Editor's Note: Stratfor pays close attention to the enduring crisis in Venezuela. Contained here are a collection of recent analyses and reports pertaining to the economic, political and security situation in one of Latin America's most dynamic and troubled countries. For a foundational exploration of the challenges facing the country, read: Venezuela Braces for a Tough 2015.
The coalition of parties that oppose the ruling United Socialist Party of Venezuela (PSUV) have claimed that the government intends to chip away at the their legislative supermajority, which they won in recent general elections. The coalition, known as the Democratic Unity Roundtable (MUD), earned 112 of 167 total seats in the legislature, giving its members more political power than they have had in years. In fact, with those kinds of numbers, the legislature could pass laws virtually unopposed, and it could conceivably vote to remove the vice president, Cabinet ministers and supreme court justices. President Nicolas Maduro will have a hard time maintaining control of the government if the legislature can overrule his decisions.
It is little wonder, then, that unconfirmed reports have suggested that the government may use the judiciary to remove as many as 22 lawmakers from the opposition coalition. Specifically, the government is trying to persuade the judiciary to approve new elections in districts that tallied unusually high numbers of invalidated votes.
Such a move would be an act of desperation, the last thing Caracas can do to prevent the opposition from possessing the political power a supermajority confers. But it is also risky. Even if the supreme court approves new elections in select districts, there is no guarantee that the government would win. The initial elections, held Dec. 6, represented a resounding rejection of the PSUV, not to mention the high inflation and persistent food shortages that arose during its tenure. The obvious risk is that the elections will yield similar results.
But perhaps more detrimental to the ruling party are the divisions that this decision could create. The PSUV is already divided; National Assembly Speaker Diosdado Cabello and Defense Minister Vladimir Padrino Lopez initially disagreed over whether to officially recognize the outcome of the Dec. 6 elections. Since Padrino Lopez controls the armed forces — a major arbiter of Venezuelan political power — his support of the new elections is vital for the stability of the current government.
Dec. 6 - Dec. 7
Analysis: Old strategies are no longer yielding results for Venezuela. Nevertheless, in 2016, the Venezuelan government will continue prioritizing foreign debt payments and reinvestment into the energy sector at the expense of imports. So far, this strategy has allowed it to maintain oil production and avoid a disorderly default on its foreign debt. But challenges will arise as inflation frustrates voters and public funds become depleted.
To make matters worse, the ruling United Socialist Party of Venezuela's (PSUV's) potential loss of its legislative majority in Dec. 6 elections could diminish the government's firm control over the legislative branch. Moreover, renewed protests by the opposition in 2016 are likely to be more threatening than the wave of unrest that occurred in 2014, simply because the economy is in much worse condition. As the economy deteriorates and unrest mounts, the government's unity will be tested, and deeper splits could develop between the major political factions running the country. Read the full analysis here: Venezuela's Problems Run Deep.
Analysis: The balance of political power in Venezuela is poised for a major change following Dec. 6 legislative elections, when the ruling United Socialist Party of Venezuela (PSUV) and the main opposition Democratic Unity Roundtable will square off over 167 National Assembly seats. In the lead-up to the elections, both parties have sought to portray themselves as unified fronts. In actuality, the PSUV is split into two main factions, one associated with President Nicolas Maduro and the other with Assembly Speaker Diosdado Cabello, and several smaller factions. Read the full analysis here: A Loss for Venezuela's Ruling Party Will Challenge Its Main Leaders.
Venezuela's government added a 60-day extension to the state of emergency for a number of municipalities in the states of Zulia and Apure along its border with Colombia. The extension applies to the municipalities of Machiques de Perija, Rosario de Perija, Jesus Enrique Lossada, Catatumbo, Jesus Maria Semprun, Colon and La Canada de Urdaneta.
Speaking at the Summit of South American and Arab Countries (ASPA) in Riyadh, Venezuelan President Nicolas Maduro called for "fair price policies" on the global oil market. Maduro also announced that Venezuela would host the 2018 ASPA Summit. Venezuela relies heavily on crude oil exports and Maduro has long called for a fixed price as a way to counter falling oil prices. Maduro wants prices of at least $70 per barrel, Reuters reported. The Venezuelan president is facing increasing political and economic pressure ahead of Venezuela's Dec. 6 parliamentary elections.
Also on Nov. 11, Venezuelan President Nicolas Maduro's godson and nephew were arrested in Port-au-Prince, Haiti, as part of a U.S. sting operation. The U.S. Drug Enforcement Administration coordinated the effort to detain Efrain Antonio Campos Flores and Francisco Flores de Freites, who were caught smuggling just under a ton of cocaine. After the arrest, Haitian authorities transported the two men to New York City, where the U.S. Attorney's Office for the Southern District of New York presented the drug charges against them.
The Venezuelan government extended the state of emergency in the Zulia state cities of Indigena Bolivariano Guajira, Mara and Almirante Padilla for a further 60 days. The government began extending such measures in states along the Colombian border in October, ostensibly to curb smuggling and other criminal activities.
Venezuelan President Nicolas Maduro has issued a presidential decree extending the state of emergency by 60 days in several municipalities of Tachira state, on the country's border with Colombia. The municipalities include Bolivar, Pedro Maria Urena, Junin, Capacho Nuevo, Capacho Viejo and Rafael Urdaneta. The government has played up the border closure, which has been in place since Aug. 21, as a necessary maneuver to combat cross-border smuggling and crime. But the decision to provoke a political disagreement with Colombia is part of the ruling United Socialist Party of Venezuela's broader strategy of minimizing future threats to the party's leadership.
Analysis: A political turnover could be in store for Venezuela, and the country's leaders are doing their best to prepare for it. The Dec. 6 parliamentary elections are less than two months away, and the ruling United Socialist Party of Venezuela (PSUV) stands a good chance of losing its legislative majority. Faced with the prospect of diminished political power, the party's key figures are taking steps to secure their own futures, including banding together and pre-emptively limiting the opposition's room to maneuver.
