I’m holding an open comment thread about Venezuelan politics.
This week there were two standoffs at the National Assembly, the US announced support for a negotiated settlement leading to new elections, and Guaido plans more protests in the coming days. It was a busy week, even by Venezuelan standards. As the two sides appear at a stalemate, more twists and turns are likely in the coming months. Ask me your Venezuela-related questions and I’ll do my best to answer them.
Update (11AM EST): Stepping away for a while. I’ll continue answering questions as they come in over the coming days. Thanks to everyone who has participated so far.
What are your thoughts on what sectoral sanctions have done in terms of the humanitarian crisis in Venezuela? The weisbrot Sachs study seems to establish a causal link between sanctions and a worsening in the crisis, but a paper critiquing their methodology came out in the brookings institute that mentioned that the bulk of the deterioration happened before sanctions. And a study authored by Francisco Rodriguez that supported WS findings also said it was insufficient to establish a causal link. Where do you stand on this debate? Have sanctions been the main reason for worsening of the crisis, or has it been maduros corruption and incompetent policy?
The Brookings report largely has it right. The data before sanctions started shows the government's corruption and incompetence is the key cause of Venezuela's suffering.
However, it's also true sanctions contributed some amount to the problem. Even if sanctions increased suffering by 1%, is it worth it? It's a tough moral argument to make.
I don't agree with FRod on some of his analysis, but I appreciate the attempt to find a proposal that balances pressuring Maduro with alleviating the humanitarian crisis. I'd like to see more policymakers offering counter-proposals trying to find that balance.
Whether you want to blame Maduro or sanctions or a combination of the two, getting food and medical aid to people who need it should be a priority. I think that's one of the things Guaido has gotten correct. It's a major human rights violation that Maduro has used state resources to block humanitarian aid that he cannot politically control.
Is there truly a single Trump administration strategy on Venezuela, or is it a jumble of internal interests with opposing theories of change? Going into 2020 what do you make of State vs. NSC divisions, or the Prince + Giuliani backchanneling?
I half agreed with your answer there. I do think there are multiple points of view within the Trump administration, some more hawkish than others. At the same time, there are also some very negative actors working towards their own interests rather than the best interests of Venezuela or the US. In that, I find the Giuliani back channeling really troubling and not part of a strategic or professional policy process. He's working with (and being paid by) some bad actors in and around Venezuela whose motives are not good. He also has regular conversations with Trump that may influence policy in a negative way.
Do you believe any potential incoming (opposing) administration will have to strike deals with high profile Bolichicos, offering amnesty in exchange for their financial/political support?
Absolutely yes. As unsavory as it is, amnesty deals are often needed to restore peace and normalize the situation. Then 30 years from now a bunch of old guys will be prosecuted when a new generation comes to power and undoes those amnesty agreements. That's the lesson of Chile, Argentina, Guatemala....
Several lower level officers have released a video announcing 'Operacion Aurora' - efforts to restore democracy to the country. Will Maduro be concerned about this, or does he still have broad support from the military?
Maduro, the Venezuelan military and the Cubans assisting the counter-intelligence ops will be very concerned about this. They will move swiftly to try to identify those in the video and brutally take them out. Their view is that they need to send a message that any attempts at armed uprising will be crushed.
Boz, highlighting some points here that I think are worth mentioning followed by questions for you:
I think what you have mentioned in one of the points below about dollarization and how the economy is being split into people using foreign currency (mainly those based in Caracas) and those still getting paid and using Bolivares, is going to be key going forward - not for the economy, but for Chavismo's support base. Maduro may end up losing the little support he continues to enjoy because of this. Do you foresee this happening sometime this year?
From the comments below, it seems there are 2 main things keeping Maduro in power: military support and international support specifically from Russia, China, Cuba and perhaps Turkey. For the military, I suppose Maduro will continue offering them as many incentives as he possibly can, because he knows his survival in office depends on it. But the military will probably be willing to turn on him if they receive reliable assurances that they would be allowed to receive some immunity or protection for doing so - is this likely to happen though? Who can give any assurances of immunity to the military at this point, Guaido?
On sanctions, I totally agree with your points below - they are really not achieving the sort of the objectives that they are meant to, and are instead pulling Maduro and his international allies much closer together, and in fact making the Chavistas more reliant than before on Russia and China. But the question is, if not sanctions, then what? What can be done?
Finally, one last question, is Maduro really the one calling all the shots? What are the chances of an internal fissure that results in a shuffle of leadership with Maduro out and someone else from the Chavista camp taking charge - someone more pliant to regional and international actors like the US and Lima group?
1) I do think Maduro will increasingly lose the support of anyone being paid in Bolivares. This will create a different dynamic to the protests than existed in years past. There are likely to be protest organizations that don't start with the "traditional opposition" as we refer to them.
2) The confusion over amnesty is one of the mistakes made by Guaido and his coalition in the past year. They hesitate, and for good reason because nobody wants to give criminals and human rights abuses impunity, but convincing the military to flip requires them to be clearer about the terms.
3) For sanctions to work, I think there needs to be better coordination and enforcement of the sanctions that are in place. Corrupt people need to be named and shamed. More bank accounts and assets need to be seized. Those countries and companies assisting in sanctions evasion on gold and oil should be punished.
I do also think we could back off on some sanctions that have proven less effective, provide some sort of route for oil sales that help the Venezuelan population, and do more to provide humanitarian assistance. Doing things that help the Venezuelan people and build up alternative and effective governing institutions that compete with the ruling regime will help replace Maduro and help the rebuilding process.
It's a coalition of Maduro and people around him, with Maduro playing a key role in balancing things. I do think having a Chavista leadership shuffle is a very plausible transition option and one I have on my list of ways this transition may occur.
How have the reforms that maduro has implemented (no more price / currency controls) changed the economy? Are the poor benefiting? is this different from dollarization?
This is a critical question for Venezuela's stability this year. The answer is that:
*people who have access to dollars can now obtain almost anything they need in Caracas. Far fewer shortages than before.
*Almost half of all transactions in the country are now in dollars or another foreign currency.
*But, most people don't have access to dollars and most people don't live in Caracas.
*The poor can't afford many things. Prices are rising in Bolivares.
*Who is still paid in Bolivares? Government workers including teachers and medical workers. The elderly receiving pensions. And, most importantly, many police and soldiers. All those groups are having a harder time affording things.
The points above will change the populations driving the protests in 2020. Previous rounds of protests were driven by the "opposition base" which included some relatively wealthy neighborhoods and university students. We began to see a new trend in 2019 and I expect more protests led by the working class this year.
There are two gold problems. One is the illegal mining problem in the South. The other is the export of Venezuela's gold reserves by the Central Bank. Gold, and laundering gold to get around sanctions, has become a key lifeline for Maduro as oil revenues have dried up. But, as the Bloomberg video linked above notes, he's running low on gold too.
@Claire Prestwood and others. I work in and on Venezuela since June 2018. In 2018 I was in Caracas 18 times in six moths in 2018 and in 2019 about the same amount of times and in total I spent about 86 days in country. We conducted filed work in all five boarder (Colombia) states and collected plus 5000 data points. Main focus transnational criminality, illegal mining, ELN, Hezbollah and Colectivos. In total we did more that 12.000 hours of work in 2019 alone.
I can probably answer a few questions if anyone is interested.
Can you discuss the domestic security implications of the Maduro administration's recent move to formally incorporate pro-Maduro colectivos into the Bolivarian military?
*Handing a bunch of poorly trained and poorly disciplined militia members weapons seems like a bad idea. One that could destabilize the country both short term and long term.
*So many of those weapons are going to get "lost" and end up in the hands of criminals inside and outside Venezuela. Small arms proliferation is already a mess in this hemisphere and it's going to get worse.
*It's going to create tensions with the military, especially the commanders who want a professional fighting force. The militia is bigger and will require resources in a resource-constrained environment.
So why is Maduro doing it?
*He fears an invasion (as unlikely as I think that is) and sees this as a potential counter.
*He wants a large armed group of loyal civilians who can threaten a small group of professional soldiers should they decide to turn on him.
*That group can also make up the beginnings of a future guerrilla organization that will make Venezuela less safe if he is tossed. It's an insurance plan.
*It's also an informal vote-getting organization. He'll organize the militia to go to the polls later this year.
That's a great question. Let me provide a few alternative answers:
*The academic literature on sanctions says that they are better at changing behavior and not particularly effective at regime change.
