stonewalled and their protests met with violence.

Almost two million signatures have been collected for the referendum, but the National Electoral Council, loyal to the establishment, has been dilatory in ratifying the process. The Supreme Court, to which the outgoing assembly appointed 13 of its 32 judges in December 2015, has ruled against opposition initiatives on several occasions.

Venezuelans are suffering an economic calamity, with the absence or shortages of most basic commodities, runaway inflation and a currency no one wants. The IMF forecasts the economy will shrink 8% this year and 4.5% in 2017, after a 5.7% contraction in 2015. The private sector is all but defunct, since essential imports require hard currency at government-controlled rates. Although the social programs initiated by Chavez continue, the establishment is unable to pay creditors, including Indian companies. Most reputable international airlines have suspended flights to Caracas for non-payment of their dues.

Oil production has fallen to 2.37 million barrels per day in May, according to OPEC. Several oilfields are producing below capacity due to a lack of fresh investment. Compounded by the fall in oil prices since 2014, Venezuela’s cash reserves have all but vanished. The government currently maintains three official rates of 6.3 bolivars, 13.5 bolivars and about 200 bolivars per dollar for authorised purchases of “essential” items. The ‘free market’ rate was over 1000 bolivars to the dollar in June.

International backing and condemnation

For some years now, the international community has been ambivalent over the evolution of the Venezuelan model. There has been support from left-wing governments in the region, several Central American and Caribbean countries dependent on Venezuelan oil at subsidised rates, and ‘strategic’ partners, such as China, Russia and Iran.

China has bankrolled Venezuela to the extent of $50 billion in recent years, much of it untied to projects but eventually to be repaid in crude oil. Russia backed Chavez with lavish supplies of sophisticated armaments, including missiles, aircraft, armoured vehicles and assault rifles. US sources estimate that between 2007-2011 Russian arms transfers to Venezuela amounted to over $13 billion by 2011. The US has been out in the cold for years, although it still buys most of Venezuela’s oil.

Recent political developments in the region have given rise to a hypothesis, which is still under debate, of a rightward shift in Latin America. The rise to presidency of Mauricio Macri in Argentina (2015) and Pedro Pablo Kuczynski in Peru (2016), the suspension of President Dilma Rousseff in Brazil (2016) and the overwhelming parliamentary victory of the Venezuelan opposition have encouraged a more assertive stance against left-wing politics in general.

While Venezuela’s domestic political polarisation is not reflected entirely in the regional context, a growing number of countries feel the situation is critical. Earlier this month, 25 former presidents of Latin American and Spain, from the right and centre-right, called on the international community to take cognisance of the face-off between the government and the assembly. For over a month, quiet diplomacy has been undertaken by former presidents Jose Luis Zapatero of Spain, Martin Torrijos of Panama and Dominican Republic’s Leonel Fernandes to promote a dialogue.

Within Mercosur, which admitted Venezuela in 2012, there has been criticism from Argentina and Paraguay. Luis Almagro, Uruguay’s former foreign minister and currently the secretary general of the 34-nation umbrella regional grouping, the Organisation of American States (OAS), came out with a 132-page critique on May 30 against the Maduro government. He invoked the Inter-American Democratic Charter to call an urgent meeting of the permanent council to consider the ‘alteration of the constitutional order’.

At the OAS General Assembly on June 14-15, Venezuela failed to get support for a resolution to censure Almagro, whose manoeuvre to expel Venezuela from the OAS, under Article 20 of the democratic charter, was abandoned for lack of political support. The matter was taken up at an extraordinary session of the permanent council on June 21, called by Venezuela, where it failed to get enough support to call off the council session called by Almagro on June 23.

At this last meeting, Almagro claimed, “The people of Venezuela are faced with a government that is no longer accountable to them”. He condemned “the loss of the moral and ethical purpose of politics… the direct result of the actions of those currently in power…” He called on the council to intercede and inter alia push for a recall referendum before the end of 2016. After January 10, 2017, even if a recall referendum succeeds, Vice President Aristóbulo Isturiz will be president till the next elections in 2018.

The meeting ended without a vote. Twelve delegations spoke strongly in favour of Venezuela. It was clear the others had no stomach to push for a vote. The matter could be raised again but the overwhelming consensus is for dialogue.

Earlier, US foreign secretary John Kerry met with his Venezuelan counterpart, Delcy Rodriguez, during the OAS General Assembly and launched a bilateral dialogue. The last US ambassador in Venezuela was expelled in 2010 and efforts are on to normalise relations. US under secretary Thomas Shannon was in Caracas a day before the permanent council meeting, although Kerry had claimed the US was not taking sides but merely supporting the constitutional process.

Wait and watch

Venezuela is important to India primarily for its hydrocarbon resources. Till last year, it was India’s largest trading partner in the Latin America region, exporting over $10 billion worth of oil. This figure has halved in 2015-16 with the drop in oil prices. ONGC (Videsh) Ltd has invested in two major oil projects in Venezuela, but over $500 million in dividends has been withheld for years by the national oil company PdVSA.

India’s exports to Venezuela have fallen drastically, to $131 million from $258 million in 2014-15. Hyderabad-based pharmaceutical major Dr. Reddy’s Laboratories had to write off US$65 million related to losses in Venezuela and Glenmark is owed $45 million. In a meeting with Isturiz in May, these and other companies were promised 5% of the Venezuelan market. The government has been attempting to recover some of these dues by setting up an escrow account from payments made to Venezuela for imported oil.

Peace and democratic order in Venezuela are in India’s interest. With Venezuela’s solvency in doubt, at least until oil prices rise significantly, it will be difficult to invest more in that country, despite its abundant oil reserves. The opposition-dominated assembly sent a note to all embassies in Caracas a few weeks ago warning that any deals with the Venezuelan government will be subject to its review eventually. There is little the Indian establishment can do, it appears, except try and recover the pending dues.

Deepak Bhojwani is a retired Indian diplomat who was Ambassador to Venezuela from 2003 to 2006.

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