Even if the opposition manages to gain control of Venezuela's legislature in December, its effect on the country's broader economic crisis will be minimal. But because an electoral loss could accelerate the PSUV's fragmentation, Venezuela's political landscape could look very different in the coming year. Read the full analysis: Venezuela's Leaders Prepare for a Risky Election.
In September, a U.S. court indicted Venezuela's former financial intelligence director Pedro Luis Martin and former anti-drug unit head Jesus Alfredo Itriago on charges of trafficking cocaine into the United State through Colombia, Venezuela and Mexico, according to newly unsealed documents. There whereabouts of both men is currently unknown. The government of Venezuelan President Nicolas Maduro has denied official complicity in drug trafficking in the past, although it has not yet commented on this case.
Analysis: A recent deal between Venezuela and Guyana will not resolve the two countries' border issues. On Sept. 27, Venezuelan President Nicolas Maduro and Guyanese President David Granger met in New York at a reunion hosted by U.N. Secretary-General Ban Ki Moon. The two heads of state reached an agreement on Guyana's next ambassadorial nominee to Venezuela, Marilyn Cheryl Miles, who Caracas has refused to accept thus far in light of the Guyanese government's efforts to seek an International Court of Justice ruling that would award it territory to which Venezuela also lays claim. During the meeting, Maduro also expressed his desire to continue dialogue on the territorial issue in the hope of negotiating a resolution. Read the full analysis: A South American Border Dispute Drags On.
Venezuela President Nicolas Maduro is extending the state of emergency to the state of Amazonas, along the border with Colombia. Maduro also proposed a 6-month plan to secure Venezuela's borders. On Aug. 22, the president declared a state of emergency in six municipalities near the Cucuta crossing in Tachira state, ostensibly to counter the threat posed by Colombian criminals and to curb food and gasoline smuggling to Colombia. The closures could also be a political tactic ahead of elections.
The president of Guyana, David Granger, said that Venezuela has been increasing the number of military personnel on the border with Guyana. Granger said that Venezuela is taking a dangerous route instead of seeking a peaceful resolution to their territorial dispute. Guyana announced Sept. 21 that it will resort to the International Court to solve the maritime boundary tensions with Venezuela.
Analysis: A key Venezuelan legislative election is less than three months away, giving the country's leaders little time to decide how to safeguard against threats to their power. The main threat to the ruling PSUV at this point is the loss of political power it could experience if it loses control of the legislature after the Dec. 6 election. But the party's core leaders face an additional threat: drug trafficking charges in the United States. Read the full analysis here: Venezuela's Next Election Poses a Double Threat to Leaders.
Venezuelan opposition leader Leopoldo Lopez was convicted of inciting violence and sentenced to 13 years in prison Sept. 10, as his supporters and Venezuelan authorities clashed outside the courthouse, Mercopress reported Sept. 11. Lopez, the founder and leader of the Voluntad Popular party, had a leading role in organizing the 2014 protests against the government, which turned violent. One man was killed during the conflict outside the Caracas courthouse, and several more were injured. Amnesty International, the United Nations and the U.S. government, among others, have condemned Lopez' arrest and imprisonment.
Venezuelan President Nicolas Maduro extended the states of emergency in the Zulia state cities of Guajira, Mara, and Almirante Padilla. Maduro also ordered the border crossing with Colombia in the Zulia town of Paraguachon to be closed. In recent weeks, Maduro has ordered a number of border closures in Tachira state. Caracas is scapegoating ahead of what may be a period of unrest before elections.
Venezuelan military authorities announced Sept. 3 that trucks will be allowed to begin crossing the Venezuela-Colombia border in Tachira State in the coming hours. The border has been closed since Aug. 20 because of an alleged criminal attack against Venezuelan national guardsmen.
China will loan Venezuela $5 billion to help increase oil production in the midst of falling oil prices. Venezuelan President Nicolas Maduro signed the deal, which also renews another $5 billion loan from earlier in the year, during a visit to China this week. Venezuela has received more than $50 billion in loans from China since 2005, repaying most with oil shipments.
The Venezuelan government declared a state of emergency in four more municipalities: Lobatera, Panamericano, Garcia Hevia and Ayacucho in Tachira state have now been added to the list. The municipalities of Bolivar, Pedro Maria Urena, Junin, Capacho Nuevo, Capacho Viejo and Rafael Urdaneta have been in an offical state of emergency since Aug. 22, after an unidentified gunmen killed three soldiers near the Colombian border on Aug. 19.
Geopolitical Diary: The Venezuelan and Colombian foreign ministers met in Cartagena on Aug. 26 to discuss Venezuela's Aug. 20 decision to close the most used border crossing between the two countries. Venezuelan President Nicolas Maduro ordered the Cucuta crossing's closure after an attack by unidentified gunmen left three soldiers injured Aug. 19. On Aug. 22, the president declared a state of emergency in six municipalities near the Cucuta crossing in Tachira state, ostensibly to counter the threat posed by Colombian criminals and to curb food and gasoline smuggling to Colombia. Military raids in a makeshift shantytown near the border accompanied the declaration, which resulted in the expulsion of more than a thousand Colombian citizens to Cucuta, Colombia, over several days. Read the full Geopolitical Diary here: The State of the State of Emergency in Venezuela.
Venezuelan President Nicolas Maduro ordered that the Venezuela-Colombia border be closed for 72 hours beginning Aug. 20. Maduro said that Colombian paramilitary forces ambushed three Venezuelan soldiers in San Antonio, Tachira state. Vielma Mora, the governor of Tachira, said that the soldiers were injured in an anti-smuggling operation. Venezuela has closed the border on other occasions, but usually for only a few hours at a time.
