When will Venezuela’s Maduro exit the presidency?

Venezuela's acting President and presidential candidate Maduro wears a hat with a bird on it as he speaks during a campaign rally in Vargas
Reuters

In this analysis I comment about four scenarios that could answer the million dollar question. But, first we have to warm up with some context.

In 2015 Chavismo’s unpopularity reached its peak, after years of political and economic mismanagement. The Legislative elections came as a self-inflicted knockout for President Maduro. It seemed that he would not get up and survive the 2016 round.

Then, the moderate opposition -gathered at the Democratic Unity Roundtable (MUD)- started campaigning for the recall referendum that would get President Maduro out of power no later than this year. Predictably enough, Chavismo pulled out his bag of tricks and did not let the challenger throw the final punch.

About 73 per cent of Venezuelans would have voted against Maduro in the recall referendum – a political right under Article 72 of the Venezuelan constitution. In other words, most citizens believe that Maduro’s exit is the best solution to Venezuela’s political and economic crisis.

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.

Yet, why did the MUD accept the dialog? It looks like their main priority is the presidential election. Naturally, the MUD would like to be the undisputed political platform of the opposition’s candidate. So, the initial plan of agitating the people by pushing for a recall vote on the streets sounded like the agenda of the so-called radical opposition and the MUD stepped back.

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.

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Why Venezuela has a black market for toilet paper?

toilet-paper-dollar-roll
Reuters/Umit Bektas

I was checking twitter yesterday and read what Tomi Lahren (@TomiLahren), host of “Tomi” on TheBlaze, said about Venezuela.

Tomi is right with this tweet:

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?

Venezuela’s oil revenues represent some 95 per cent of export earnings.

Price Control

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.

How can 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.