*The same studies also point to a "black knight" effect in which an outside power rescues a sanctioned country. In Venezuela's case, Russia has provided a clear role in evading sanctions.
*It may be that sanctions are being effective but take time. They aren't a magic wand solution, but they are clearly draining Maduro of resources and placing pressure on his inner circle.
*Some have hypothesized that while sanctions should cause fractures in the inner circle, they have had the opposite effect of pushing them together so they all sink or swim together.
*Counter-intelligence matters. People who threaten to defect are rounded up, tortured and sometimes killed. That sends a message that makes it less likely for people to defect or try to organize a mass defection.
*Offering a clear off ramp to sanctions is important. I'd say the smartest thing done by the Trump administration last year was dropping the sanctions on General Figueroa within a week after he defected. It sent the right signal.
How will the diplomatic standoff against Maduro fare in 2020, considering a change in tone from Argentina and the US in recent days? Is the "Cerco Diplomático" strategy over, or will the international community somehow coordinate another offensive alongside the opposition?
In general, every country that has recognized Guaido has stuck with him except the places that have voted new people into power (Mexico, Argentina). I think the international community remains largely in Guaido's corner minus a few critical actors such as Russia, China, Cuba.
Keep an eye on the EU. They have some new leadership that appears to want a more active role in promoting a peaceful and democratic solution to Venezuela's crisis.
Which factor played the biggest role in causing the recent humanitarian crisis if you had to choose: 1. Venezuela’s historically absolute reliance on their oil industry. 2. The Inflation Maduro has caused. Or 3. The economic sanctions the US has placed on Venezuela?
The single biggest factor is the Chavistas corruption, stealing hundreds of billions of dollars over decades in power, and Maduro's total mismanagement of the economy. The decline in oil prices in 2014 certainly played a major role. When oil prices were high, the Chavistas could be corrupt and mismanage and still run a populist/clientelist state. When oil prices dropped, it exposed their flaws. They screwed it up more from there.
By 2017, there was significant hunger and lack of medical care. 2017 was the first year sectoral sanctions (the sort that impact the broader economy) were first really applied. Those sectoral sanctions increased in January 2019 with the sanctions of pdvsa. Sanctions have certainly had some increased impact on humanitarian issues, but most of the blame is with Maduro.
What is the threshold for Maduro leaving power? Do you have scenarios for the process of regime change (i.e Maduro needs to lose x amount of money to lose power)
Let’s say that Venezuela stopped paying off their debts to Russia. Recently, it seems that Maduro is blocking aid to the people, so if he were to stop using funds to pay off Russia, would he use those funds to feed the population? If not, what would he use them for?
Some thoughts about reasons to keep sanctions. However, as I've stressed elsewhere, the yes/no divide is not actually the best way to resolve this. My actual preference is that some sanctions should be kept and even strengthened (particularly the individual sanctions), some should be reformed and others should be dropped.
The individuals sanctioned deserve to be punished. They're awful people. They're people who torture and kill their political opponents, who use food as a political weapon leading to child malnutrition, who steal billions while their population suffers, who traffic in drugs, who are happy to destroy the environment with oil spills and dirty wildcat gold mining chemicals,
Dropping sanctions at this point would be rewarding Maduro for surviving the sanctions. Rewarding bad actors is generally not good policy. Further, it sends a message to other bad actors around the world that the United States is willing to give up sanctions after a certain amount of time.
Prior to sanctions, the Maduro regime (and the Chavez government prior to it) stole hundreds of billions of dollars in government funds. If sanctions are dropped, they would prioritize stealing more money and handing it out to friends and supporters, not helping the general Venezuelan population that lacks for food and healthcare.
If not sanctions, then what? Sanctions have become the de facto policy when the international community wants to do something more than strongly worded statements but does not want to use military force. If sanctions are dropped, what other policy will do a better job to pressure Venezuela to return to democracy and improve the lives for the average Venezuelan? For whatever criticisms of sanctions, it's likely they are better than the alternatives of doing nothing or using military force.
War is unlikely whether sanctions remain or not. Dropping sanctions would generally be a signal that war is less likely (note that dropping sanctions doesn't make war less likely. Instead, dropping sanctions would likely be part of a process in which tensions were reducing).
Can you explain the Hxagon model, and how that led you to calculate the 80% chance of Maduro being removed in 2020 prediction? Is there any way for you to quantify how much US sanctions have attributed to the 80% number.
What was your process for converting qualitative analysis into a quantitative probability? How did you use the variables/key factors of Maduro's likely fall from power to get to a percentage?
What are the most likely and true upsides for the US removing sanctions. Based on threads I’ve read here it seems like simply removing sanctions will not solve the humanitarian crisis
I'd rather reform sanctions that just remove all of them. but here are some arguments I can see in favor of removing sanctions:
It's not clear the sectoral sanctions are working. The literature says that sanctions can be used for behavior change, but that regime change caused by sanctions is very unlikely.
If they never work, do we keep them on for decades? That was ultimately the mistake of the Cuba embargo.
Individual sanctions have not yet created the high level defections and internal dissent that was expected. In fact, it may have driven some competing actors together. They also have not promoted better behavior and improved human rights.
Sanctions have given Russia and China a greater role in Venezuela and reduced the US role. Sanctions have led to increased costs and missed opportunities for US businesses. That effect will linger long into the future.
Policies should not be based on worsening the conditions of a country in the hopes that it gets bad enough that the regime changes. All our focus should go to improving lives for Venezuela, not making things worse.
Given Maduro's tendency to mismanage the economy, wouldn't it be better to just let him fall on his own and not give him the scapegoat of sanctions?
It's tough to measure. I'd argue one of the most effective things the US did was place the AUC on the list of terrorist organizations in 2001. That move helped cut the ties between the Colombian military and the AUC and made Colombia a safer place.
The FARC and ELN remain on that terrorism list. Maduro supports them anyway and provides a safe-haven to them. And nobody has done much about that. So it hasn't really been effective on that front.
I like this question. There are absolutely implications. The US has a long history of imposing its position upon the hemisphere and has made mistakes along the way. How do we know we're not doing the same here? Any time the US acts in the region, there is a question about whether the US has the authority to do so and what our motivations are.
At the same time, this isn't a clear-cut case of US "imperialism" as the Chavistas would claim. The US, in alliance with many other countries, is standing up for the only democratically elected leader who is supported by a plurality of Venezuelans. We're standing against someone who is opposed by over 80% of the country, has tortured and killed his political opponents, starved children, sent millions of refugees into exile, and clings to power via unconstitutional means. The US is at its best when we support democracy and human rights and I have little doubt that opposing Maduro places us on the right side of history here.
But being correct in the big picture level doesn't mean we shouldn't question our methods and rethink things that aren't working. We should lead, but also be humble about the fact we can't control outcomes. We should listen to our allies when they suggest there may be better ways to do things. We should work with the region to solve the challenge of Venezuela, not try to impose a solution and insist others follow because we believe we are certain about what will work best.
An article in CSIS by Moises Rendon indicates that even if sanctions were removed that oil revenues wouldn’t go to the poor but to entrench the Maduro regime by ensuring the loyalty of military officials. Do you think it’s likely that revenues will be used to help the poor? And do you think that issuing new bonds through US markets would cure the debt crisis currently in Venezuela?
I largely agree with Moises on this. Prior to sanctions, the Maduro regime (and the Chavez government prior to it) stole hundreds of billions of dollars in government funds. If sanctions are dropped, they would prioritize stealing more money and handing it out to friends and supporters, not helping the general Venezuelan population that lacks for food and healthcare.
Some sort of new bonds may be necessary, but the bigger challenge is that Venezuela needs to clear up all its old debt from multiple sources. One of the big questions in the rebuilding process. Nobody wants to donate funds to Venezuela's humanitarian crisis or rebuilding process just to have those funds go to pay Wall Street or Russia.
Is there a high chance that senior military officials will betray Maduro? Reuter’s reporter in 2017 that in the aftermath of sanctions Maduros approval rating went up by 6 percent. With that in mind is this causing waves of support to go to Maduro? And if it is then is it more probable that he will be ousted w/o sanctions?
Sanctions may have created a brief "rally around the flag" effect, but it didn't last. Maduro's support is very low, even among those Venezuelans who dislike and disagree with sanctions.
The senior military officer question remains one of the key potential tipping points. There are rumors of tensions and reports of plots, but nearly all of them have stuck with Maduro through now.
