By: Dr. Dan Hellinger
Venezuela Expels U.S. Diplomats, Relations Off-Course
President Maduro accused the three U.S. diplomats of meeting with right-wing opposition groups and of financing economic sabotage, including attacks on the country’s electrical grid. U.S. officials deny the claim. Venezuela’s opposition and sources quoted by the U.S. media claim that Maduro is attempting to distract the public from the country’s domestic problems.
The expulsions capped off a steady deterioration in relations between Washington and Caracas.
On September 13, the government of the United States issued its annual scorecard on cooperation with its “war on drugs.” The scorecard listed the governments of Venezuela and that of its close ally, Bolivia, as having “failed demonstrably” to cooperate. Over the next two weeks, Venezuela announced 22 arrests, including the head of airport security at the international airport at Maquetía (near Caracas), after 1.4 tons of cocaine were discovered in 31 suitcases on an Air France flight scheduled to leave for Paris.
On September 17, the United States waited until the last moment to approve Maduro’s flight plan to cross Puerto Rico en route to China for a state visit. U.S. officials claimed the request was not properly filed. On September 23, another dispute over air transport occurred when Maduro charged that the U.S. government had not provided adequate security for his flight to New York to attend the United Nations General Assembly. Maduro cancelled his trip as a result.
While Maduro certainly confronts a sea of troubles at home and might want to distract the public, few media accounts have examined his claims that the three diplomats have meddled in the country’s politics. They might at least examine Keiderling’s previous post in Cuba. A book published earlier this year by a Cuban double agent on CIA activities claims Keiderling was actively involved in intelligence activities, specifically recruitment of dissidents, in 2005 during her posting at the U.S. Interests Section in Havana.
“finger.” Not a rude gesture, “el dedo” referred to the practice whereby a president, upon completion of his six year term, would point to a successor – with the understanding that the outgoing president would thereupon retire from politics.
As David Smilde points out in his blog for the Washington Office on Latin America (WOLA), the PSUV is likely to win control of a majority of local races because of its strength in small towns scattered throughout the more rural parts of the country. During his presidency, the late President Chávez repeatedly framed local, state, and legislative elections as a referendum on his own rule. Now, it is Capriles who is attempting to turn the coming local elections into contests over Maduro’s popularity, hoping that the MUD will win a majority of votes, if not actual races.
As discussed below, the opposition could make significant gains in the coming elections.
Polls Disagree on December Elections, Maduro’s Standing
Across the board, most of Venezuela’s polling performed poorly in April’s presidential election, generally over-estimating Maduro’s margin of victory. It is also more difficult to predict outcomes for municipal elections, given the way local conditions can vary. However, indications are that the opposition is likely to do well.
A late July poll carried out by Datanalysis, a polling company owned by the opposition, showed responses to the question of whether voters would cast their ballots for the mayoral candidate of the PSUV or that of the MUD in a statistical dead-heat. The poll had the electorate split almost evenly between those who approved and those who disapproved of Maduro’s performance in office.
In prior years, turnout in local elections has been approximately 40%, about half of the turnout rate in April’s presidential elections. Turnout will be a crucial determinant in this year’s contests. Will PSUV voters disgruntled with Maduro and the party simply stay home? Will opposition voters be discouraged from voting by Capriles’ claims of fraud in April, or are they energized by the closeness of the contest? We are unlikely to know until ballots are cast on December 8.
WOLA’s Iñaki Sagarzazu provides a complex analysis of a number of different polls, adjusting results for historical biases and overall trends. His conclusion, drawn at the end of August, is that up until that point, Maduro achieved an overall stable approval from slightly less than half the population, but suffered a deterioration in his approval ratings from those who were neutral after the April election.
Economic Issues: Shortages, Inflation, Exchange
Venezuela’s government continues to wrestle with difficult economic choices – but the news is not all bad. The widely reported high inflation rate of 45 percent for the first eight months of 2013 is outside the norm for Latin America, but that rate has been declining recently – dropping from 6.1% for May 2013 to 3.2% for July and 3.0% for August. And the second quarter saw robust economic growth.