Analysis: With crucial legislative elections less than four months away, Venezuela is tilting toward a major social crisis. Endemic food shortages have plagued Venezuela for years, worsening with the decline of global oil prices in late 2014. Now they are the norm across the country. This has stoked public discontent and led to the isolated looting of food stores and supermarkets. The deterioration of law and order is likely to continue. Even if the ruling United Socialist Party of Venezuela (PSUV) loses its legislative majority in December elections, the government's inability to keep store shelves even minimally stocked will lead to further unrest. Read the full analysis here: Venezuela's Crisis Nears the Tipping Point.
The Venezuelan Central Bank has ordered banks in the Venezuelan state of Zulia to limit withdrawals to 40,000 bolivares per individual because of a shortage of 50 and 100 bolivar bills. Venezuela is struggling to stabilize its economy and to manage long-term shortages of basic goods.
Geopolitical Diary: As we scan the proverbial geopolitical horizon, there are two countries that stand out as high-risk targets for significant social unrest in the coming months. Not surprisingly, both are oil producers terrified at the sight of Brent crude falling below $50 per barrel on Monday.
The first is Venezuela, where even the most optimistic of government-manufactured statistics should give observers a feeling of deep foreboding. Venezuela burns through its oil reserves at a dizzying rate of roughly $1 billion per month. Not only that, but the country is actually down to about $16.9 billion in total reserves, with only a fraction of that amount — estimated at less than $1 billion — held in liquid reserves. Given the country's heavy dependence on oil revenue, it hardly takes an expert statistician to see that Venezuela is in an untenable financial situation. The lack of foreign exchange to finance imports has led to severe food shortages. And the Dec. 6 legislative election only complicates matters, as an already hamstrung government is going to be all the more resistant to imposing structural economic reforms that are as unpopular among voters as they are necessary to the country's financial viability. Read the full Geopolitical Diary here: Russia, Venezuela Hold Anarchy at Bay.
One man was killed and 15 people were arrested when a group of people looted grocery stores and attacked state-owned vehicles in San Felix. Unconfirmed reports indicated that up to 60 people were arrested. The National Guard deployed armored vehicles to San Felix, and the looting has reportedly subsided. The riots occurred in the midst of high inflation and food shortages as a result of the country's economic crisis.
The border between Colombia and Venezuela closed after national guard personnel from Venezuela killed a Colombian merchant in a confrontation. The death of the Colombian citizen sparked protests in the Mojon 23 border area separating Cucuta, Colombia from San Antonio del Tachira in Venezuela. Colombian and Venezuelan authorities are meeting to discuss anti-smuggling operations on both sides of the border.
The release of opposition protesters imprisoned in 2014 will not be a part of ongoing negotiations between Venezuela and the United States aimed at improving relations, Venezuelan Foreign Minister Delcy Rodriguez said in a July 15 interview. Demands for the release of political prisoners are one of the key U.S. requirements, in addition to a free and fair Dec. 6 parliamentary vote, a senior U.S. official said.
Analysis: Mercosur, the customs union consisting of Brazil, Argentina, Uruguay, Paraguay and Venezuela, may soon heighten its efforts to craft a trade deal with the European Union. Mercosur's next summit, to be held July 16-17 in the Brazilian capital, comes amid increasing conflict within the bloc over negotiating trade deals with external parties, particularly with the European Union. However, the second half of the year could see greater movement toward a free trade agreement between Mercosur and the European Union, with Brazil playing a more active role in expanding Mercosur's trade prospects and relationships. Read the full analysis here: Mercosur: Striving for Consensus on EU Trade.
Stratfor's Third-Quarter Forecast: In coming months, the Venezuelan government will attempt to balance the competing domestic priorities of saving dollars for paying foreign debts due in the fourth quarter of 2015 and funding social spending ahead of legislative elections Dec. 6. Venezuela will be able to tap limited sources of funding, such as government spending funds and central bank reserves, in an attempt to avoid future default. Despite the risk of further declines in President Nicolas Maduro's already low public approval ratings, the government also will continue to limit foreign currency allocations for imports to protect its dwindling stock of dollars. However, the Venezuelan government is unlikely to implement any major economic reforms, such as a currency devaluation or fuel price increase, in the third quarter because sharp economic adjustments prior to the election would further endanger the ruling United Socialist Party of Venezuela's popularity.
Increasingly dissatisfied citizens will hold a few isolated demonstrations in the third quarter, but widespread organized unrest promoted by the country's political opposition is unlikely. With an election date set, Venezuela's opposition parties will be focused on contesting legislative elections rather than spurring major demonstrations. Meanwhile, the Venezuelan government could implement measures — such as redistributing food or consumer goods from private firms to potential voters at a discount — to briefly raise its public approval ahead of the elections. Read the full Forecast here: Stratfor's Third-Quarter Forecast 2015.
People's Ombudsman of Venezuela Tarek William Saab met with U.S. Senator Robert Corker in Caracas July 1. Saab said that he spoke with Corker about bilateral relations, upcoming Dec. 6 legislative elections and unspecified prisoners held in Venezuela.
Geopolitical Diary: U.S. President Barack Obama announced July 1 that the United States and Cuba will formally re-establish diplomatic ties. Both countries will eventually appoint ambassadors, while embassies in Havana and Washington will be opened on or after July 20. The opening of embassies is a crucial step in renewing relations with Cuba, though the Cuban embargo could take years to lift because of the need for congressional approval. The U.S.-Cuban rapprochement stands out because it allows the United States increased leeway to address two major events playing out in the hemisphere, both of which directly relate to Cuba.
The first of these issues is peace negotiations in Havana between the Revolutionary Armed Forces of Colombia and the Colombian government. Talks are progressing despite an upsurge in FARC attacks nationwide since late May. The violence — that has long been used to get more concessions out of talks — is a sign that substantive issues are likely under discussion. Read the full Geopolitical Diary: Improving U.S.-Cuban Ties Create Openings in Colombia and Venezuela.