Boz, this comment threat is a terrific idea. Thank you for building such a valuable informational portal on LatAm politics. My question: If you were tasked with forecasting Venezuela's economic and political future over the next 24 months in the form of scenarios (anywhere from 2-6 different scenarios), how would you describe those scenarios?
I'm not exactly sure what you are asking, but let me give three answers that go at the question of oil prices in different ways.
One of the big surprises in the past year was the fact the US sanctioned Venezuela, kept pressure up on Iran, and oil prices globally barely moved. It helps prove the emergence of US shale oil industry as a global swing producer has helped level off large movements in oil prices.
Venezuela does not get as much for its oil per barrel as it used to. As I understand it, this is in part this is due to them using a new blend that is preferred by Asian customers (helping them avoid sanctions) but is less profitable. They are also losing cuts of every barrel to those who are helping them evade sanctions and launder funds.
Gasoline prices in Venezuela remain remarkably cheap for the average consumer. You can fill up a car's gas tank for pennies. But the challenge is finding gasoline right now. There are major shortages. There are long-standing rumors that the Maduro regime may raise gasoline prices at some point in the future. Venezuela's history shows that would be a very unpopular move.
I am naive about how to best handle this situation. My online girlfriend is willing to consider leaving Venezuela. I live in the USA. She and I are willing to consider vacationing in Ecuador, and likely moving there if we like it. She has an expired Venezuelan passport, but getting an extension has not been easy. I would like to fly her to Ecuador and then back to Caracas. Then make solid plans on a possible move. She knows of bus rides available to Colombia and back.. What can she reasonably do? Wait for the extension? Just fly or bus without it? Declare her a refugee? Maybe you know people who faced this problem and what they did? Thank you for your effort.
Are sanctions helping diversify Venezuelan markets away from oil? Specifically, are they helping the private sector improve and take a bigger role in the Venezuelan market?
They're helping diversify in the sense that Maduro is more reliant on illicit gold mining, money laundering and other criminal activity now that oil exports are down. But no, it's not helping in the sense that I think you asked the question, with more private sector and non-oil industry economic activity taking a greater role in Venezuela's economy.
It's a big and difficult challenge, but in a future rebuilding process, it would be good to move away from an oil-based economy.
It helps a little, but no. Drug trafficking has made some individuals in Venezuela very wealthy, but isn't enough to run a country on. Similarly, some of the security forces use extortion and kidnapping to get paid (because the Bolivares the govt pays them are essentially worthless). The Maduro regime is operating as a criminal state and it may help keep him in power in the sense that the criminals who are profiting want to keep that ride going. This may help regime cohesiveness, but isn't sustaining the country that much. It's a much smaller amount of money (by several orders of magnitude) than the oil Venezuela used to bring in.
The one dark source of revenue that actually matters is the gold mining industry. That's one I try to model when working through their finances. Sanctions are an important factor and there is a major effort to launder the gold by Venezuela, Turkey, Dubai and Russia. Guaido recently called for the international community to label the gold out of Venezuela as "blood gold," similar to the idea of conflict minerals in the Congo. He has a good point there.
The article above discusses the effect that sanctions have had on Maduro new economic decisions shifting away from socialism and towards liberalization. My question is: if sanctions are the reason why Maduro is adopting these policies now, is it probable that Maduro will reimpose these policies if sanctions are removed, considering his socialist background?
That's a great question and almost impossible to answer in a hypothetical sense. It would be a bad move to reinstitute price and currency controls. Yet, it's totally plausible that Maduro would reinstitute previous economic policies because he's proven to be an idiot when it comes to managing Venezuela's economy over the years. Maduro is also under pressure from Russia to engage in some of these economic reforms, so it isn't just sanctions (though some of Russia's pressure is driven by US sanctions on Venezuela). You'd have to game out how Russia's pressure might change if sanctions dropped and whether Maduro would respond to the pressure in the same way.
The refugee situation is tough. Colombia deserves a lot of credit for how they have handled the millions of refugees who have passed through their borders. Still, it is straining the social welfare system in a country that is still recovering from decades of armed conflict. There are also signs of a xenophobic backlash by sectors of the population that were seen during the protests late last year.
Separately, (and I think it's very important to keep the issues separate), Venezuela's crisis has also impacted Colombia's security situation due to the FARC, ELN and other illegal groups finding refuge and gaining revenue and recruits from the crisis in Venezuela. That has a major impact on Colombia as well.
Thank you for the response! As a quick follow up, assuming refugee flows remain around their predicted levels this year, do you think Colombia’s welfare programs will be able to adapt? Or will the country be forced into some other scenario, I.e. closing the border, recession, austerity etc
Probably not recession. Colombia will likely do better than much of the rest of the region. There is a big debate about austerity and social spending right now in Colombia, but it's driven by local politics, not refugee flows.
Colombia will probably just continue to manage as best as it can.
The international community should be stepping up its aid to Venezuelan refugees and it hasn't. I don't predict that it will in 2020, but I would love to see more attention and resources going to the problem. Colombia can't afford it on its own.
If the US lifted sanctions on the country, do you think citizens would be able to get more access to food and medicine and would the economy be generally better off ?
As I wrote elsewhere on this thread: Prior to sanctions, the Maduro regime (and the Chavez government prior to it) stole hundreds of billions of dollars in government funds. If sanctions are dropped, they would prioritize stealing more money and handing it out to friends and supporters, not helping the general Venezuelan population that lacks for food and healthcare.
Dropping sanctions would mean some additional money would go to pay for the bare minimum of food. But most of the money would go to help the people who destroyed the country in the first place.
We came across some evidence that explained that Maduro isn’t interested in debt restructuring but we didn’t understand for what reason he would not do that. Do you believe there is a reason for Maduro to not restructure the debt?
The US government only began to oppose the Chavez government when the Chavez government expropriated Exon. Getting Exon back in US hands has always been the driving force of past US governments. Once Trump appointed the Exon President as the Secretary of State, I thought for sure that a coup de etat was in the making to get Exon back in US hands. I am curious to know what you think of Exon's role in the Guaido government? Was handing Exon back to the US part of the agreement of US supporting Guaido?
The 50+ countries who support Guaido do so because he's the only remaining democratically elected leader in Venezuela after Maduro attempted a fraudulent reelection in 2018. I don't think Exxon had anything to do with that.
I think Guaido or anyone from his coalition who comes to power will be more open to foreign (non-Russian) oil companies including Exxon because they need assistance in restarting oil production in the country. Venezuela's citizens will definitely be watching those deals and will protest if they feel foreign companies get too good of a deal in that process or that citizens aren't benefiting from the oil production.
If you are interested in Exxon's role in world politics, I highly recommend reading Steve Coll's "Private Empire." It's a great book on the subject.
Also what is the chance that the refugee crisis causes a recession in Latin America because of instability and decreasing investor confidence? Since these countries are highly liberalized I think that instability from the refugee crisis might impact economic growth in the short term
I don't think the refugee crisis has a major impact on the region's economies. But the region does have some serious economic issues. I wrote about them here in November:
Thanks for hosting this, Boz! Have a bunch of question...
1) What options do you think Guaido has, other than perpetual rallies that seem to be getting steadily smaller?
2) Why has the public become so disillusioned with Guaido's campaign - is it just that they thought the change would happen sooner, and then were disappointed when Maduro stayed in power?
3) What does the military think of all this, and why have they continued to back Maduro, despite pressure from the population/international community?
4) Have you seen any military members desert over the last several months? Or switch sides?
5) Are local security forces on the same page as the military?
6) If Guaido can't rally the people, is there anyone else who has popular support who may make a better candidate?
7) All said, is military support the main reason Maduro is still in power, or are there other forces that are keeping him in office/who else might stand in the way of ousting Maduro?
8) How much of the population resent the US over sanctions, or do they see Maduro as the one at fault?
2+6 The public did think change would come sooner and some of the dropped support has come due to disappointment on that front. At the same time, rumors of Guaido’s political demise are too early. He remains the most popular politician in Venezuela and has much lower negative ratings than most other politicians.
3 The military leadership is uncomfortable and unhappy, but they haven’t broken with Maduro. What it’s going to take is a critical question. They need to have some guarantee that they won’t be punished.
4 Thousands of military members deserted last year. Some were very public, including after the February humanitarian aid push. A larger number simply walked off the job, with many joining the refugee flows.
5 There are security forces that are far worse than the military when it comes to repression. See this amazing reporting by Reuters on the extrajudicial executions committed by the FAES.
