Sometimes a country seems destined to slowly implode, no matter how needless it is and no matter how many people get hurt.
So it is with Venezuela. Once Latin America’s richest country, Venezuela still sits on the world’s largest proven oil reserve. As long as global oil prices were high, it spent freely on Hugo Chavez’s dream of redistributing wealth, even while the overall economy and security situation deteriorated. Five years after his death, and now in an era of low oil prices, his successors govern a land of chronic shortages, malnutrition and hyperinflation. The country is on the brink of default.
Countries like Venezuela hold together longer than you’d think possible. But a reckoning always comes, as it did this fall when the only other country suffering hyperinflation, Zimbabwe, booted out President Robert Mugabe. In this case, the reckoning may have less to do with Venezuelans themselves than it does with the global oil market, and the attitudes of China and Russia.
Presidential elections are scheduled before the end of April. Nicolas Maduro, Chavez’s hand-picked successor, announced last week that he is running for re-election. Domestic politics haven’t been the answer, however. The opposition can’t bridge its own ideological differences, allowing Maduro to repeatedly outmaneuver it. Street protests fizzled after 120 people died in clashes with security forces. A flamboyant police investigator-cum-movie star tried — and failed — to spark the opposition movement. He died in a shootout with government forces this month.
Outside pressure is growing, but it hasn’t had much of an effect, either. The European Union slapped sanctions on seven Venezuelan officials last week, following Washington’s lead. President Trump raised the possibility of military intervention, but few expect that to happen. The U.S. is still importing Venezuelan oil.
Shortages of basic goods are endemic. Widespread looting is reported. A five-month investigation by the New York Times published last month found severe childhood malnutrition. Inflation is now estimated at 50 percent a month. The country is often late making payments on its debt.
Maduro blames economic warfare, particularly by the United States. But even he acknowledged that corruption is a problem. And then there is the drug running. Two nephews of his wife were sentenced to 18 years in jail last month for conspiring to smuggle cocaine into the United States.
Through it all, Maduro’s grip on power actually appears to have gotten stronger. The opposition swept National Assembly elections in 2015, and set out to challenge him. Here is what happened instead, as recounted by Brookings Institution fellow Harold Trinkunas: Maduro vetoed the assembly’s legislation, ordered state agencies to ignore its oversight, got the Supreme Court to declare its actions unconstitutional, and then built a parallel body that he controls.
Street protests died out when it became clear that the police and military weren’t about to desert Maduro.
Now, some opposition politicians have recognized Maduro’s new assembly; others are negotiating with the government. One of two prominent challengers to Maduro, Leopoldo López, is under house arrest. The other, Henrique Capriles, came within 2 percentage points of beating Maduro in 2013. He has been banned from running this time.
So how does this end?
Venezuela’s real weakness is its complete dependence on oil, which provides 95 percent of its revenue. Not only are global prices low, however. Venezuela’s production is down, too — it fell 13 percent last year. If anything, the decline seems to be accelerating.
If it does keep falling, if oil prices don’t stage a major rally, and if Venezuela doesn’t find another big pot of money, it won’t be able to service its debt. Venezuela owes $64 billion to bond holders, $20 billion to the Russians and Chinese, $5 billion to multilateral lenders and billions more to oil importers and service companies, according to the Financial Times. Creditors may start seizing oil, tankers and other assets, shutting down its only real source of revenue.
The Chinese and the Russians appear to be the only ones seriously interested in propping up Maduro. Easy access to that huge oil reserve is probably worth more to China than the cash it has handed out. It might be patient for a while yet, but probably doesn’t want to bail Maduro out endlessly. Russia is merely following President Vladimir Putin’s blueprint — rebuilding Moscow’s influence wherever he can, this time by messing around in Washington’s backyard. It restructured $3 billion of Venezuelan debt in November. But Putin has much less wiggle room than the Chinese.
Crunch time, according to a senior adviser to Maduro who spoke to the New Yorker’s Jon Lee Anderson, will come when the government has to decide whether to buy desperately needed food and medicine, or service the debt.
A diplomat quoted by Anderson sees only two scenarios for Maduro. If there is a global crisis that causes oil prices to spike, Maduro might hang on for a while. Otherwise, Venezuela continues to deteriorate and one of Maduro’s allies pushes him aside. That’s what happened in Zimbabwe. It might not be the cleanest result, but it at least offers a chance to end a long, downward slide.