This is neither a conspiracy theory nor an intuitive analysis but a piece of intelligence: Maduro needed cash to service PDVSA debt -due next Wednesday- and Moscow wanted to help him out by investing in PetroPiar (PDVSA) but was unsure about the “legal mechanism” to protect this investment at the domestic level.
Before getting into detail, let me first talk about how this works. Russia and China, countries with very aggressive extractive policies, have been shaping Venezuela’s legal framework since the beginning of the “revolution”. It first started with mid-ranking officials, organizing investment rounds and signing agreements on behalf of Venezuelan “interests”.
As soon as debts and new investments got bigger, Russia and China required the intervention of high-ranking officials. Rafael Ramirez was the most prominent of these guys, during his tenure in PDVSA and the Ministry of Petroleum & Mining.
At some point, Venezuela’s rulers were asking so much money and so often, that the eastern hegemons would only move forward as long as the president himself was directly involved in the negotiations. For those who did not know why Maduro travels around and then comes back to Caracas talking about loans and multibillion-dollar projects, this is the main reason.
There is also the unoficial side of this process, involving bolichicos and boliburgeses. For example, sometimes the government would appoint an enchufado as the unoficial representative in a business or guisness (corrupt transactions). The enchufado would offer presidential decrees or laws comprising every condition and prerogative investors wished to be included to undertake the transaction -for those interested in this specific topic, check out some decrees and other acts related to “Gran Misión Vivienda Venezuela”.
That changed dramatically after december 6, 2015, when they lost their grip on Congress. Now, the ruling elite has to compromise with the opposition whenever they need congressional approval on relevant matters, including foreign debt and certain joint-ventures. At this moment, such idea (common in a democracy) is unthinkable for the dictator and his bad hombres.
The thing is that the Russians know this very well and, therefore, were not satisfied with a presidential decree to seal the deal of PetroPiar. As result, Miraflores came with a solution, the Supreme Court would render a decision establishing that the legality of oil & gas joint-ventures did not require congressional approval but the Supreme Court’s endorsement. Moscow accepted the proposal.
What went wrong? Russia only wanted a formal document against the potential denunciation of the PetroPiar transaction by the Venezuelan Congress. Instead, the government crossed the line by using the Supreme Court to dissolve Congress in what was later considered as an Auto-Coup.
The Russian negotiators tried to make some money and help Maduro with a lifesaver but their condition became an anchor. Here is the the issue: the moment when the government has nothing to offer but poor guarantees for Russian investments is approaching. Will Russia (this also affects China) stop pouring money into Maduro’s hands, let his regime die and give away its stake in Venezuela?
Russia’s damage control, after this huge mistake, will be important to monitor in coming weeks.
“La parola chiave è transizione, che poi vuol dire cambiamento di governo; a pronunciarla è appena stato Rex Tillerson, il nuovo segretario di Stato americano”: a parlare con la DIRE è Claudio Sandoval, professore di diritto internazionale dell’Universidad metropolitana di Caracas, ora negli Stati Uniti per un corso ad Atlanta. Il tema delle lezioni è l’impatto della “revolucion bolivariana” sulle relazioni tra gli Stati Uniti e i Paesi dell’America Latina. Una storia già difficile che adesso, con l’ingresso alla Casa Bianca di Donald Trump e dall’altra parte Nicolas Maduro al posto di Hugo Chavez, rischia di prendere una piega ancora più preoccupante. “Di ‘transizione’ Tillerson ha parlato in un’intervista al blog ‘Latin America Goes Global’” dice Sandoval: “L’idea è che sia necessario un cambiamento, da realizzarsi attraverso elezioni, con una decisione popolare”.
Le relazioni tra Caracas e Washington erano complesse già ai tempi di George Bush e di Barack Obama. L’ultima conferma è un’inchiesta americana cominciata quattro anni fa, che questo mese ha portato alle sanzioni nei confronti del vice-presidente venezuelano Tareck Aissami. Proprietà e conti bancari confiscati con l’accusa, sottolinea il dipartimento del Tesoro, di avere “un ruolo di rilievo nel traffico internazionale di stupefacenti”. Secondo Sandoval, i risultati dell’indagine non erano stati resi pubblici da Obama per timore di compromettere il dialogo avviato dalla sua amministrazione con Cuba, alleata tradizionale del Venezuela.
