Unprecedented and unexpected changes are occuring in Venezuela following an electoral victory for the opposition. Now the opposition will have to find a way forward as Maduro’s party and the rest of the continent react.
On December 6th, Opposition Party MUD (Democratic Union) achieved a decisive victory over Maduro and the PSUV (United Socialist Part) after nearly two decades of Chavist rule. MUD now holds 112 Congressional seats over 83 of PSUV, attaining thus a supermajority that grants them total control over the National Assembly (legislative body).
Scheduled for December 2018 are the next Presidential Elections. Opposition leaders must decide whether they will wait till the last round or seek to strike early. MUD is aware that they have not prevailed out of their appeal but rather due to a growing aversion to Chavism, particularly given the unbearable economic situation. Although winners, they face a conundrum: How to fix the economy without being Government (yet)?
Opposition leaders don’t want to take the heat for the needed –yet unpopular- restructuring of the economy, and would instead prefer to let Maduro bear the weight of it. But a strictly defensive stance could tarnish the power gained, and buy Maduro some time to stage some intricate maneuver.
At the moment, aiming to knock him down from power is their second option. MUD’s numbers are enough not only to pass any desired law, but to initiate a revocatory referendum to oust Maduro from power.
However, they are conscious about the perils that such decision could entail. Chavist power rests upon the economic benefits of energy exports and the hard power of an addicted military command. Even absent the first variable (oil revenues), Maduro still has an ultimate resource.
Although these electoral results bring hope for long awaited changes, they won’t offer any immediate alleviation on the present time economy; In fact it could further contribute to accelerating the spiral of uncertainty and speculation.
Venezuela’s Economic situation will remain troubled
At the core of the Chavism fallout is the very reason why it managed to stay in power: Venezuela has the world’s largest oil reserves, almost 300 Bn Barrels. 96% of Venezuela’s hard-currency inflow comes out of oil exports, representing 25% of its GDP.
When barrel prices were over 100USD, the Chavism model of populist subsidies and bloated defense budgets gave the regime enough social and military support to do as it pleased. Venzuela relied solely upon its oil exports, becoming profoundly vulnerable to energy commodity prices.
Financial mismanagement paired with corruption of endemic proportions corroded the state from the inside out, and made the state too rigid to change course of action when the economy went off track. Negative public accounts were addressed by expanding the monetary basis, triggering skyrocketing inflation, a plunging currency, and food shortages.
What was a worrisome scenario rapidly turned catastrophic when the world’s oil market experienced an unprecedented surplus and barrel prices sank from 110 to 40 USD. For every $1USD the barrel drops, Venezuela loses nearly $700 million USD in revenues for PDVSA, the national energy company.
Venezuela currently is the world’s worst performing economy with over 200% inflation and 10% GDP contraction. Its economy runs under a 20-30% public deficit, while its foreign reserves stand below the 15 billion USD mark.
Adding to the already explosive mix, the nation has to face 15.8 billion USD in debt payments for the next year. In order to recover from its deficit, Venezuela would need an oil barrel trading at over 125USD, but prices are actually expected to slip below the 30USD mark.
Chavism will fight back
We should expect Chavism to raise the stakes, as accustomed. Maduro has congressional majority until January 5th during which he can pass a series of laws to grant himself exceptional powers and rule by Decree, as Chavez once did.
Moreover, PSUV has plans to renovate 15 Juries of the Supreme Court with people they trust, and turn the Judiciary into a legal blockade to contain the laws to be passed by the opposition majority. If controlling the Executive and Judiciary powers is be enough to stay in power, PSUV could resort to even more drastic gambits.
Maduro has recently called the military to “defend the homeland” and promised to raise wages and living conditions for soldiers while stating “it is time to return to strengthen the Armed Forces.” Given a worst-case scenario, the PSUV could stage a crisis and suspend other democratic institutions indefinitely.
No one bets on a loser
As the Chavist experiment fails, Latin American leaders will tend to create a political void around Maduro who is poised to become a regional pariah.
With the surprising victory of Mauricio Macri after 12 years of Kirchnerist rule in Argentina, and the growing likelihood of an impeachment against Dilma Rousseff in Brazil, the socialist ‘Pink Tide’ in Latin America seems to be shifting to the point that even Lula da Silva has openly criticized Maduro’s intentions to indefinitely perpetrate in power.
Maduro, unlike Chavez, will not have unconditional support from neighbours anymore. Leftist political leaders do not enjoy the financial surplus nor the social support to adventure themselves into the ideological soap-operas that characterized the early 21st Century Latin America.
Facing times of social apathy for Politics, regional leaders will be reluctant to take on neighbourhood problems. From now on, regional politics will have a much more pragmatic and conditional support rather than a blindly ideological one.