8 Polling shows the vast majority of the population dislikes Maduro and wants him gone immediately. There is a disagreement over what method to remove him is best, but most people want it done peacefully. Sanctions are not particularly popular, but even a majority of Venezuelans who dislike sanctions also dislike Maduro. While sanctions may have created a brief rally around the flag effect, far more Venezuelans blame Maduro than sanctions for the main source of problems in the country.
Can you elaborate on the 4th question? I can't seem to find a lot of literature that gives examples of specific military officials that have broken away from Maduro.
So, the highest profile military officer to flip was General Figuera on 30 April last year. But lots of lower level desertions have occurred. For example, take a look at this El Nuevo Herald article from last month saying that at least 6,000 sergeants from the National Guard had deserted.
Will Venezuela be able to keep the interests of Russia and China? If Venezuela is unable to pay back debts, how long will it be until other governments stop supporting Maduro?
First, is it likely that the US intervenes with military operations to oust Maduro?
Second, there was a really good article by CNBC in which they found in 15/16 scenarios with similar hyper inflation to Venezuela the regimes were ousted. Given that is it likely that Maduro would be ousted w/o sanctions?
1) I think it's very unlikely that the US uses military ops to oust Maduro. It remains highly unlikely as long as every other country in the hemisphere appears to oppose that option.
2) This is one of the best questions. Maduro wrecked his own economy. Then sanctions added to his challenges. If there weren't sanctions, would Maduro's wreckage of the economy push him out anyway? It's a tough hypothetical. It becomes more challenging because dropping sanctions now would give him oxygen and help him in a way that (if you could time travel back) never placing sanctions on him would not have.
The current economic reforms and dollarization process have been forced in part by the sanctions. If sectoral sanctions against oil and debt were eliminated today, Maduro would likely be in a better place and more stable than he was in 2017-2018.
That is an argument against removing sanctions, but it's also possibly an argument to remove sanctions more intelligently. Don't just wave a wand and remove them. Figure out other policies that keep pressure on Maduro personally while letting things improve for the average Venezuelan.
Hypothetical here, but say an International coalition of western hemisphere forces lead by the US stationed troops near the Venezuelan border. They then gave an ultimatum: Maduro out by X date or we remove him from office to restore democracy in the country and end the migration humanitarian crisis. Would this not scare the armed forces, the one institution that holds up the regime? Even if they know it is a bluff, the mere presence of the forces should scare enough of the higher brass in Venezuela causing division within the Maduro camp. A key to this strategy's success would be a backdoor agreement between the Lima group + others in the international community that this move was indeed a bluff, and that there was no intention of an actual invasion.
1) never bluff on using military force. It creates credibility issues. If it's there, they have to be willing to use it.
2) "international coalition" requires countries other than the US, all of whom have rejected a potential military option up until now. It's a cautious diplomatic coalition-building exercise.
Just a hypothetical I was thinking about. Obviously the hard part here would be the optics of such a tactic. That is why an agreement between nations to hold firm while the negative backlash occurred is key.
Russia's role in PDVSA is a major issue being discussed by analysts right now. What are their intentions? Can they consolidate and formalize control? Will the next govt recognize Russia's agreements with Maduro. As Claire mentioned, there is also a question about Citgo that has a more formal paper trail and complicates a lot of things.
The issue is also oil for cash/goods and drilling rights. Russia has expanded its footprint within Venezuela's energy infrastructure and oil economy in exchange for various forms of aid, but as Boz mentions, the extent of that debt and the promises made are still unknown.
I think you're referring to shares in CITGO here. PDVSA is the state-owned oil company and it would be very, very unlikely that Venezuela's government would turn over complete control of its only source of revenue to Russia. CITGO is a subsidiary of PDVSA.
There is currently a question about ownership of CITGO given Guaido's interim presidency and the US recognition of his role. Therefore, ownership and/or directorship of CITGO is contested. Plus, CITGO profits from the United States are being redirected to Guaido's administration.
If the US were to drop sanctions, what sort of alternative measures will they do instead if any? Would if be military intervention which the administration And Bolton have said before?
While I know that's the debate question, "Drop sanctions" is a big generalization. Some sanctions should be strengthened, some should be rethought, and some should be dropped. Additionally, US policy needs to find other creative levers of influence and negotiations besides sanctions. I think military force is very unlikely and should be very unlikely.
In a debate round, I heard a team cite a claim from LARR that there is an 80% chance of a Maduro ouster in 2020. Is that an accurate representation of your opinion? Has that value shifted recently? What's the methodology you used?
I haven't done that analysis since November, but I don't think the numbers have changed much. I still think it is quite likely that Maduro leaves power this year. I'm waiting to see a few things play out this month including the current dispute at the National Assembly and the informal takeover of parts of PDVSA by Rosneft before I do another stability analysis update.
How will Maduro's hold on power throughout 2020 (especially in light of the recent developments in the AN) impact the already strained relationship with Colombia?
Maduro's hold on power is a problem for Colombia in many more ways than it is other countries. Colombia faces the main flow of millions of refugees. The potential for weapons trafficking is high. The FARC and ELN use Venezuelan territory to hide and to make money with extortion, drug trafficking and illegal mining. Venezuelan recruits have increased the strength of what were once Colombian illegal/criminal/terrorist groups including the FARC and ELN.
All of those problems get worse the longer Maduro remains in power.
Venezuela is currently in the process of an informal dollarization of the economy. People paying in dollars don't experience hyperinflation. But the Bolivar has collapsed just in the past two weeks, meaning those who get paid in Bolivares are still experiencing hyperinflation.
I don't think dollarization is an ideal long-term solution, but allowing foreign currencies to be used in the country would seem to be an important step (currency controls and price controls previously forbade any use of the dollar or other foreign currency for local transactions, even if it happened sometimes). It creates some stability in the system and forces the local government to run an effective macro policy to keep its currency worth something.
Building a new Venezuelan currency that doesn't experience hyperinflation should be part of the rebuilding process. A credible and independent central bank that doesn't just print money on the whims of the president will be key to make it happen.
So far, no. The US sanctioned Cuba for decades without changing Cuba's behavior. While I think sanctions against Maduro may have some effect, more sticks/sanctions are unlikely to change Cuba's help for Maduro. That said, I think Cuba can be negotiated with and is an avenue the international community should pursue. But the current administration in the US is unlikely to agree with me on that.
What are your thoughts on what sectoral sanctions have done in terms of the humanitarian crisis in Venezuela? The weisbrot Sachs study seems to establish a causal link between sanctions and a worsening in the crisis, but a paper critiquing their methodology came out in the brookings institute that mentioned that the bulk of the deterioration happened before sanctions. And a study authored by Francisco Rodriguez that supported WS findings also said it was insufficient to establish a causal link. Where do you stand on this debate? Have sanctions been the main reason for worsening of the crisis, or has it been maduros corruption and incompetent policy?
The Brookings report largely has it right. The data before sanctions started shows the government's corruption and incompetence is the key cause of Venezuela's suffering.
https://www.brookings.edu/research/revisiting-the-evidence-impact-of-the-2017-sanctions-on-venezuela/
However, it's also true sanctions contributed some amount to the problem. Even if sanctions increased suffering by 1%, is it worth it? It's a tough moral argument to make.
I don't agree with FRod on some of his analysis, but I appreciate the attempt to find a proposal that balances pressuring Maduro with alleviating the humanitarian crisis. I'd like to see more policymakers offering counter-proposals trying to find that balance.
https://oilforvenezuela.org/
Whether you want to blame Maduro or sanctions or a combination of the two, getting food and medical aid to people who need it should be a priority. I think that's one of the things Guaido has gotten correct. It's a major human rights violation that Maduro has used state resources to block humanitarian aid that he cannot politically control.
Is there truly a single Trump administration strategy on Venezuela, or is it a jumble of internal interests with opposing theories of change? Going into 2020 what do you make of State vs. NSC divisions, or the Prince + Giuliani backchanneling?
Hi Geoff. I just listened to a good podcast this morning that took a crack at that question and others may want to listen as well:
https://venezuelablog.org/venezuela-new-year-new-political-tumult-podcast/
I half agreed with your answer there. I do think there are multiple points of view within the Trump administration, some more hawkish than others. At the same time, there are also some very negative actors working towards their own interests rather than the best interests of Venezuela or the US. In that, I find the Giuliani back channeling really troubling and not part of a strategic or professional policy process. He's working with (and being paid by) some bad actors in and around Venezuela whose motives are not good. He also has regular conversations with Trump that may influence policy in a negative way.