United States Senator Robert Corker arrived in Venezuela on June 29 to meet with unspecified high-ranking Venezuelan officials. Corker, who is the chairman of the Senate Foreign Relations Comittee, is in Venezuela as part of a U.S. diplomatic initiative to improve relations with the country. According to the Miami Herald, the Venezuelan government may announce the release of Venezuelan political prisoners, including opposition figure Leopoldo Lopez, during the visit.
The Venezuelan government in a foreign ministry press release proposed the creation of a high-level bilateral commission to discuss a solution to the unresolved maritime border between Colombia and Venezuela. Venezuelan President Nicolas Maduro on May 27 decreed a military defense zone that extends into waters claimed by both Colombia and Venezuela.
Meanwhile, Venezuelan opposition leader Leopoldo Lopez ended his hunger strike June 23 after 30 days, his wife announced at Voluntad Popular headquarters. The National Electoral Council announced June 22 that it would hold legislative elections Dec. 6. A fixed date for the elections had been one of the conditions set to end the strike.
Venezuela's legislative elections will be held December 6, Venezuelan National Electoral Council President Tibisay Lucena said during a live broadcast June 22 on Telesur. The Venezuelan government has come under increasing economic pressure that is threatening the political status quo.
Geopolitical Diary: The president of Venezuela's National Electoral Council held a nationally televised unscheduled press conference June 22 to announce that legislative elections would be held Dec. 6. While it is not unusual to formally call for elections six months ahead of the scheduled date, the council's silence on electoral proceedings over the past several months spurred speculation among observers within Venezuela's political opposition that the election would be delayed or canceled outright — a move that would be politically untenable for the weakening government in the long run. In analyzing the costs and benefits to the government, Stratfor forecast that the government would hold elections rather than risking the consequences of not holding elections. The National Electoral Council announcement means that Venezuela has committed itself to holding elections, but political uncertainty will grow in the coming months as the country's long-running crisis progresses. Read the full Geopolitical Diary here: In Venezuela, Elections Are the Lesser of Two Evils.
Exxon Mobil Corp. and Venezuela's state-owned energy company, Petroleos de Venezuela, announced June 18 that they will sell their joint venture in a 189,000-barrel-per-day refinery in Chalmette, Louisiana, to PBF Energy Inc. for $322 million. The sale also includes chemical production facilities and interests in several subsidiaries. The transaction will be complete by the end of 2015.
Caracas will eliminate restrictions on consumer purchases that allow shoppers to buy items only on specific dates according to the registration numbers on the consumers' national identification cards, Venezuelan Food Minister Carlos Osorio said June 17. The minister also said the measure will be slowly removed by presidential order. The government decision is intended to prevent Venezuela's further economic and political unraveling.
Recent discussions between Venezuelan and U.S. officials suggest that tentative negotiations between the two countries are taking shape. U.S. State Department Counselor Thomas Shannon has met with Venezuelan officials on three occasions — twice with Venezuelan President Nicolas Maduro in Caracas and once with National Assembly Speaker Diosdado Cabello in Port au Prince, Haiti. The United States has begun engaging Venezuela at a time when Caracas' public finances are stretching thin. These political contacts are still in an early stage but may grow into wider negotiations on Venezuela's political future.
The information available about the meetings suggests that both sides may still be feeling out potential concessions rather than making substantive decisions. Shannon's discussion in Haiti reportedly dealt with whether the United States would repeal an executive order imposing sanctions on seven Venezuelan officials allegedly involved in human rights violations. Some officials are part of a list of dozens of Venezuelan officials that includes Cabello, who faces a criminal investigation in a U.S. federal district court for allegedly facilitating cocaine trafficking to the United States, a fact U.S. negotiators could leverage. In the meeting, Shannon also reportedly asked for Venezuela to set a date for legislative elections and reiterated long-standing U.S. demands to release political prisoners.
Ultimately, both Caracas and Washington have incentives to approach these negotiations seriously. Maduro appears to be having trouble imposing badly needed political and economic reforms that would inevitably affect the interests of other Venezuelan leaders. Other leaders have already resisted change, delaying policies such as a devaluation of the country's overvalued exchange rates and increases in gasoline prices. Cabello also likely wants to secure amnesty from a potential indictment for cocaine trafficking to the United States.
Simultaneously, Venezuela's worsening economic crisis has motivated the United States to negotiate with Venezuelan officials to facilitate a smoother political and economic transition rather than to watch its disorganized economy collapse. But to enact the sweeping reforms Venezuela needs to mend its economic distortions, resistance from the military and other elite, such as Cabello, needs to be neutralized or negotiated away. Here the United States may exercise policies, whether in the form of further sanctions or continued criminal investigations, to induce Venezuelan officials to accept U.S. demands.
Venezuela's government is reportedly considering implementing a new foreign exchange mechanism that would phase out the overvalued exchange rate of 6.3 bolivars to the U.S. dollar in favor of an exchange rate of either 20 bolivars to the dollar or closer to the current rate of the Simadi mechanism, which is 200 bolivars to the dollar.
Analysis: As the price of Brent crude continued its five-day dip, settling at $64 per barrel Tuesday, we can assume the latest slump is extremely worrisome for Maduro. The petrodollars he needs to keep the Venezuelan economy afloat are dwindling. He has only $17.8 billion sitting in largely illiquid reserves, most of which are stored in gold, and total reserves are declining by roughly $2 billion every month. Less oil revenue means fewer dollars to fund imports, which in turn means the average Venezuelan with a necessary ID card can shop only on days designated by the government. And on those days, that citizen has to rush to stand in maddeningly long lines patrolled by security guards, only to find that basic goods, from toilet paper to milk, are stripped from the shelves. Read more here: Disbanding the Venezuelan Mafia.