Una preoccupazione che con Trump sarebbe saltata, anche per le pressioni esercitate sul neo-presidente dalle lobby del Congresso a maggioranza repubblicana. “A chiedere la linea dura è anzitutto il gruppo legato a Marco Rubio” spiega il professore. Convinto che le tensioni potrebbero crescere nonostante Trump appaia intenzionato a rafforzare un’alleanza anti-terrorismo con la Russia. “Per Mosca – spiega il professore – l’asse con Caracas ha un valore strategico che va al di là delle relazioni economiche”. In questo contesto si inserisce la mediazione in Venezuela della Santa Sede, attenta alle rivendicazioni popolari e in prima fila nel sostegno a un tavolo negoziale tra il governo e l’opposizione. “Al riguardo la politica americana è stata oscillante” dice Sandoval. “L’ultimo segnale è stata però la richiesta di scarcerazione di Leopoldo Lopez, il politico di opposizione più popolare, condannato a 14 anni di carcere”.
1. By calling the Executive Vice President of Venezuela a prominent drug trafficker, The trump administration implies that Venezuela is a kleptocracy.
2. This could become the official beginning of an undiplomatic relationship between the Trump Administration and the Venezuelan government, characterized by verbal attacks from different directions: Microphone diplomacy.
3. It is worth mentioning that the former Venezuelan Ambassador to the Organization of American States, Mr. Roy Chaderton, advised President Maduro to be cautious and wait for President Trump’s first move.
2. A Message.
4. We do not want Tareck El Aissami as your potential successor.
3. Extradition order or arrest warrant through INTERPOL.
5. As the Executive Vice President of Venezuela, Tareck El Aissami has diplomatic immunity. However, he might not want to take the risk and travel overseas.
6. There is some precedent. For example, the detention of retired Venezuelan General, Hugo Carvajal, in Curacao (2014), under similar charges. Last year, President Maduro’s nephews were found guilty on drug charges at a US court. It is not just a deterrence policy. The United States has demonstrated to be serious about this issue.
4. A more radical behavior is expected.
7. The ruling elite would want to remain in power at all cost. The other choice is prison.
8. From this point of view, these sanctions are not helpful because the ruling elite will not see a safe exit from power.
5. The dialogue
9. It could represent a threat to the dialogue, an initiative between the government and the opposition, endorsed by the Vatican and the United States.
10. Now that one of the main supporters of these talks is attacking one of the government’s principal negotiators, it could be the end of the conversation: I will not endorse something where a drug lord is participating. It would be a contradiction to talk to someone you call “Prominent Venezuelan Drug Trafficker”.
11. On the other hand, it could be a carrot and stick strategy to put the government under pressure and force Maduro to meet some demands such as liberating political prisoners like Mr. Leopoldo Lopez and celebrating regional, municipal and presidential elections, etc.
How far does the US government want to go, remains an open question.
Today, Dr. Shannon O’Neil, senior fellow at the Council on Foreign Relations, spoke on Bloomberg Surveillance about the situation in Venezuela. Below, I elaborate on my initial reactions to this interview.
Why the Democratic Unity Roundtable (MUD) gave up the recall referendum and wants to wait until 2018? Venezuela’s opposition is divided into two main positions: The MUD prefers a pacific and electoral long-transition whereas another group, represented by Leopoldo Lopez, Maria Corina Machado and Diego Arria, insists on a constitutional referendum that could become a non-violent and electoral short-transition.
Who is right? Could a deeper humanitarian crisis and gross violation of human rights be prevented now? Is it permissible to tolerate famine and deaths -due to current economic crisis-, arguing this could save thousands of Venezuelans from a potential violent conflict?
Those who believe this dire situation must be stopped before it gets worse, would support Mr. Lopez’s approach. People who think that it will actually get worse if the opposition attempts to protest now on the streets instead of talking, would bet on the MUD.
Since politicians behind the MUD want to be the main leaders of the opposition, it is understandable why they are willing to agree upon the government’s breaches of basic democratic rules as long as president Maduro orders the National Electoral Council to celebrate gubernatorial elections in 2017 and the presidential election in 2018.