Do you believe any potential incoming (opposing) administration will have to strike deals with high profile Bolichicos, offering amnesty in exchange for their financial/political support?
Absolutely yes. As unsavory as it is, amnesty deals are often needed to restore peace and normalize the situation. Then 30 years from now a bunch of old guys will be prosecuted when a new generation comes to power and undoes those amnesty agreements. That's the lesson of Chile, Argentina, Guatemala....
Several lower level officers have released a video announcing 'Operacion Aurora' - efforts to restore democracy to the country. Will Maduro be concerned about this, or does he still have broad support from the military?
Maduro, the Venezuelan military and the Cubans assisting the counter-intelligence ops will be very concerned about this. They will move swiftly to try to identify those in the video and brutally take them out. Their view is that they need to send a message that any attempts at armed uprising will be crushed.
Boz, highlighting some points here that I think are worth mentioning followed by questions for you:
I think what you have mentioned in one of the points below about dollarization and how the economy is being split into people using foreign currency (mainly those based in Caracas) and those still getting paid and using Bolivares, is going to be key going forward - not for the economy, but for Chavismo's support base. Maduro may end up losing the little support he continues to enjoy because of this. Do you foresee this happening sometime this year?
From the comments below, it seems there are 2 main things keeping Maduro in power: military support and international support specifically from Russia, China, Cuba and perhaps Turkey. For the military, I suppose Maduro will continue offering them as many incentives as he possibly can, because he knows his survival in office depends on it. But the military will probably be willing to turn on him if they receive reliable assurances that they would be allowed to receive some immunity or protection for doing so - is this likely to happen though? Who can give any assurances of immunity to the military at this point, Guaido?
On sanctions, I totally agree with your points below - they are really not achieving the sort of the objectives that they are meant to, and are instead pulling Maduro and his international allies much closer together, and in fact making the Chavistas more reliant than before on Russia and China. But the question is, if not sanctions, then what? What can be done?
Finally, one last question, is Maduro really the one calling all the shots? What are the chances of an internal fissure that results in a shuffle of leadership with Maduro out and someone else from the Chavista camp taking charge - someone more pliant to regional and international actors like the US and Lima group?
1) I do think Maduro will increasingly lose the support of anyone being paid in Bolivares. This will create a different dynamic to the protests than existed in years past. There are likely to be protest organizations that don't start with the "traditional opposition" as we refer to them.
2) The confusion over amnesty is one of the mistakes made by Guaido and his coalition in the past year. They hesitate, and for good reason because nobody wants to give criminals and human rights abuses impunity, but convincing the military to flip requires them to be clearer about the terms.
3) For sanctions to work, I think there needs to be better coordination and enforcement of the sanctions that are in place. Corrupt people need to be named and shamed. More bank accounts and assets need to be seized. Those countries and companies assisting in sanctions evasion on gold and oil should be punished.
I do also think we could back off on some sanctions that have proven less effective, provide some sort of route for oil sales that help the Venezuelan population, and do more to provide humanitarian assistance. Doing things that help the Venezuelan people and build up alternative and effective governing institutions that compete with the ruling regime will help replace Maduro and help the rebuilding process.
It's a coalition of Maduro and people around him, with Maduro playing a key role in balancing things. I do think having a Chavista leadership shuffle is a very plausible transition option and one I have on my list of ways this transition may occur.
How have the reforms that maduro has implemented (no more price / currency controls) changed the economy? Are the poor benefiting? is this different from dollarization?
This is a critical question for Venezuela's stability this year. The answer is that:
*people who have access to dollars can now obtain almost anything they need in Caracas. Far fewer shortages than before.
*Almost half of all transactions in the country are now in dollars or another foreign currency.
*But, most people don't have access to dollars and most people don't live in Caracas.
*The poor can't afford many things. Prices are rising in Bolivares.
*Who is still paid in Bolivares? Government workers including teachers and medical workers. The elderly receiving pensions. And, most importantly, many police and soldiers. All those groups are having a harder time affording things.
The points above will change the populations driving the protests in 2020. Previous rounds of protests were driven by the "opposition base" which included some relatively wealthy neighborhoods and university students. We began to see a new trend in 2019 and I expect more protests led by the working class this year.
Can you discuss how illegal gold mining and gold exports are also keeping Maduro in power?
There is a lot of good research on this. To start:
https://www.bloomberg.com/news/videos/2019-10-01/secretive-gold-deal-keeping-venezuela-video
https://www.crisisgroup.org/latin-america-caribbean/andes/venezuela/073-gold-and-grief-venezuelas-violent-south
https://www.miamiherald.com/news/nation-world/world/americas/venezuela/article230669164.html
https://www.atlanticcouncil.org/event/venezuelan-illegal-mining-transnational-crime-displacement-and-violence/
There are two gold problems. One is the illegal mining problem in the South. The other is the export of Venezuela's gold reserves by the Central Bank. Gold, and laundering gold to get around sanctions, has become a key lifeline for Maduro as oil revenues have dried up. But, as the Bloomberg video linked above notes, he's running low on gold too.
Awesome, thanks Boz.
@Claire Prestwood and others. I work in and on Venezuela since June 2018. In 2018 I was in Caracas 18 times in six moths in 2018 and in 2019 about the same amount of times and in total I spent about 86 days in country. We conducted filed work in all five boarder (Colombia) states and collected plus 5000 data points. Main focus transnational criminality, illegal mining, ELN, Hezbollah and Colectivos. In total we did more that 12.000 hours of work in 2019 alone.
I can probably answer a few questions if anyone is interested.
For clarification all five Venezuelan states bordering to Colombia.
Can you discuss the domestic security implications of the Maduro administration's recent move to formally incorporate pro-Maduro colectivos into the Bolivarian military?
*Handing a bunch of poorly trained and poorly disciplined militia members weapons seems like a bad idea. One that could destabilize the country both short term and long term.
*So many of those weapons are going to get "lost" and end up in the hands of criminals inside and outside Venezuela. Small arms proliferation is already a mess in this hemisphere and it's going to get worse.
*It's going to create tensions with the military, especially the commanders who want a professional fighting force. The militia is bigger and will require resources in a resource-constrained environment.
So why is Maduro doing it?
*He fears an invasion (as unlikely as I think that is) and sees this as a potential counter.
*He wants a large armed group of loyal civilians who can threaten a small group of professional soldiers should they decide to turn on him.
*That group can also make up the beginnings of a future guerrilla organization that will make Venezuela less safe if he is tossed. It's an insurance plan.
*It's also an informal vote-getting organization. He'll organize the militia to go to the polls later this year.
Sanctions have been placed on Venezuela for a very long time, so why haven’t they pressured Maduro and his inner circle out of power yet
That's a great question. Let me provide a few alternative answers:
*The academic literature on sanctions says that they are better at changing behavior and not particularly effective at regime change.
*The same studies also point to a "black knight" effect in which an outside power rescues a sanctioned country. In Venezuela's case, Russia has provided a clear role in evading sanctions.
*It may be that sanctions are being effective but take time. They aren't a magic wand solution, but they are clearly draining Maduro of resources and placing pressure on his inner circle.
*Some have hypothesized that while sanctions should cause fractures in the inner circle, they have had the opposite effect of pushing them together so they all sink or swim together.
*Counter-intelligence matters. People who threaten to defect are rounded up, tortured and sometimes killed. That sends a message that makes it less likely for people to defect or try to organize a mass defection.
*Offering a clear off ramp to sanctions is important. I'd say the smartest thing done by the Trump administration last year was dropping the sanctions on General Figueroa within a week after he defected. It sent the right signal.
How will the diplomatic standoff against Maduro fare in 2020, considering a change in tone from Argentina and the US in recent days? Is the "Cerco Diplomático" strategy over, or will the international community somehow coordinate another offensive alongside the opposition?
In general, every country that has recognized Guaido has stuck with him except the places that have voted new people into power (Mexico, Argentina). I think the international community remains largely in Guaido's corner minus a few critical actors such as Russia, China, Cuba.
Keep an eye on the EU. They have some new leadership that appears to want a more active role in promoting a peaceful and democratic solution to Venezuela's crisis.
Which factor played the biggest role in causing the recent humanitarian crisis if you had to choose: 1. Venezuela’s historically absolute reliance on their oil industry. 2. The Inflation Maduro has caused. Or 3. The economic sanctions the US has placed on Venezuela?