Analysis: Unconfirmed reports say the Venezuelan government is planning a takeover of distribution networks belonging to Empresas Polar, the country's largest private food production and distribution firm. Polar CEO Lorenzo Mendoza sent an open letter to Maduro on April 30 saying the company was open to discussing Venezuela's food supply problems as well as possible solutions. According to one report, the Venezuelan Food Ministry may be planning to seize Polar's distribution networks, intending to redirect flows of food products to state-owned supermarkets, where such products are becoming increasingly scarce. Redirecting to these stores could temporarily provide food items to the poorest Venezuelan voters ahead of this year's legislative elections. While it is not entirely clear that Caracas has decided to take such measures, it is plausible given the government's needs. Read more here: Venezuela Considers Food Distribution Takeover.
The president of Venezuelan state-owned oil company Petroleos de Venezuela and the company's financial director disagree on how to allocate funds within the company. Sources claim President Eulogio del Pino believes the company should reinvest in increasing oil production, while Financial Director Erick Malpica Flores insists funds should go toward paying the state's foreign debt and sponsoring the upcoming legislative election. Some reports claim del Pino could be replaced by former Venezuelan Ambassador to the United States Bernardo Alvarez Herrera or by former Interior Minister Miguel Rodriguez Torres.
The United States is willing to discuss the placement of a Venezuelan ambassador in Washington, Assistant Secretary of State for Western Hemisphere Affairs Roberta Jacobson said April 21. Jacobson said the United States would review a year-old petition to appoint Maximilian Arvelaez to the position. Maduro requested a review of the petition during last week's Summit of the Americas.
The Venezuelan National Electoral Council is drafting a plan to reorganize the nation's electoral districts to increase the total number of legislators to be elected later this year. The reorganization could allow more legislators to be elected in constituencies where voters typically support pro-government candidates and would reduce the number of legislators elected in heavily pro-opposition areas. Caracas is struggling to manage public opinion amid a worsening economic crisis.
Analysis: With increased foreign exchange restrictions now legally in effect, the Venezuelan government is rationing its limited pool of dollars to continue funding imports and foreign debt payments this year. On April 12, anecdotal evidence emerged in Venezuelan media of increased lines at public banks as citizens sought access to their allotted amounts of foreign currency. On April 10, the National Foreign Trade Center (Cencoex) cut disbursements of foreign currency to travelers by nearly 70 percent in some cases. The move limits outflows of dollars from the Venezuelan government, thereby saving more for crucial payments and imports to avoid default and stave off social unrest. However, the move will make it harder for Venezuela's citizens and the already struggling private sector to repatriate profits or fund operations. Read more here: In Venezuela, Spending Cuts Are Not Enough.
Analysis: The United States wants to get involved in Venezuela's economic crisis while it still might be able to shape the direction of events. It signaled as much April 7, when it dispatched U.S. State Department Counselor Thomas Shannon to Caracas to meet with Maduro and members of Venezuela's political opposition. Then, on April 11 at the seventh Summit of the Americas held in Panama, Maduro met privately with U.S. President Barack Obama. But even if Washington were to intercede by brokering a negotiation between the government and its opponents, perhaps fostering a coalition government, the outcome of Venezuela's crisis depends first and foremost on domestic political and economic factors. Read more here: The United States Cannot End Venezuela's Crisis.
Maduro said relations between the United States and Venezuela could enter a new, improved era following the U.S. clarification on an executive order that called Venezuela a security threat. A day earlier, the White House said that the wording in the executive order that imposed sanctions on several Venezuelan citizens was part of a standard template and that Venezuela did not pose a security threat to the United States. However, U.S. officials did say the country threatened the stability of the region. Maduro met with U.S. State Department Counselor Thomas Shannon on April 8 and called the executive order the biggest mistake Obama has made while in office. Maduro said he was optimistic ties could improve after what he called Obama's partial rectification of the statements.
A shootout in Caracas between colectivos Alexis Vive and La Piedrita killed four April 8, according to unverified Twitter statements. Rumors follow similar reports of a major colectivo shootout in several parts of central and western Caracas in late March.
Venezuela is not a threat to U.S. security, and the executive order that indicated it was is a standard template, Deputy National Security Adviser Benjamin Rhodes said April 7. An executive order signed in March freezing the U.S. assets of seven Venezuelan officials said Venezuela posed an extraordinary threat to U.S. security. The wording has caused widespread condemnation in Venezuela. Presidential Adviser for the Western Hemisphere Ricardo Zuniga said Venezuela did pose a risk for its neighbors and other countries in the region.
Analysis: Maduro is facing a major political dilemma. He must decide whether he can afford to hold legislative elections or delay them until his low public approval ratings recover. The country's deteriorating financial situation threatens to hurt support for the ruling United Socialist Party of Venezuela (PSUV). If the party loses its majority in the legislature, the opposition could gain more control over budgetary and political decisions, even opening the possibility of a recall effort against Maduro in 2016.
Delaying or suspending the elections, however, presents even more risk for Maduro and his party. Venezuela's economy is unlikely to recover anytime soon, so dissatisfaction among voters is likely to increase as time goes on. The later an election is held, the worse the PSUV would likely perform. Canceling elections could erode Maduro's support among PSUV members who want to run for office while giving the opposition a focal point to rally around, potentially provoking a crisis even sooner. Between the two options, the Maduro government is indicating that it will hold the elections sooner rather than later. However, it is also forming a backup plan, should it need to take more drastic measures to maintain power. Read more here: Can Venezuela's Maduro Afford to Hold Elections?
The government of China reportedly plans to lend around $10 billion to Venezuela in the next several months, an anonymous Petroleos de Venezuela official said. The agreement on the first $5 billion is reportedly set to be finalized this month as part of the Joint Chinese-Venezuelan Fund. The second half of the assistance would go toward Chinese companies boosting development of Venezuelan oil fields and would be finalized in June.
Venezuela's National Assembly on March 15 granted Maduro the power to govern by decree until Dec. 31. Maduro requested the power, citing the need to fix the country's severe economic crisis and protect against security threats from the United States. He claims the United States is attempting to overthrow him with a coup, a charge Washington characterized as baseless. Critics have accused Maduro of seeking the ability to silence critics and hoard power.