The most vexing and politically damaging problems are shortages in staple goods, forcing long lines of consumers to wait hours outside of markets. The opposition-controlled private media and the international press blame government incompetency, while the government emphasizes hoarding and sabotage. There is reason to believe that the truth lies in a combination of both.
When the system came crashing down with the collapse of oil prices and currency devaluation in 1983, a differential exchange rate system somewhat like the one used today was implemented, and with similar results. Manipulation and corruption contributed enormously to the loss of confidence in the two-party rule of Democratic Action (AD) and COPEI (the Christian Democrats).
The scandals, as well as pressure from the International Monetary Fund, induced President Carlos Andrés Pérez in 1989 to eliminate differential exchange and unify the rate, allowing it to fluctuate in response to market demands. The rate rose quickly from nine times its original value to Bs. 40 to the dollar, and continued to climb. On January 1, 2008, the government issued new notes replacing old bolívars with new ones at 1,000 to 1, creating the present currency, originally at 4.3 to 1 dollar.
For a middle-class person traveling to Venezuela, the official exchange rate can be prohibitive, raising the price of a $125 hotel room to $300 or $400 per night. For Venezuelans traveling to the U.S. on legitimate business, tourism, or family visits, the controlled rate is crucial to affordability.
The implementation of free floating currency in 1989 did not stem inflation or the cascade of middle-class Venezuelans into the ranks of the poor. However, the decline of living standards between 1983 and 1998, it should be acknowledged, cannot be reduced to exchange rate issues, but was due to a complex array of factors, including historically low international oil prices. Still, the lesson would seem to be that neither uncontrolled or controlled currency exchange, in and of itself, is the solution to Venezuela’s deep structural economic problems.
On the toilet paper front, the government announced on September 20 the temporary occupation of one of the larger factories producing the hygienic paper. The intention behind the occupation – set to last 15 days – is to check account records to determine if the private owners have been hoarding or evading price controls. The action was carried out by a new government agency charged with policing producers of goods subject to control. During August, Venezuela’s government imported 50 million rolls to meet demand. In recent weeks, the daily press has been filled with government announcements highlighting authorization of currency to import toilet paper, discoveries of hoards, and plans to increase toilet paper production.
Is Sabotage or Poor Management behind Blackouts and Accidents?
The running battle between the government and opposition over the causes of market shortages is echoed in similar debates over the causes of other problems afflicting daily life in Venezuela.
On September 3, electrical blackouts left nearly 70 percent of the country, mostly in the western region, without electricity. The results produced major transportation headaches, including an evacuation of the Caracas metro system. President Nicolás Maduro blamed the outage on sabotage by political opponents and announced the creation of a new security force to defend the country’s electrical system; the opposition placed the blame on failure by the government to invest in infrastructure.
Maduro’s claims of sabotage should not be casually dismissed, as the mainstream international media has tended to do. Many professionals who lost their jobs in the oil industry after they participated in the lock-out of December 2002 to March 2003 have found new employment in the utilities sector.
However, President Maduro himself acknowledged that infrastructure problems contributed to the outage, even as he accused extremist sectors of the opposition of sabotage. “We must consolidate the balance between generation and consumption, focusing efforts on system security against calculated sabotage,” he tweeted.
The political fallout is made worse by the Chávez government’s promise to improve service after chronic blackouts occurred between 2009 and 2011. At that time, infrastructure shortcomings, wasteful consumption, and a prolonged drought (affecting hydroelectric generation) prompted the government to launch efforts to improve transmission equipment and create more public consciousness about energy conservation.
Despite perceptions of profligate electricity use, Venezuelan consumption of kilowatts per capita, according to World Bank data, is greater than Chile’s and less than Mexico’s.
Whether sabotage or poor maintenance is to blame, the widespread nature of the blackout can be traced to a bottleneck in the distribution system. The problem affected a portion of the grid where 50 percent of the country’s electricity passes. Sabotage would not require a bomb; a computer virus would do the trick.
