In a historic rebuke, five Latin American nations urged the International Criminal Court (ICC) to investigate the regime of Venezuelan president Nicolas Maduro for human rights abuses. Though such a public denunciation is noteworthy, the most legitimate external threat to the Maduro regime comes not from its neighbors, but from Beijing.
Though Latin American countries have historically avoided public denunciations of each other, Argentina, Chile, Colombia, Paraguay, and Peru joined Canada in referring Venezuela’s leadership to the ICC for investigation into human rights abuses. This denunciation comes at a time when Venezuela’s neighbors are struggling to cope with the unprecedented exodus of Venezuelans from a homeland bedeviled by a severe economic crisis and growing political repression. Nonetheless, regional powers are unlikely to take meaningful action, leaving the future of Venezuela up to China and a host of internal threats.
The making of a crisis
Historically, Venezuela’s economy has been remarkably unbalanced, with oil representing 90 percent of the country’s exports while most goods are imported. During the oil boom of the 2000s, while more prudent oil-dependent nations were hoarding foreign-exchange reserves or investing in other areas of their economies, the profligate spending of former president Hugo Chavez saw Venezuela’s savings dwindle to lower levels than when the oil boom began. This financial mismanagement, along with widespread graft and a war on the private economy, left Venezuela in a remarkably vulnerable state for when oil prices inevitably fell.
The 2013 death of Chavez coincided with the end of the oil boom, and his protegé Nicolas Maduro faced some tough decisions. Instead of allowing the Bolivar to fall in value, he held the exchange rate at an overvalued peg and rationed imports. Prices rose nonetheless, and Maduro responded by imposing price controls, which caused widespread shortages and the shuttering of businesses. Instead of responding by increasing taxes and curtailing spending, Maduro turned to the printing press to supply currency, which predictably led to massive inflation and further economic decline.
A mural showing Chavez and Maduro, and urging the viewer to vote for Maduro (Source: Wikimedia).
Current state
The economic and humanitarian crisis caused by this mismanagement is epic in scale. The International Monetary Fund predicts that Venezuela’s inflation rate will surpass one million percent by the end of the year. The United Nations estimates that 2.3 million Venezuelans, roughly 7 percent of the population, have fled the crisis since 2015. In the last five years, the economy has shrunk by half. The average Venezuelan has lost 11 kilograms (24 lbs) due to a lack of food and 90 percent now live below the poverty line. With the country’s military dutifully repressing protests against the Maduro regime, few hope for a peaceful internal resolution to the crisis as international condemnation grows.
While the indictment of Venezuela by its neighbors is an embarrassment, it does not indicate that Venezuela faces any threat from regional actors. In the end, the theatrics by Venezuela’s neighbors do not meaningfully change the course of the investigation by the ICC, which itself has little ability to enforce its rulings. While the foreign policy of Trump is impossible to predict, recent murmurs of a military intervention by the United States are unlikely to materialize. China is the only external actor with the leverage to meaningfully correct the course of the Maduro regime.
A fickle dragon
Beijing has a history of propping up the Venezuelan regime Between 2007 and 2014 China lent $63 Billion to Venezuela, more than half of all its lending to Latin America during that period. While China supported Venezuela partly because of an ideological alliance with its US-skeptic leadership, these were not sweetheart deals; the interest rates charged by China were exorbitant, and repayment was to be in oil. Since the loan terms were solidified when oil was around $100 a barrel, the number of barrels required to repay its debt nearly tripled when the price of oil fell to around $35 in early 2016. Though the oil price has since partially recovered, China controls Venezuela’s financial future and remains the Maduro regime’s only major source of capital.
Despite China’s leverage, it is unlikely that Beijing will take an active role in a regime change in Venezuela. Maduro recently returned from a charm tour in China, where he fervently praised the country and its ideological father Mao Zedong, and was rewarded with $5 Billion in loans. China has pledged $250 Billion in investments in Latin America by 2025, and as long as Maduro continues to heavily service the relationship he will likely receive further support. China’s efforts to distance itself from allegations that its Belt and Road Initiative is damaging its ostensible beneficiaries make it even less likely that Beijing will publicly cut Venezuela’s lifeline and push it into default. However, China has shrewdly reached out to Maduro’s opposition in an attempt to secure repayment should Maduro fall. While Beijing is unlikely to hasten Maduro’s departure, it is also unlikely to lend him meaningful support should he find himself in a compromised situation.
Outlook
In the medium term, major external actors are unlikely to change course in their approach to the Maduro regime. The international community will continue to voice its displeasure as the effects of the Venezuelan crisis spills into neighboring countries, but is highly unlikely to meaningfully intervene. Meanwhile, China will likely continue to financially support Maduro without putting restrictions on his increasingly authoritarian behavior. However, the Maduro regime is far from safe. Though it faces little threat from external actors, internal threats such as violent protests, assassination attempts, and a history of military coups point to a highly tumultuous medium-term future for Venezuela. While these internal factors are tough to accurately predict, the unsustainable current course of the Maduro regime makes it likely that some combination of them will spell the end of the Maduro regime before the next presidential election in 2024.