Maduro announced military exercises starting March 14, saying Venezuela needs to be prepared and cannot be like Libya or Iraq. Separately, Venezuela’s legislature is expected to soon pass a law that would allow Maduro to rule by decree for six months. The actions come in response to U.S. sanctions on seven Venezuelan officials.
Maduro has asked the Venezuelan National Assembly to approve a new law that would give him so-called special powers to keep the peace and counter imperialist aggression. The announcement comes after the United States placed sanctions on several Venezuelan leaders and called the country a national security threat. Few details about the law have been released, but if passed it would likely give Maduro power to rule by decree in some areas. The Venezuelan National Assembly will consider the law March 10.
Also on March 9, Obama signed an executive order placing sanctions on seven Venezuelan officials accused of threatening the national security and foreign policy of the United States. The listed individuals are former Bolivarian National Guard Director of Operations Antonio Jose Benavides Torres; Bolivarian National Intelligence Service Director General Gustavo Enrique Gonzalez Lopez; former Bolivarian National Guard General Commander Justo Jose Noguera Pietri; Bolivarian National Police Director Manuel Eduardo Perez Urdaneta; former Bolivarian National Intelligence Service Director General Manuel Gregorio Bernal Martinez; Bolivarian National Armed Forces Inspector General Miguel Alcides Vivas Landino; and public prosecutor Katherine Nayarith Haringhton Padron. The sanctions freeze these individuals' assets in the United States, block them from entering the country and make it illegal for U.S. citizens to conduct business with them.
Delegations from Petrocaribe member states are meeting March 6 in Caracas for the energy alliance's ninth summit. Maduro, Foreign Minister Delcy Rodriguez and Oil and Mining Minister Asdrubal Chavez are scheduled to attend. The meeting comes at a time when Venezuela is seeking to raise funds by any means at its disposal to address its public financial crisis. As of March 5, an unconfirmed report claimed Venezuela intended to sell $1.5 billion worth of gold from its reserves (around 10 percent of the known amount) to raise its liquid reserves.
Given Caracas' cash problems, Venezuela could use the meeting to formalize either a decrease in energy shipment volumes to member states or to change the financing terms of Petrocaribe. Such a decrease in shipments would raise the cost of energy imports for vulnerable member states like Nicaragua and the Dominican Republic. Before the oil price drop in 2014, Petrocaribe and other subsidized energy exports represented less than 10 percent of Venezuela's daily oil production, a low burden to overall finances. Member states paid a portion of the shipments' value up front when oil prices were low, and under the terms of the agreement, this portion became smaller as oil prices rose. But since Venezuela faces significantly reduced oil income and no real economic lifelines, raising cash flow into depleted public finances is critical for the government. Petrocaribe is a plausible area in which such cost cutting could occur.
The Venezuelan Central Bank has suspended a planned foreign exchange auction through the recently implemented Marginal Foreign Exchange System. Instead, the central bank will directly administer foreign exchange to buyers.
The head of the U.S. diplomatic mission in Caracas held a rare meeting March 2 with Venezuela's foreign minister as tensions between the two countries increased. Two days earlier, Maduro announced that the government had detained Americans accused of spying and would be taking steps to shrink the U.S. Embassy staff. Four missionaries from North Dakota were detained and deported from Venezuela the week before. It is unclear whether they are the Americans that Maduro has accused of espionage.
Two marches took place in Caracas, with one group protesting a crackdown on government opposition and another supporting President Nicolas Maduro. Anti-government activists gathered to denounce the Feb. 20 arrest of Caracas' mayor and the Feb. 24 killing of a teenager at a protest. The Venezuelan government, meanwhile, called on supporters to march to commemorate the anniversary of the protests of 1989. Several avenues in Caracas faced traffic jams because of the opposing rallies, highlighting unrest as Venezuela struggles with its economic crisis.
The trial against 10 Venezuelan military officers involved in a 2014 coup plot is set to begin Feb. 25, Ultimas Noticias reported Feb. 24. The group to stand trial consists mostly of air force officers, including Gen. Oswaldo Hernandez. The news comes just days after the arrest of Caracas metropolitan Mayor Antonio Ledezma for his alleged participation in a foiled coup attempt.
About 30 armed people and members of the National Bolivarian Intelligence Service seized the opposition Copei party headquarters in Caracas. According to Copei President Roberto Enriquez, 12 party headquarters across the country have been taken over by armed individuals, Diario 2001 reported.
Members of Venezuela's Bolivarian National Intelligence Service, known by the acronym Sebin, arrested Caracas metropolitan Mayor Antonio Ledezma on Feb. 19. Ledezma is an opposition politician who was prominent in supporting a 2014 wave of protests. On the same day, opposition politician Leopoldo Lopez, who has been held at the Ramo Verde prison outside Caracas since Feb. 18 for his role in organizing and leading protests, was allegedly transferred from the prison to an unknown location. The arrests follow Maduro's Feb. 12 claim that there was a coup plot planned by Ledezma and opposition legislator Julio Borges. Maduro confirmed Ledezma's arrest in a televised address Feb. 19. Defense Minister Gen. Vladimir Padrino Lopez was among those in attendance. Maduro claimed in the address that a coup plot by the opposition was still ongoing, and he called on followers to prepare within 72 hours to oppose it.
Maduro and his predecessor, Hugo Chavez, both relied on arrests of opposition politicians to manage escalating dissent. However, Ledezma's arrest is notable because it comes at a particularly sensitive time for the Maduro administration. Some recent events cast doubt on Maduro's claims of coup plots. For example, CNN released a telephone interview with Lopez from the Ramo Verde prison Feb. 18, despite the close monitoring by prison authorities to which Lopez is reputedly subjected. As for Ledezma's arrest, the possibility remains that Maduro is trying to pre-emptively crack down on the opposition to forestall future protests. But he would only do this if he was sure of complete support from the armed forces, particularly the army.
