Venezuela increasingly seems to be on the verge of collapse. The economy, which contracted by about 10 percent in the past two years, is in free fall. The central bank sold off 16 percent of its gold reserves in the first quarter alone to raise cash. LATAM Airlines Group and Deutsche Lufthansa suspended flights to the country in recent days because they cant get money out of the country. And the political opposition is campaigning for a referendum to recall the countrys socialist president, Nicolás Maduro.
Amid the mounting chaos, however, Maduro is digging in to secure his grip on power, dimming hopes for an early or peaceful transition that could end the countrys nightmare.
On May 13 Maduro announced a nationwide state of emergency, initially for 60 days, but analysts say it could be extended until next year. The measure allows the government to take almost any action deemed necessary to maintain public order, including expropriating private companies. The president has also adopted increasingly threatening language. At a news conference on May 17, he said the opposition-controlled National Assembly was against the national interest and that it was only a matter of time before it disappears.
Its unraveling before our eyes, as we speak, Patrick Duddy, former U.S. ambassador to Venezuela, told Fox Business Network. There have been a couple of indications within the last week which would suggest, at least economically, things are going to get worse before they get better.
Many Venezuelans appear resigned to that scenario. Maduro has support from around a quarter of the population, says Rafael Klemprer, a real estate developer in Caracas. He will not just resign. Most people are totally fed up, but they are afraid of protesting. Its not clear if the opposition will be able to gather enough protesters to force the governments hand on the referendum.
The opposition has drawn tens of thousands of supporters into the streets recently to protest against the government, but those efforts paled in comparison with the massive demonstrations that occurred in Venezuela two years ago, or the protests that brought millions into the streets of Brazil in recent months to call for the removal of President Dilma Rousseff, who was suspended May 12, pending an impeachment trial. Many opposition members appear cowed by the violent clashes in the country in 2014, which left more than 40 people dead.
The army, which has benefited in myriad ways from the rule of Maduro and that of his predecessor, former army colonel Hugo Chávez, has so far largely stayed out of the countrys political crisis.
The armed forces are a complicated organization, says Ricardo Hausmann, a Venezuelan who heads the Center for International Development at Harvard University. It is easier for them to do nothing. The big test will come if lots of people start to demonstrate and Maduro calls on the army to use bullets on protesters. Are they prepared to turn on the Venezuelan people?
In early May the national guard, which is part of the army, used tear gas and pepper spray to break up a demonstration in Caracas led by Henrique Capriles, who ran against Maduro in the 2013 presidential election. The guard also blocked a march led by Capriles and Henry Ramos Allup, a socialist but opposition supporter who now heads the countrys National Assembly.
Some elements within the army seem amenable to the opposition. Cliver Alcalá, a retired general major who was close to Chávez, recently said Maduro had handled the late presidents legacy very badly and that the government should allow the recall referendum to take place. However, general in chief Vladimir Padrino López, the current army commander and minister of Defense, and other senior officers have recently pledged their unswerving allegiance to the Maduro government.
The president also has some other important cards in his hand. The countrys Supreme Court, which he stuffed with supporters last December, unwaveringly backs him, as does the National Electoral Council, known by its Spanish initials CNE. Maduros approval rating stands at 26.8 percent, according to pollster Datanalisis, underscoring a significant level of hard-core support for chavismo, the highly personalized style of socialism practiced by Maduro and Chávez. By contrast, Brazils Rousseff saw her approval rating plunge to 11 percent at the time of her impeachment.
The economic crisis is inflicting serious hardship on the Venezuelan people. According to Barclays, imports are expected to almost halve, to $20 billion this year from $37 billion last year, causing a severe drop in living standards. People wait in line for hours outside supermarkets, even though most stores lack many basic consumer goods. The authorities have taken drastic steps to raise cash, with the central bank cutting its gold reserves in the first quarter through the sale of 1.38 million ounces, worth nearly $1.7 billion at current prices.
But there are signs that the economic tide may be turning in Maduros favor. The recent rebound in oil prices, which has seen Brent crude rise above $50 a barrel in late May, compared with a 13-year low of $27.50 in January, is easing pressure on the government.
Analysts now believe that Petróleos de Venezuela, the state-owned oil company that acts as an arm of the state and funds many of the countrys social programs, should be in a better position to pay back $4 billion in maturing foreign debt and $5 billion of debt interest that is due at the end of the year. The companys benchmark dollar bond due in 2027 was quoted at 41.70 cents on the dollar on May 31, near the years high.
Miguel Pérez Abad, the countrys vice president for economic policy, recently told journalists that China would renew a $5 billion loan to Venezuela within the next two months. The government has already secured a $400 million loan from the Inter-American Development Bank, and it is expecting between $4 billion and $5 billion in mining investment this year, says Pérez.
Against that backdrop, the opposition must jump through a series of hoops to force a recall referendum. It has already collected 1.85 million signatures, far above the required 1 percent of the countrys 19.8 million registered voters. However, more than 180,000 people must go to the offices of the CNE to verify in person that they back a referendum.
If referendum supporters clear that hurdle, they must gather signatures from more than 20 percent of people on the electoral roll. Assuming a referendum takes place, recall supporters must obtain more than 7.5 million votes, exceeding the number of people who voted for Maduro in the past presidential election, in 2013.
All of this has to happen on an accelerated timetable if the opposition wants to guarantee a real change of power. The referendum must take place by mid-January to force a fresh presidential election. Otherwise, a successful recall drive would simply see Vice President Aristóbulo Istúriz complete Maduros term, which runs until January 2019. Earlier this month Istúriz said Maduro would not be ousted by a referendum this year because one would not take place.
The CNE, headed by Maduro loyalist Tibisay Lucena, seems to be dragging its heels on the referendum process. Some opposition leaders believe that one of the reasons the government recently reduced the working week for public sector employees to two days from five was to make it harder for the CNE to verify referendum signatures.
In a recent poll, Datanalisis found that just over 63 percent of respondents said they would like Maduro to resign or be removed by a referendum this year.
Latin Americas famous pink tide seems to be turning. Not only is Rousseff likely to be convicted by the Brazilian National Congress, but also Argentina now has a center-right president, Mauricio Macri. Evo Morales, Bolivias left-wing president, lost a referendum this year that would have cleared the way for him to run for a fourth term in 2019. Even Cuba, where Maduro received his political training, is moderating its policies, establishing relations with the U.S. and hosting President Barack Obama for a historic visit in March.
Maduro is also becoming more isolated in the region. In mid-May he had a sharp exchange of words with Luis Almagro, the former Uruguayan foreign minister who is now secretary general of the Organization of American States. Almagro attacked Maduro as a traitor and a petty dictator after the president had accused him of being a CIA agent. On May 31 Almagro called for an urgent meeting of the OAS to consider suspending Venezuelas membership over alleged breaches of democracy, but it was far from clear whether that initiative could garner the required support of two thirds of the groups 35 member nations.
In practice, the OAS has little power to force change in Venezuela, and most of the countrys big neighbors are engulfed in their own political problems. If change is going to come, it will have to be driven by domestic forces.