However, would president Maduro agree to carry out any of said elections? The electoral calendar does not give him too much choice.
On the other hand, what if Chavismo accepts defeat in both, the gubernatorial elections and the presidential election? Apparently, the problem would be solved.
Nevertheless, facts show it will not be that easy. By avoiding the celebration of the gubernatorial elections and the recall referendum, this year, the government demonstrated it is not giving any advantage, no matter if it has to break constitutional rules to stay in power.
In the event Chavismo undertakes the elections, would them be free, fair and transparent? Would the attempt by the government to steal the elections end up in the bloodshed the Obama administration and the Vatican wanted to prevent?
Mr. Trump might decide to have a dog in this fight. It is very tricky because his good intentions may end up helping Mr. Maduro, in case the Trump administration intervenes to help the wrong people oust president Maduro.
There is always a possibility that a popular uprising and/or Venezuela’s army intervention backfire, victimizing president Maduro.
The bottom line: At this stage, certain measures outside diplomatic boundaries could be more damaging than helpful.
1. This deal, aimed at raising oil prices, is great news for President Maduro, as Chavismo desperately needs petrodollars to buy more time in power -extra cash to service foreign debts and import basic goods, in an attempt to cope with high unpopularity rates and the economic mess it created.
3. The news was also regarded as Mr. Eulogio Del Pino’s -Minister of Petroleum and President of Petroleos de Venezuela, S.A., (PDVSA)- diplomatic victory.Mr. Del Pino believes that by August 2017, oil price will range from $60 to $70 pb and firms will restart investments (that would have experienced a drop of $300bn, since 2014).
4. Venezuela would cut 95,000 barrels per day, which is thought to be a life-saver from an embarrassing situation, as PDVSA has been unable to raise its production. Argus shows some interesting numbers that are worth sharing in this week’s edition:
Venezuela’s crude production dropped 338,000 b/d or almost 13pc over the first 10 months of 2016, from 2.654mn b/d at end-2015 to 2.316mn b/d in October…
Venezuela’s official crude output in October was 18,000 b/d below September’s reported production of 2.334mn b/d.
… Calculated on an annualized basis at PdV’s current year-to-date average export price of $34.21/bl, a crude output decline of 338,000 b/d totals almost $4.2bn of lost potential export revenues.
Venezuela has continued servicing its foreign debt on time despite an over 61pc plunge in PdV’s average oil export price from $88.42/bl at end-2014 to $34.21/bl for year-to-date 2016 as of 25 November.
6. The electoral solution to Venezuela’s crisis might be tied to an impartial and independent CNE. Right now, the Chavista government has total control over the CNE, whose members must be replaced any time soon, pursuant to article 296 of the Venezuelan constitution (seven-year period). With this control, the government has undertaken several irregularities throughout the years, such as electoral fraud, delaying regional elections based on their popularity or rejecting the recall referendum against president Maduro.
7. Now that the Venezuelan Congress is controlled by the opposition, the government does not want Congress to do its job and appoint the new members of the CNE. In his petition, Congressman Hector Rodriguez (the government), argued that the opposition fell under constitutional omission and that is why the Supreme Court (the government) must appoint these people. It is worth noting that Chavismo has been illegally sabotaging legislative sessions so that Congress does not get the job done in many matters, including this important one.
8. In the event the Supreme Court illegally nominates the new members, there is higher risk next “expected” elections in 2017 (regional) and 2018 (presidential) will not be fair and transparent.
MERCOSUR agrees to suspend Venezuela
#BREAKING South American bloc Mercosur confirms Venezuela’s suspension: foreign ministers
9. It is the first institutional reprimand against the Maduro administration, based on its human rights violations and economic mismanagement of Venezuela. While the political effect of this decision represents a dramatic drawback to Chavismo’s leadership in the region, there may not have major legal and economic impact.