Notably, Gen. Vladimir Padrino Lopez, who functions as both the country's defense minister and the head of the joint chiefs of staff, attended Maduro's Feb. 19 speech. When Maduro last spoke of a coup plot Feb. 12, National Assembly Speaker Diosdado Cabello was next to him. Ledezma's arrest could trigger opposition protesters to mount potentially disruptive demonstrations. While this outcome is not a forgone conclusion, the arrest is nevertheless a notable event whose fallout bears watching in the coming days and weeks. We will also be watching to see whether the armed forces are fully behind Maduro and whether he is using this event as an opportunity to disrupt the opposition.
A coup planned against the Venezuelan government has been stopped, and civilians and members of the military have been detained, Maduro said in a televised speech Feb. 12. According to Maduro, those involved were being paid U.S. dollars, and one of the suspects had been issued a U.S. visa to use if the plot failed. The coup was planned to coincide with the one-year anniversary of the beginning of violent protests, and it allegedly would have involved the bombing of the presidential palace and of the TeleSur offices in Caracas, as well as the assassination of opposition members. Venezuelan Minister of Defense Vladimir Padrino Lopez said on Twitter that the military is still loyal to Maduro's government.
Analysis: Venezuela's new foreign exchange mechanism will likely lead to a minor devaluation of the bolivar, but it will not be enough to address the country's worsening economic crisis. The Marginal Foreign Exchange System, which was announced Feb. 10 and will take effect Feb. 19, will complement the country's low exchange rate, 6.3 bolivars to the dollar, and the existing Sicad mechanism, which trades at 12 bolivars to the dollar. According to an unconfirmed report, the new mechanism could trade the currency at around 130 or 140 bolivars to the dollar, figures more in line with the black market rate of nearly 190 bolivars to the dollar. Read more here: Venezuela's Economic Measures Leave Crisis Unresolved.
Also on Feb. 11, Venezuelan Finance Minister Roldolfo Marco Torres said the country will honor its foreign debt commitments and is ready to pay $2 billion in March. Torres said the government has more than $250 million in bonds. Venezuela has cut its budget to make up for a revenue shortfall arising from low oil prices.
Venezuelan police arrested the former head of Petroleos de Venezuela's Western Division, Jose Luis Parada, on charges of embezzlement and conspiracy to commit a crime. Parada's relative, Nubia Parada, was arrested Jan. 30 on corruption charges related to selling stolen fuel.
Venezuelan authorities arrested Oil Ministry official Nubia Parada on corruption charges and will bring her before a court today, according to a state prosecutor's office statement. Parada oversees the domestic fuel market and has held her post for nearly a decade. This is one of the first arrests of a high-ranking official tied to gasoline smuggling that the Venezuelan government has made during Maduro's administration.
Several thousand opposition supporters marched in Caracas but stopped prematurely after scuffles broke out between police and students, opposition leaders said, Bloomberg reported. As a result, opposition Gov. Henrique Capriles also canceled his planned speech. The demonstrators marched to protest product shortages and demand a change in government as the Venezuelan economy continues to struggle and opposition forces try to make gains.
Analysis: With Venezuela deep in an economic crisis, the most prominent leader among its political opposition, former presidential candidate Henrique Capriles of the Mesa de la Unidad Democratica coalition, has called for a protest in Caracas on Jan. 24 that will be accompanied by national demonstrations. The country's politically active student protest movements have also called for nationwide demonstrations to take place Jan. 23. The renewed protest activity suggests that the Venezuelan opposition, which for nearly a decade was too internally divided and politically unpopular to threaten the government in elections, will try to capitalize on public discontent to make gains in the legislative elections tentatively scheduled for late 2015. For the opposition, taking control of the legislature would be a significant political victory that could grant it greater control over certain aspects of the government's domestic policies. Read more here: Venezuela's Opposition Poised to Make Gains.
Also on Jan. 22, A foreign exchange scheme comprising three markets was formed to meet all foreign currency needs, Maduro said. Maduro, who had returned from an overseas trip to seek funding for Venezuela's ailing economy, said the exchange rate of 6.30 Venezuelan bolivars to a U.S. dollar will remain in place for food and basic items.
Maduro returned to Caracas after completing a 12-day world tour. Maduro also said he would renew efforts to improve the economic situation of Venezuela and would hold his administration accountable. Maduro left Venezuela on Jan. 5 to visit Russia, China, Iran, Saudi Arabia, Qatar, Algeria and Portugal to try to get funding for the deteriorating Venezuelan economy. There were no major disturbances upon his arrival.
Analysis: Venezuela needs money, perhaps now more than ever. Its economy has long been in decline, but the fall of the price of oil has deprived Caracas of the additional revenue it needs to alleviate its food shortages, which have upset the public and divided the ruling party.
With that in mind, President Nicolas Maduro has begun a two-week fundraising tour abroad. Of course, he would appreciate any money he receives on his trip — it may help to put food back on the shelves of Venezuelan stores — but it would bring only temporary relief. If Maduro does not convince lenders to loan him money, he will likely have to adopt potentially risky economic measures that may well destabilize his government. Read more here: In Venezuela, Maduro Tries to Buy More Time.
Maduro will meet with Russian President Vladimir Putin on Jan. 15. The leaders are expected to discuss the state of the oil markets and projects in energy and banking. Falling oil prices have impaired Venezuela's economy. Maduro faces political uncertainty at home and has not provided a date of return from his overseas trip.
At least 109 Colombian citizens were deported from Venezuela in the last three days for purchasing basic food products. The deportations are part of Venezuela's efforts to stop the smuggling of basic food products out of Venezuela amid critical food shortages. On Jan. 13, the government seized a company for allegedly hoarding goods.