The single biggest factor is the Chavistas corruption, stealing hundreds of billions of dollars over decades in power, and Maduro's total mismanagement of the economy. The decline in oil prices in 2014 certainly played a major role. When oil prices were high, the Chavistas could be corrupt and mismanage and still run a populist/clientelist state. When oil prices dropped, it exposed their flaws. They screwed it up more from there.
By 2017, there was significant hunger and lack of medical care. 2017 was the first year sectoral sanctions (the sort that impact the broader economy) were first really applied. Those sectoral sanctions increased in January 2019 with the sanctions of pdvsa. Sanctions have certainly had some increased impact on humanitarian issues, but most of the blame is with Maduro.
What is the threshold for Maduro leaving power? Do you have scenarios for the process of regime change (i.e Maduro needs to lose x amount of money to lose power)
Let’s say that Venezuela stopped paying off their debts to Russia. Recently, it seems that Maduro is blocking aid to the people, so if he were to stop using funds to pay off Russia, would he use those funds to feed the population? If not, what would he use them for?
hi Boz! Can u explain the best reason to keep sanctions? Thanks .!
Some thoughts about reasons to keep sanctions. However, as I've stressed elsewhere, the yes/no divide is not actually the best way to resolve this. My actual preference is that some sanctions should be kept and even strengthened (particularly the individual sanctions), some should be reformed and others should be dropped.
The individuals sanctioned deserve to be punished. They're awful people. They're people who torture and kill their political opponents, who use food as a political weapon leading to child malnutrition, who steal billions while their population suffers, who traffic in drugs, who are happy to destroy the environment with oil spills and dirty wildcat gold mining chemicals,
Dropping sanctions at this point would be rewarding Maduro for surviving the sanctions. Rewarding bad actors is generally not good policy. Further, it sends a message to other bad actors around the world that the United States is willing to give up sanctions after a certain amount of time.
Prior to sanctions, the Maduro regime (and the Chavez government prior to it) stole hundreds of billions of dollars in government funds. If sanctions are dropped, they would prioritize stealing more money and handing it out to friends and supporters, not helping the general Venezuelan population that lacks for food and healthcare.
If not sanctions, then what? Sanctions have become the de facto policy when the international community wants to do something more than strongly worded statements but does not want to use military force. If sanctions are dropped, what other policy will do a better job to pressure Venezuela to return to democracy and improve the lives for the average Venezuelan? For whatever criticisms of sanctions, it's likely they are better than the alternatives of doing nothing or using military force.
Hi Boz, do you have any evidence that removing sanctions will cause a war? And if you don't agree, do you have any counter evidence? Thanks!
War is unlikely whether sanctions remain or not. Dropping sanctions would generally be a signal that war is less likely (note that dropping sanctions doesn't make war less likely. Instead, dropping sanctions would likely be part of a process in which tensions were reducing).
Can you explain the Hxagon model, and how that led you to calculate the 80% chance of Maduro being removed in 2020 prediction? Is there any way for you to quantify how much US sanctions have attributed to the 80% number.
What was your process for converting qualitative analysis into a quantitative probability? How did you use the variables/key factors of Maduro's likely fall from power to get to a percentage?
What are the most likely and true upsides for the US removing sanctions. Based on threads I’ve read here it seems like simply removing sanctions will not solve the humanitarian crisis
I'd rather reform sanctions that just remove all of them. but here are some arguments I can see in favor of removing sanctions:
It's not clear the sectoral sanctions are working. The literature says that sanctions can be used for behavior change, but that regime change caused by sanctions is very unlikely.
If they never work, do we keep them on for decades? That was ultimately the mistake of the Cuba embargo.
Individual sanctions have not yet created the high level defections and internal dissent that was expected. In fact, it may have driven some competing actors together. They also have not promoted better behavior and improved human rights.
Sanctions have given Russia and China a greater role in Venezuela and reduced the US role. Sanctions have led to increased costs and missed opportunities for US businesses. That effect will linger long into the future.
Policies should not be based on worsening the conditions of a country in the hopes that it gets bad enough that the regime changes. All our focus should go to improving lives for Venezuela, not making things worse.
Given Maduro's tendency to mismanage the economy, wouldn't it be better to just let him fall on his own and not give him the scapegoat of sanctions?
How effective have sanctions been in curbing terrorism in the region?
It's tough to measure. I'd argue one of the most effective things the US did was place the AUC on the list of terrorist organizations in 2001. That move helped cut the ties between the Colombian military and the AUC and made Colombia a safer place.
The FARC and ELN remain on that terrorism list. Maduro supports them anyway and provides a safe-haven to them. And nobody has done much about that. So it hasn't really been effective on that front.
Are there any hegemonic implications of the US' Venezuela policy? Not really specific to sanctions.
I like this question. There are absolutely implications. The US has a long history of imposing its position upon the hemisphere and has made mistakes along the way. How do we know we're not doing the same here? Any time the US acts in the region, there is a question about whether the US has the authority to do so and what our motivations are.
At the same time, this isn't a clear-cut case of US "imperialism" as the Chavistas would claim. The US, in alliance with many other countries, is standing up for the only democratically elected leader who is supported by a plurality of Venezuelans. We're standing against someone who is opposed by over 80% of the country, has tortured and killed his political opponents, starved children, sent millions of refugees into exile, and clings to power via unconstitutional means. The US is at its best when we support democracy and human rights and I have little doubt that opposing Maduro places us on the right side of history here.
But being correct in the big picture level doesn't mean we shouldn't question our methods and rethink things that aren't working. We should lead, but also be humble about the fact we can't control outcomes. We should listen to our allies when they suggest there may be better ways to do things. We should work with the region to solve the challenge of Venezuela, not try to impose a solution and insist others follow because we believe we are certain about what will work best.
do sanctions either bolster/weaken us influence/hegemony in latin america?
An article in CSIS by Moises Rendon indicates that even if sanctions were removed that oil revenues wouldn’t go to the poor but to entrench the Maduro regime by ensuring the loyalty of military officials. Do you think it’s likely that revenues will be used to help the poor? And do you think that issuing new bonds through US markets would cure the debt crisis currently in Venezuela?
I largely agree with Moises on this. Prior to sanctions, the Maduro regime (and the Chavez government prior to it) stole hundreds of billions of dollars in government funds. If sanctions are dropped, they would prioritize stealing more money and handing it out to friends and supporters, not helping the general Venezuelan population that lacks for food and healthcare.
Some sort of new bonds may be necessary, but the bigger challenge is that Venezuela needs to clear up all its old debt from multiple sources. One of the big questions in the rebuilding process. Nobody wants to donate funds to Venezuela's humanitarian crisis or rebuilding process just to have those funds go to pay Wall Street or Russia.
Is there a high chance that senior military officials will betray Maduro? Reuter’s reporter in 2017 that in the aftermath of sanctions Maduros approval rating went up by 6 percent. With that in mind is this causing waves of support to go to Maduro? And if it is then is it more probable that he will be ousted w/o sanctions?
Sanctions may have created a brief "rally around the flag" effect, but it didn't last. Maduro's support is very low, even among those Venezuelans who dislike and disagree with sanctions.
The senior military officer question remains one of the key potential tipping points. There are rumors of tensions and reports of plots, but nearly all of them have stuck with Maduro through now.
Boz, this comment threat is a terrific idea. Thank you for building such a valuable informational portal on LatAm politics. My question: If you were tasked with forecasting Venezuela's economic and political future over the next 24 months in the form of scenarios (anywhere from 2-6 different scenarios), how would you describe those scenarios?
Is liberalization, dollarization, and privatization happening in Venezuela? If so, is it partly because of Sanctions ?
Boz, Do you think as a result of US sanctions on Venezuela oil prices have risen there. If so what is the detriment to that?
I'm not exactly sure what you are asking, but let me give three answers that go at the question of oil prices in different ways.
One of the big surprises in the past year was the fact the US sanctioned Venezuela, kept pressure up on Iran, and oil prices globally barely moved. It helps prove the emergence of US shale oil industry as a global swing producer has helped level off large movements in oil prices.
Venezuela does not get as much for its oil per barrel as it used to. As I understand it, this is in part this is due to them using a new blend that is preferred by Asian customers (helping them avoid sanctions) but is less profitable. They are also losing cuts of every barrel to those who are helping them evade sanctions and launder funds.