10. With this suspension, Venezuela will have the right to vote but no formal voice within the organization. However, Venezuela does not lose its trading privileges -President Maduro has been importing basic goods from MERCOSUR to face shortages (especially cattle from Brazil and grain, dairy products and poultry from Uruguay). Unless, they find better partners, it is unlikely Venezuela will stop buying products in this market or breach contracts with suppliers. In retaliation, they may delay payments though…
12. The Democratic Unity Roundtable (MUD), which is a faction of the Venezuelan opposition that holds talks with President Maduro, is now coming under pressure as the so-called “Dialogue” may lead them nowhere in the immediate future.
13. The MUD claims that the Government is not complying and, therefore, threatened to leave if such situation continues. The MUD knows that President Maduro is talking to buy more time in power rather than fulfilling people’s electoral expectations. So, this move is an excuse to get out of the negotiation room anytime.
14. Since “the talks” will end up without results, the MUD and the Government are about to start playing the blame game for a better exit.
Leopoldo Lopez’s party launches #SiHaySalida, as a new strategy to oust Maduro by democratic means.
15. In my opinion, this is an smart strategy in legal and political terms. Based on President Maduro’s undemocratic exercise of power, the Venezuelan Congress can declare “absolute absence”in accordance with article 233 of the Venezuelan constitution. I will post my technical opinion regarding this matter next week.
16. What is #SiHaySalida about? The opposition holds majority in Congress and is able to request a federal plebiscite, asking voters whether they want Maduro to go or stay (article 70 of the constitution).
17. If citizens say they want President Maduro gone, then, Congress would declare his absolute absence. Legislators can do this anyway but the idea of backing the declaration with the consent of most Venezuelan voters makes it stronger and more legit. According to #SiHaySalida all this can be done early next year.
18. This is a plebiscite and not a recall referendum (article 72 of the constitution). The former only measures a popular opinion on important State matters (for example, whether the people would like the president gone), whereas the latter gives voters actual power to decide if the ruler has to go.
19. The plebiscite does not produce any legal effect because it is just a poll but official, instead of being conducted by private pollsters, the CNE has to take care of it. On the other hand, the recall referendum does entail direct legal consequences. In other words, while people can fire Maduro through the recall referendum, Venezuelans cannot oust Maduro by freely expressing their opinion of rejection against him. In sum, both, the plebiscite and the recall referendum, could be used to measure President Maduro’s performance.
20. One can predict the Supreme Court would rule against it and even if the plebiscite is accepted, the CNE would do anything to avoid it. Nevertheless, Venezuela is not facing a legal problem but an unprecedented political crisis.
21. After the MUD accepted to partner with President Maduro and kill the recall referendum, the people lost their hope and motivation to protest. With this new proposal by Volutad Popular -which is as legal and legit as the recall referendum-, Venezuelans’ hope and moral could be revived and the risk of a popular upheaval may change certain things.
22. #SiHaySalida can go further than #LaSalida. Voluntad Popular has nothing to lose at this point. Some of its prominent leaders are in jail, exiled or enjoying legislative immunity. Under current circumstances, Leopoldo Lopez -who is also barred from holding office- has no real chance to become president of Venezuela either.
23. It is logical that common citizens and the political leaders that have suffered the most, look for democratic alternatives to the MUD’s talks with President Maduro, which only increases President Maduro’s longevity in power and their party quotas while the country is in free fall.
While the logical way out was spoiled by undemocratic means and the main problem is still there, what else could be done to get rid of President Maduro? Would a dialog be the alternative to achieve this goal? Is it smarter to avoid the dialog and keep a defiant stand? How about a military intervention? What if Maduro sticks around past 2018?
Scenario 1: The dialog. This is an ineffective option for one basic reason: Which dictator negotiates his own political execution, when he actually controls other branches of power?
Scenario 2: Nonviolent resistance. Unleashing some kind of civil disobedience could lead to a popular uprising. Nevertheless, this would be a lost cause if the recall of Maduro is the flag. Since the soonest elections could be held in 2017, if Mr. Maduro is fired, the Vice-president will assume his position until December 2018, based on article 233 of the constitution.
Scenario 3: Violence. While a Military coup may kick Chavismo out, is it convenient? Would a Junta be the solution?
Scenario 4. Perpetuation. President Maduro could last many more years in office. Venezuela would end up being Cuba or Zinbabwe, societies that became extremely tolerant to their rulers.
