22 February 2019

Friday, 08:05

CURRENCY

VENEZUELAN SOCIALISM IN AGONY

Country is on the verge of disaster, Maduro is desperate

Author:

01.02.2019

On January 23, Venezuelan opposition leader Juan Guaidó declared himself the "interim president" of the country, creating a unique system of modern duality of power. In fact, the legitimacy of President Maduro has been questioned before, but it was the newly elected President of the National Assembly Guaidó who set the record straight: either the opposition removes Maduro from presidency or goes to jail entirely.

 

"Look, an impostor's talking!"

In fact, the issue of "interim presidency" was raised on January 11, after Maduro’s inauguration, who won the May 2018 election. Instead of congratulations to the president, the National Assembly of Venezuela actually declared him a usurper. Maduro ignored the criticism of the opposition, calling the deputies of the National Assembly, who did not attend his inauguration ceremony, traitors.

During public discussions in Caracas, a 35-year-old parliamentary speaker Juan Guaidó called on the military to join the opposition, and citizens to disobey Maduro. On the same day, a group of military tried to organise a revolt in the capital. They arrested several officers of the National Guard and released an online statement to overthrow the incumbent president. However, the mutiny was violently supressed, and the Venezuelan defence minister, Vladimir Lopes, declare his support for Maduro.

If the opposition has no problems with civilian support, then they have to be seriously mindful of the military. It was the army that used to defend the authorities and even rule the state as a junta (simply means "assembly" in Spanish) during the "democratic" times in Venezuela.

Trying to pre-empt the situation, Guaidó promised an amnesty to the military and officials supporting Maduro. The intention was to have the security forces on their side, or at least to ensure their neutrality.

Maduro has not remained indifferent and even declared his readiness to negotiate with the opposition leader, although he has previously called him a 'smarty pants' and a 'foreign sycophant'. Guaidó also considered that negotiating with Maduro meant de facto recognition of his legitimacy.

 

Foreign intervention

As soon as Guaidó declared himself as an interim head of state, the Trump administration has 'legitimised' him as a representative of the only legally elected authority in Venezuela. In addition, the US has initiated an emergency meeting of the UN Security Council on the situation in Venezuela. It soon became clear that Guaidó, who received an American education, had secretly visited the US shortly before the self-proclamation.

In response to such unfriendly behaviour, Maduro has announced the breaking off diplomatic ties with the US, giving the American embassy 72 hours to leave the country. However, given that Maduro was no longer a legitimate president for the US, there was no point in obeying his orders. To make things worse, Guaidó urged all foreign embassies to stay in Venezuela, and not to listen to Maduro. As a result, Maduro left the US embassy in the country, reformatting it into an "office of mutual interests."

It is no secret that the US has exclusive interests in Venezuela, same as Venezuela is vitally interested in relations with the US, being is the largest exporter of Venezuelan oil. In 2014, for example, the US bought almost $30 billion of Venezuelan oil. Being the country's main export product, Venezuelan oil is not suitable for refineries in other countries because of the large presence of sulphur. American refineries using the Texas oil of similar characteristics are ideal for Caracas. In addition, up to 500 American companies are operating in Venezuela, supplying a wide range of products from agricultural products to personal care products.

On the other hand, it is not possible to break off relations entirely. That is why the US rhetoric regarding the Maduro regime has been relatively mild up until the arrival of two Russian strategic bombers TU-160 to Caracas in December 2018. Military cooperation between Russia and Venezuela cannot but disturb Washington. Should the plans of the Venezuelan government to open a Russian Air Force base on the Archill Island materialise, the US will face a second Caribbean crisis right around the corner.

As in the Soviet times, the Kremlin traditionally supports socialist regimes in Latin American countries. Moscow has established very warm relations with Venezuela over the past twenty years. It provided to Caracas more than $17 billion in loans. Apparently, Moscow is worried about their investments. At the most critical moment of the crisis, President Putin has personally called Maduro to express his support, while the special representative of the Russian Foreign Ministry at the UN Security Council demanded putting an end to interference in the internal affairs of Venezuela.

Russia, China, Iran and Turkey are the main supporters of Maduro in the world, while the United States, Canada, EU, Japan, Australia and almost all Latin American neighbours are demanding his resignation.

 

Cruelty Latin American way

Soon after the death of Hugo Chávez in 2013, a wave of strikes and anti-government demonstrations swept Venezuela. New Che, as Chavez was called, has managed to somehow consolidate the nation and rule the country thanks to public support for almost ten years. His successor, Nicholas Maduro, has tried to achieve the same result by force. He has been regularly criticised for the high level of crime, as well as the economic collapse of the country. Maduro's response was harsh, when the police and security forces opened fire on demonstrators. Social protests resumed after a sharp drop in oil prices. Social protest added to the political one, gradual covering the main power class of the country, the poor population.

Maduro eventually lost the battle when the opposition won the parliamentary elections. Hence, Venezuela has been suffering from an acute political crisis between the legislative and executive branches of the government. Parliamentarians have repeatedly raised the issue of impeachment of the president, but each time have lost the battle to Maduro thanks to the support of the Supreme Court and the law enforcement agencies. Yet the situation was recoverable if the Maduro regime could make concessions to the opposition leaders. But Maduro opted for confrontation. In 2017, he announced a new session of the Constitutional Assembly to allegedly draft a new constitution. The Assembly declared its supremacy over the National Assembly and ordered the country's new prosecutor general to deal with "national traitors". The country was again swept by protests: during the clashes of demonstrators with law enforcement services, hundreds of demonstrators died, many were arrested and sent to prison.

 

Dutch disease

The roots of the current Venezuelan problems date back to the neo-socialist policy of Chávez. Choosing the expansion of public employment based on the Soviet economic model instead of improving production efficiency, the government could indeed reduce unemployment, but have become addicted to the 'oil needle'. Called the Dutch disease among the economists, it occurs when a sharp increase in export earnings in one industry adversely affects the development of other spheres of the economy. Drastic decline in energy prices in 2014 forced the Maduro government to restart emission of the national currency, which led to hyperinflation and skyrocketing of prices. If during the ten-year rule of Chávez, inflation in Venezuela increased 14 times, then during the five-year presidential term of Maduro, it rose 14 thousand times. In an attempt to stop inflation, the Venezuelan government limited the increase in food prices and began expropriating the goods of large companies, which made business in the country unprofitable. This led to a total shortage of basic foodstuffs and emptying the shelves of grocery stores in major cities of the country. According to non-governmental organisations, about 93% of Venezuela’s population suffer from malnutrition. The country has so far experienced several waves of emigration with four million people leaving the country in recent years. As a last resort, the government initiated free distribution of products to the population but is no longer to contain the growth of discontent. People just cannot understand why they are forced to starve if their country ranks the first in the world in proven reserves of oil. This reinforces social protest and the ranks of protesters on Venezuelan streets. Apparently, under existing circumstances, a prompt resolution of the crisis is impossible. According to many analysts, the country is on the verge of disaster, while Maduro remains in a desperate state, when each next move can only deter the situation. The opposition does not have a clearly formulated economic program either. "Interim president" Guaidó only promises "to bring Venezuelans to prosperity". But, as we know, populist rhetoric is not enough to feed the people.

One possible way out of the current situation is to create a government of national consensus. However, sharp political confrontation rejects is reversing the idea entirely. Apparently, Venezuelans do not seem much terrified by the ominous rule of a military junta.



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