The governor of Venezuela's Miranda state, Henrique Capriles, called for a "mobilization" against Maduro's government in statements made to the privately owned Radio Caracas Radio. According to Capriles, he would provide more details in the coming hours, but said that this was not a call to mount "guarimbas," a Venezuelan term for roadblocks or violent protests. Maduro is in an increasingly tenuous political position because of the impact of low energy prices on Venezuela's economy and ongoing food shortages.
Also on Jan. 12, Maduro said Qatari banks would grant Venezuela billions of dollars to help the country survive the global drop in oil prices. Maduro did not specify exactly how much Qatari banks would provide but said the funds would be used for important development projects. Maduro has been visiting OPEC countries since Jan. 9 to discuss the drop in oil prices. He is slated to visit Algeria next.
Analytic Guidance: Maduro is in an increasingly tenuous position. During his nearly two-year time in office, Maduro has contended with an increasingly weak national economy, eroding his ability to manage the various factions within the ruling United Socialist Party of Venezuela (PSUV). In this context, widespread unconfirmed reports have emerged, none clearly reliable, that a coup is being planned against the president.
According to information from Stratfor sources, military commanders and auxiliary security forces known as colectivos will coordinate with the majority of PSUV congress members to prevent Maduro from returning to power once he returns to the country. Maduro is abroad on a state visit that took him to China and Russia as well as Iran, and so far he has not provided a return date. Venezuelan Defense Minister Gen. Vladimir Padrino Lopez is also part of the delegation accompanying Maduro. Read more here: Analytic Guidance: Considering a Coup in Venezuela.
Also on Jan. 9, hundreds of Cuban military personnel have reportedly left Venezuela for Cuba, according to unconfirmed reports from former Monagas state Gov. Jose Briceno. The reason for the movement is unknown. Meanwhile, a group assembled in Caracas' La Candelaria neighborhood to protest food and goods shortages, El Universal reported. Long waiting lines for basic goods including corn flour, cooking oil, milk, diapers and deodorant have become the norm in Venezuela.
Members of Venezuela's Bolivarian National Police used tear gas to disperse a student protest at the Catholic University of Tachira in San Cristobal, Tachira state. At least two protesters were arrested. The previous night, a separate group of protesters used burning tires to block the Pan American Highway in San Cristobal but were eventually dispersed by police as well. Last year's wave of protests began in Tachira state with student demonstrations against the government of President Nicolas Maduro.
Bilateral trade between Colombia and Venezuela from January 2014 to November 2014 totaled about $2 billion, compared to $2.5 billion during the same period in 2013, a report from the Chamber for Venezuelan-Colombian Economic Integration said. The decline was caused by Venezuela's struggling economy, which has been hampered by structural problems and a drop in global oil prices.
Dec. 30, 2014
The Venezuelan Central Bank confirmed that the country entered a recession in 2014. According to the bank, Venezuela's economy shrank during the first three quarters of the year. GDP dropped by 4.8 percent year-on-year in the first quarter of 2014, followed by 4.9 percent and 2.3 percent declines in the second and third quarters, respectively. Additionally, 12-month inflation reached 63.6 percent by November. Venezuela's increasingly desperate economic circumstances will hinder the ruling party’s ability to govern effectively and will raise the likelihood of protests in 2015.
Dec. 18, 2014
U.S. President Barack Obama signed legislation Dec. 18 that will freeze the assets and bar the visa applications of Venezuelan officials involved in crackdowns on demonstrators in Caracas and around Venezuela earlier in 2014. The U.S. Senate and House of Representatives approved the sanctions last week.
Dec. 14, 2014
Analysis: The Venezuelan economy continues its downward spiral as 2015 approaches. Faced with rising domestic expenses that it can no longer meet through dollar income from oil exports alone, Caracas has accelerated measures to increase its money supply since 2012. The central bank has also printed more bolivars to keep up with spending obligations. This expansion of the monetary supply has spurred inflation, which was already exacerbated by government foreign exchange mechanisms and smuggling to Colombia, making food and goods less available to consumers in Venezuela. The decline in global oil prices that began in September has compounded these troubles. Read more here: Low Oil Prices Continue to Hurt Venezuela.
Dec. 11, 2014
The price of Venezuela's food basket averaged 15,809 bolivars ($2,509 at lowest official exchange rate) in November, up 98.1 percent from 2013. There were shortages of 15 of the 58 basic food products in the basket, including meat, rice, butter, wheat flour and sugar. Venezuela has faced chronic food shortages.
Dec. 10, 2014
According to opposition economist Jose Guerra, Venezuela's GDP shrank 4.2 percent from January to September, the steepest drop since 2009. Guerra is an ex-chief of economic studies at the Venezuelan Central Bank. The Venezuelan government has been hesitant to disclose official economic figures, prompting widespread speculation about the health of the economy. Maduro and the United Socialist Party of Venezuela are having an increasingly difficult time maintaining stability in the country amid desperate economic circumstances.
Dec. 8, 2014
The black market exchange rate for Venezuela's bolivar hit an all-time low Dec. 8, dropping to 174 bolivars per U.S. dollar. Low oil prices worldwide have caused the currency's value to drop by more than 70 bolivars since the last week of September. The devaluation has resulted in an economic crisis for Venezuela, threatening President Nicolas Maduro's grip on power.
More Key Analyses on Venezuela
Nov. 12, 2014: Venezuela's Colectivos: One of Many Problems for Maduro
Nov. 4, 2014: When Oil Prices Drop, Some Countries Lose
Oct. 23, 2014: A Power Struggle Emerges in Venezuela
Oct. 22, 2014: Venezuela's Maduro Faces Rough Months Ahead
Sept. 4, 2014: Venezuela Shies Away from Major Economic Reforms
Aug. 29, 2014: In Venezuela, New Protests Loom
Aug. 27, 2014: Venezuela's Faltering Oil Sector Could Drag Down Petrocaribe
June 13, 2014: Venezuela Paves the Way for Economic Reforms