At this moment, the first scenario is happening. As far as the story goes, President Maduro was against the ropes in the 2016 round, with some 80 per cent of popular discontent. Apparently, the MUD made a big strategic mistake by allowing the government to breathe with a dialog that buried the recall referendum –the fastest electoral mechanism to leave Maduro out of combat once and for all.
The risk of a major upheaval neither helps President Maduro buy more time nor increases the MUD’s chances to accomplish its electoral goal, as a sudden regime change could boost another leadership.
Although the peaceful and electoral transition is slow but steady, will the MUD manage to lead the opposition to the presidential election? Current internal divisions, between supporters of the dialog and promoters of nonviolent resistance, makes the MUD’s future uncertain.
The year 2016 is almost gone, and President Maduro is rather dancing Salsa enthusiastically -to symbolize not only a political recovery but also that he won this round.
If current situation continues, it is likely that Nicolas Maduro will finish his presidential period. Under this perspective, I believe that the year 2018 might become the turning point for Venezuela.
Based on Article 230 of the Venezuelan constitution, the nation MUST celebrate its presidential election in December 2018. The attempt to suspend this electoral process could be too risky, no matter what circumstances are created to justify it. Even authoritarian regimes like Cuba and Zimbabwe carry out (unfair?) presidential elections.
Whether the regime decides to undertake, suspend or steal the election, it may be the clearest opportunity for the people to oust Chavismo. If Venezuelan democrats are not brave enough to reconquer their liberties this time, it will be very difficult to take back their country afterward.
I like to think that whenever the moment comes, Venezuelans will do the right thing and regain their democracy.
So, as a Venezuelan, I want to give -a kind of For Dummies- explanation about the most important causes of this ridiculous situation: Venezuela’s price and currency controls.
Foreign Currency Exchange Control
It is all about crony capitalism at its worst. With this corrupt and ineffective system, the government provides its “socialist” friends billions of dollars -literally- to import a wide variety of products, including toilet paper and other basic goods.
Instead, most of these guys use the money for different purposes, like selling dollars in the black market -economists call it arbitrage– or purchasing properties in the United States.
Why they would prefer arbitrage?
Because it is more profitable. As of today the bid price for $1 can reach 3,000 bolívares (the local currency). So, the government gives them dollars at a cheaper rate (for example Bs. 600 per $1 and they sell at Bs. 3,000). This huge gap along with high impunity rates (they would not end up in a Venezuelan jail) make arbitrage easier and less risky than imports.
Why Venezuela must import toilet paper and other basic goods?
The socialist government of President Hugo Chavez, continued by his disciple President Maduro, carried out all kind of expropriations and confiscations you can imagine. This led to the collapse of local industries, including the agriculture and the manufacturing sectors.
Thanks to the oil boom ($100+ per barrel) the government was able to do this (and hit the private sector) through export substitution (replacing domestic production with foreign imports).
Why toilet paper shortage?
Since oil prices plummeted in 2014, the government has had troubles finding enough petrodollars to buy stuff abroad and meet demand.
Why the government is running out of cash and can’t get enough from other sources?
On the top of that, the government imposed a regulated price for toilet paper to “guarantee” anyone could buy the basic good. As expected, the product vanished from store shelves and suddenly became a hot black market item, with a much higher price.
Howcan this mess be fixed?
Venezuela must get rid of both controls. This is so basic and unanimous that even Mark Weisbrot, a pro-government economist, said that
The fastest and best way to break this cycle is to allow the currency to float.
… the government can begin to lift some of the dysfunctional price controls.
Why the government insist on those controls?
The two main reasons are corruption and political cost. First, the so-called Bolibuguesía (a group of oligarchs from both public and private sectors) is getting richer and richer with that system.
BTW, the government has a sophisticated audit platform to know which firms receive cheap dollars at the official rate and whether they import goods or swindle the money. However, the government protects those officials and businessmen doing dirty deals through the exchange control.
Second, the government is extremely unpopular (as Hannah Dreier reported “80 percent of voters want Maduro gone this year“). The elimination of the control regime could be their last decision in power, since the initial market imbalance (with price increases) will put them out of their comfort zone and could even unleash a social upheaval. It is natural they are afraid of lifting controls.