Just days before the outage, the government released a report about an explosion that killed 40 people at the Amuay refinery in Falcon State in 2012. The opposition charges the cause was poor maintenance, caused in part by the loss of skilled personnel after the lockout. The government says a suspicious quick release of gas points toward sabotage.
With a government desperate to recover popularity, and an opposition determined to blame every malady on the ruling party, sorting out fact from fiction is difficult.
Talk of a Coup
Nicmer Evans, a political scientist at the Central University and generally regarded as a moderate but critical voice within the Chavista movement, warns that incompetence by the government, made worse by deliberate economic sabotage, could lead to a coup. The administrative failures of the government and the inability of Maduro and the PSUV to inspire confidence in its socialist ideals raises serious doubts that the people would rally to the government in the way that they did in April 2002 in the coup against Chávez.
Evans argues that there are three “rights” in Venezuela today: A moderate right that seeks to gain control of government through constitutional and electoral mechanisms; an extreme right that is willing to use economic and violent sabotage to destabilize the system; and an “endogenous right,” privileged, corrupt, and powerful sectors within the PSUV that use their connections to the government to enrich themselves. The incendiary charges of electoral fraud (see Caracas Connect, April) launched using limited evidence by Capriles after the April election have ratcheted up political tensions and encouraged the extremist sectors in the opposition.
Evans argues that these “rights” have connections with different sectors within the armed forces. If he is correct, the disheartening reality is the threat of a coup that would touch off conflict among factions in the military.
Maduro to China; Venezuela Withdraws from Hemispheric Human Rights Organization
On September 10, Venezuela’s government formally withdrew from the American Convention on Human Rights, and thereby also leaves the jurisdiction of the Inter-American Court on Human Rights. The Court hears cases referred to it by the Inter-American Human Rights Commission. Venezuelans will continue to be able to appeal complaints directly to the Commission, but that body will no longer be able to refer cases to the Court that it deems to have merit.
Nineteen countries remain in the pact. The United States never ratified the 1978 Convention, and so has never been a member of the pact.
Tensions between the Commission and the Bolivarian government can be traced back to 2002, when President Chávez was angered by the Inter-American Human Rights Commission’s slow reaction to the coup attempted against him. Chávez officially gave notice of Venezuela’s intention to withdraw in July 2012, after the Inter-American Court ordered Venezuela to pay reparations to Raúl Díaz Peña, a Venezuelan citizen, convicted of placing bombs in front of the Colombian and Spanish embassies in Caracas in 2003. Peña was on a work release program in 2008 and fled Venezuela for the United States. The reparations were ordered as compensation for Peña’s claim that prison conditions had ruined his health.
Venezuela says that the functions of the IACHR are better carried out by the Union of the South (UNASUR) and the Community of Latin American and Caribbean Nations (CELAC). The U.S. is not eligible for membership in either of these new regional organizations.
Maduro in China
President Maduro arrived in China on September 22 for a series of meetings and ceremonies. While there, he signed several major economic agreements.
In visiting China, Maduro sought to build his international stature and gain economic resources to meet his goal of increasing oil production. The major deals with three of China’s most important companies will increase the export of one of China’s most abundant resources — dollars. Not only will dollars flow into Venezuela’s oil sector, they are important in the government’s battle to strengthen the bolívar against U.S. currency.
Bilateral trade between China and Venezuela has risen from $350 million in 2000 to $23 billion in 2012, with the balance in Venezuela’s favor because of oil, and more specifically, the high price of oil. As long as prices stay high, the balance will continue to favor Venezuela. Venezuela repays some of China’s loans in oil. The announced new loans and investment amount to $50 billion over the next five years.
Chinese mega-loans already totaled $36 billion before the new tranches. Most have financed oil development, and the country has, in this era of oil priced over $100 per barrel, been mostly paid off. However, the portion of these mega-loans intended for the centrally controlled development fund have not produced adequate results over the past decade and been plagued by fraud.