Gasoline prices in Venezuela remain remarkably cheap for the average consumer. You can fill up a car's gas tank for pennies. But the challenge is finding gasoline right now. There are major shortages. There are long-standing rumors that the Maduro regime may raise gasoline prices at some point in the future. Venezuela's history shows that would be a very unpopular move.
Thanks
I am naive about how to best handle this situation. My online girlfriend is willing to consider leaving Venezuela. I live in the USA. She and I are willing to consider vacationing in Ecuador, and likely moving there if we like it. She has an expired Venezuelan passport, but getting an extension has not been easy. I would like to fly her to Ecuador and then back to Caracas. Then make solid plans on a possible move. She knows of bus rides available to Colombia and back.. What can she reasonably do? Wait for the extension? Just fly or bus without it? Declare her a refugee? Maybe you know people who faced this problem and what they did? Thank you for your effort.
I find the hxagon model fascinating. What would you say are its strengths and weaknesses?
Are sanctions helping diversify Venezuelan markets away from oil? Specifically, are they helping the private sector improve and take a bigger role in the Venezuelan market?
They're helping diversify in the sense that Maduro is more reliant on illicit gold mining, money laundering and other criminal activity now that oil exports are down. But no, it's not helping in the sense that I think you asked the question, with more private sector and non-oil industry economic activity taking a greater role in Venezuela's economy.
It's a big and difficult challenge, but in a future rebuilding process, it would be good to move away from an oil-based economy.
Do you believe that sources of revenue such as drug trafficking and black money are significant enough to sustain the Maduro regime?
It helps a little, but no. Drug trafficking has made some individuals in Venezuela very wealthy, but isn't enough to run a country on. Similarly, some of the security forces use extortion and kidnapping to get paid (because the Bolivares the govt pays them are essentially worthless). The Maduro regime is operating as a criminal state and it may help keep him in power in the sense that the criminals who are profiting want to keep that ride going. This may help regime cohesiveness, but isn't sustaining the country that much. It's a much smaller amount of money (by several orders of magnitude) than the oil Venezuela used to bring in.
The one dark source of revenue that actually matters is the gold mining industry. That's one I try to model when working through their finances. Sanctions are an important factor and there is a major effort to launder the gold by Venezuela, Turkey, Dubai and Russia. Guaido recently called for the international community to label the gold out of Venezuela as "blood gold," similar to the idea of conflict minerals in the Congo. He has a good point there.
https://www.economist.com/the-americas/2019/12/18/more-dollars-and-fewer-protests-in-venezuela
https://www.wsj.com/articles/venezuela-quietly-loosens-grip-on-market-tempering-economic-crisis-11568718002
The article above discusses the effect that sanctions have had on Maduro new economic decisions shifting away from socialism and towards liberalization. My question is: if sanctions are the reason why Maduro is adopting these policies now, is it probable that Maduro will reimpose these policies if sanctions are removed, considering his socialist background?
That's a great question and almost impossible to answer in a hypothetical sense. It would be a bad move to reinstitute price and currency controls. Yet, it's totally plausible that Maduro would reinstitute previous economic policies because he's proven to be an idiot when it comes to managing Venezuela's economy over the years. Maduro is also under pressure from Russia to engage in some of these economic reforms, so it isn't just sanctions (though some of Russia's pressure is driven by US sanctions on Venezuela). You'd have to game out how Russia's pressure might change if sanctions dropped and whether Maduro would respond to the pressure in the same way.
Can you discuss the potential future impacts of the Venezuelan refugee crisis on Colombia? Thank you!
The refugee situation is tough. Colombia deserves a lot of credit for how they have handled the millions of refugees who have passed through their borders. Still, it is straining the social welfare system in a country that is still recovering from decades of armed conflict. There are also signs of a xenophobic backlash by sectors of the population that were seen during the protests late last year.
Separately, (and I think it's very important to keep the issues separate), Venezuela's crisis has also impacted Colombia's security situation due to the FARC, ELN and other illegal groups finding refuge and gaining revenue and recruits from the crisis in Venezuela. That has a major impact on Colombia as well.
Thank you for the response! As a quick follow up, assuming refugee flows remain around their predicted levels this year, do you think Colombia’s welfare programs will be able to adapt? Or will the country be forced into some other scenario, I.e. closing the border, recession, austerity etc
Probably not recession. Colombia will likely do better than much of the rest of the region. There is a big debate about austerity and social spending right now in Colombia, but it's driven by local politics, not refugee flows.
Colombia will probably just continue to manage as best as it can.
The international community should be stepping up its aid to Venezuelan refugees and it hasn't. I don't predict that it will in 2020, but I would love to see more attention and resources going to the problem. Colombia can't afford it on its own.
Thank you! As a final request; is there anyway I can access your stability report saying that there is an high chance of Maduro’s removal?
Please send me an email.
What can Russia do with Citgo and PDVSA assets? What would a Russian oil “hegemon” be able to do?
If the US lifted sanctions on the country, do you think citizens would be able to get more access to food and medicine and would the economy be generally better off ?
As I wrote elsewhere on this thread: Prior to sanctions, the Maduro regime (and the Chavez government prior to it) stole hundreds of billions of dollars in government funds. If sanctions are dropped, they would prioritize stealing more money and handing it out to friends and supporters, not helping the general Venezuelan population that lacks for food and healthcare.
Dropping sanctions would mean some additional money would go to pay for the bare minimum of food. But most of the money would go to help the people who destroyed the country in the first place.
We came across some evidence that explained that Maduro isn’t interested in debt restructuring but we didn’t understand for what reason he would not do that. Do you believe there is a reason for Maduro to not restructure the debt?
What are the impacts of the US lifting sanctions on Venezuela?
The US government only began to oppose the Chavez government when the Chavez government expropriated Exon. Getting Exon back in US hands has always been the driving force of past US governments. Once Trump appointed the Exon President as the Secretary of State, I thought for sure that a coup de etat was in the making to get Exon back in US hands. I am curious to know what you think of Exon's role in the Guaido government? Was handing Exon back to the US part of the agreement of US supporting Guaido?
The 50+ countries who support Guaido do so because he's the only remaining democratically elected leader in Venezuela after Maduro attempted a fraudulent reelection in 2018. I don't think Exxon had anything to do with that.
I think Guaido or anyone from his coalition who comes to power will be more open to foreign (non-Russian) oil companies including Exxon because they need assistance in restarting oil production in the country. Venezuela's citizens will definitely be watching those deals and will protest if they feel foreign companies get too good of a deal in that process or that citizens aren't benefiting from the oil production.
If you are interested in Exxon's role in world politics, I highly recommend reading Steve Coll's "Private Empire." It's a great book on the subject.
If it is unlikely that US does military intervention, what sort of alternate measure would they take instead
Also what is the chance that the refugee crisis causes a recession in Latin America because of instability and decreasing investor confidence? Since these countries are highly liberalized I think that instability from the refugee crisis might impact economic growth in the short term
I don't think the refugee crisis has a major impact on the region's economies. But the region does have some serious economic issues. I wrote about them here in November:
https://boz.substack.com/p/the-protest-wave-and-the-regions
Thanks for hosting this, Boz! Have a bunch of question...
1) What options do you think Guaido has, other than perpetual rallies that seem to be getting steadily smaller?
2) Why has the public become so disillusioned with Guaido's campaign - is it just that they thought the change would happen sooner, and then were disappointed when Maduro stayed in power?
3) What does the military think of all this, and why have they continued to back Maduro, despite pressure from the population/international community?
4) Have you seen any military members desert over the last several months? Or switch sides?
5) Are local security forces on the same page as the military?
6) If Guaido can't rally the people, is there anyone else who has popular support who may make a better candidate?
7) All said, is military support the main reason Maduro is still in power, or are there other forces that are keeping him in office/who else might stand in the way of ousting Maduro?
8) How much of the population resent the US over sanctions, or do they see Maduro as the one at fault?
I’ll answer some now and may get to other later:
2+6 The public did think change would come sooner and some of the dropped support has come due to disappointment on that front. At the same time, rumors of Guaido’s political demise are too early. He remains the most popular politician in Venezuela and has much lower negative ratings than most other politicians.
3 The military leadership is uncomfortable and unhappy, but they haven’t broken with Maduro. What it’s going to take is a critical question. They need to have some guarantee that they won’t be punished.
4 Thousands of military members deserted last year. Some were very public, including after the February humanitarian aid push. A larger number simply walked off the job, with many joining the refugee flows.
5 There are security forces that are far worse than the military when it comes to repression. See this amazing reporting by Reuters on the extrajudicial executions committed by the FAES.
https://www.reuters.com/investigates/special-report/venezuela-violence-police/
8 Polling shows the vast majority of the population dislikes Maduro and wants him gone immediately. There is a disagreement over what method to remove him is best, but most people want it done peacefully. Sanctions are not particularly popular, but even a majority of Venezuelans who dislike sanctions also dislike Maduro. While sanctions may have created a brief rally around the flag effect, far more Venezuelans blame Maduro than sanctions for the main source of problems in the country.
Can you elaborate on the 4th question? I can't seem to find a lot of literature that gives examples of specific military officials that have broken away from Maduro.
So, the highest profile military officer to flip was General Figuera on 30 April last year. But lots of lower level desertions have occurred. For example, take a look at this El Nuevo Herald article from last month saying that at least 6,000 sergeants from the National Guard had deserted.
https://www.elnuevoherald.com/noticias/mundo/america-latina/venezuela-es/article238320038.html
It's hard to get specific numbers, but it's clear
1) many have walked off the job.
2) not enough have yet walked off the job to cause things to change.
Will Venezuela be able to keep the interests of Russia and China? If Venezuela is unable to pay back debts, how long will it be until other governments stop supporting Maduro?
The weird thing is that Maduro has been paying back debts to Russia over things I would think are more important like feeding the population.
https://www.argusmedia.com/en/news/2011913-caracas-hopeful-on-shrinking-oil-debt-to-rosneft
Would It be possible to get access to the evidence that mentions how Maduro has an 80% chance to be ousted from office?
First, is it likely that the US intervenes with military operations to oust Maduro?
Second, there was a really good article by CNBC in which they found in 15/16 scenarios with similar hyper inflation to Venezuela the regimes were ousted. Given that is it likely that Maduro would be ousted w/o sanctions?
1) I think it's very unlikely that the US uses military ops to oust Maduro. It remains highly unlikely as long as every other country in the hemisphere appears to oppose that option.
2) This is one of the best questions. Maduro wrecked his own economy. Then sanctions added to his challenges. If there weren't sanctions, would Maduro's wreckage of the economy push him out anyway? It's a tough hypothetical. It becomes more challenging because dropping sanctions now would give him oxygen and help him in a way that (if you could time travel back) never placing sanctions on him would not have.
The current economic reforms and dollarization process have been forced in part by the sanctions. If sectoral sanctions against oil and debt were eliminated today, Maduro would likely be in a better place and more stable than he was in 2017-2018.
That is an argument against removing sanctions, but it's also possibly an argument to remove sanctions more intelligently. Don't just wave a wand and remove them. Figure out other policies that keep pressure on Maduro personally while letting things improve for the average Venezuelan.
What the the name of the CNBC article you are Talking bout ?
Hypothetical here, but say an International coalition of western hemisphere forces lead by the US stationed troops near the Venezuelan border. They then gave an ultimatum: Maduro out by X date or we remove him from office to restore democracy in the country and end the migration humanitarian crisis. Would this not scare the armed forces, the one institution that holds up the regime? Even if they know it is a bluff, the mere presence of the forces should scare enough of the higher brass in Venezuela causing division within the Maduro camp. A key to this strategy's success would be a backdoor agreement between the Lima group + others in the international community that this move was indeed a bluff, and that there was no intention of an actual invasion.
It's interesting, but....
1) never bluff on using military force. It creates credibility issues. If it's there, they have to be willing to use it.
2) "international coalition" requires countries other than the US, all of whom have rejected a potential military option up until now. It's a cautious diplomatic coalition-building exercise.
My thoughts on this from July 2018 still hold:
http://www.bloggingsbyboz.com/2018/07/13-reasons-why-us-cant-simply-invade.html
Is this actually hypothetical or is at an actual idea that is being considered by administrations
Just a hypothetical I was thinking about. Obviously the hard part here would be the optics of such a tactic. That is why an agreement between nations to hold firm while the negative backlash occurred is key.
What are the implications if Russia were to gain the PDVSA?
Russia's role in PDVSA is a major issue being discussed by analysts right now. What are their intentions? Can they consolidate and formalize control? Will the next govt recognize Russia's agreements with Maduro. As Claire mentioned, there is also a question about Citgo that has a more formal paper trail and complicates a lot of things.
The issue is also oil for cash/goods and drilling rights. Russia has expanded its footprint within Venezuela's energy infrastructure and oil economy in exchange for various forms of aid, but as Boz mentions, the extent of that debt and the promises made are still unknown.
I think you're referring to shares in CITGO here. PDVSA is the state-owned oil company and it would be very, very unlikely that Venezuela's government would turn over complete control of its only source of revenue to Russia. CITGO is a subsidiary of PDVSA.
If Russia gains control to PDVSA does that include gaining control of CITGO?
Not necessarily... it is a bit complicated.
There is currently a question about ownership of CITGO given Guaido's interim presidency and the US recognition of his role. Therefore, ownership and/or directorship of CITGO is contested. Plus, CITGO profits from the United States are being redirected to Guaido's administration.
If the US were to drop sanctions, what sort of alternative measures will they do instead if any? Would if be military intervention which the administration And Bolton have said before?
While I know that's the debate question, "Drop sanctions" is a big generalization. Some sanctions should be strengthened, some should be rethought, and some should be dropped. Additionally, US policy needs to find other creative levers of influence and negotiations besides sanctions. I think military force is very unlikely and should be very unlikely.
How did you arrive at your quantification that there is an 80% chance Maduro leaves by 2020?
I attempted to answer that methodology question in yesterday's newsletter.
https://boz.substack.com/p/latin-america-risk-report-9-january-b4c
where did you find this 80% number?
like which article
November analysis but there’s a paywall
ohh okay
Its in the 2020 January Analysis
I think November actually
can you link it?
December analysis
where do you find that?
This website
can u link it?
https://boz.substack.com/p/latin-america-risk-report-9-january-b4c
In a debate round, I heard a team cite a claim from LARR that there is an 80% chance of a Maduro ouster in 2020. Is that an accurate representation of your opinion? Has that value shifted recently? What's the methodology you used?
I attempted to answer that methodology question in yesterday's newsletter.
https://boz.substack.com/p/latin-america-risk-report-9-january-b4c
I haven't done that analysis since November, but I don't think the numbers have changed much. I still think it is quite likely that Maduro leaves power this year. I'm waiting to see a few things play out this month including the current dispute at the National Assembly and the informal takeover of parts of PDVSA by Rosneft before I do another stability analysis update.
How will Maduro's hold on power throughout 2020 (especially in light of the recent developments in the AN) impact the already strained relationship with Colombia?
Maduro's hold on power is a problem for Colombia in many more ways than it is other countries. Colombia faces the main flow of millions of refugees. The potential for weapons trafficking is high. The FARC and ELN use Venezuelan territory to hide and to make money with extortion, drug trafficking and illegal mining. Venezuelan recruits have increased the strength of what were once Colombian illegal/criminal/terrorist groups including the FARC and ELN.
All of those problems get worse the longer Maduro remains in power.
Is there a way to solve the hyperinflation in Venezuela?
Venezuela is currently in the process of an informal dollarization of the economy. People paying in dollars don't experience hyperinflation. But the Bolivar has collapsed just in the past two weeks, meaning those who get paid in Bolivares are still experiencing hyperinflation.
I don't think dollarization is an ideal long-term solution, but allowing foreign currencies to be used in the country would seem to be an important step (currency controls and price controls previously forbade any use of the dollar or other foreign currency for local transactions, even if it happened sometimes). It creates some stability in the system and forces the local government to run an effective macro policy to keep its currency worth something.
Building a new Venezuelan currency that doesn't experience hyperinflation should be part of the rebuilding process. A credible and independent central bank that doesn't just print money on the whims of the president will be key to make it happen.
Why doesn't dollarization work as a long term solution?
Do US sanctions have any bearing on Venezuela’s use of Cuban counter-intelligence ops?
So far, no. The US sanctioned Cuba for decades without changing Cuba's behavior. While I think sanctions against Maduro may have some effect, more sticks/sanctions are unlikely to change Cuba's help for Maduro. That said, I think Cuba can be negotiated with and is an avenue the international community should pursue. But the current administration in the US is unlikely to agree with me on that.