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May 30, 2014 | 08:59 GMT

In Venezuela, the Military's Influence in Government Could Block Reforms

In Venezuela, the Military's Influence in Government Could Block Reforms
JUAN BARRETO/AFP/Getty Images
Summary

Venezuelan President Nicolas Maduro is relying increasingly on bureaucratic appointments to secure support from the military. Though seemingly routine, these appointments highlight the government's strategy for managing the interests of the powerful Venezuelan armed forces. To ensure military loyalty, the Venezuelan government under former President Hugo Chavez and Maduro has regularly named military officers to often-lucrative posts in the bureaucracy. However, the military's resulting power and influence in government could hamper Maduro's ability to undertake crucial economic reforms.

Maduro named Gen. Giuseppe Yoffreda, the former commander of the air force, as president of the Venezuelan Corporation for Foreign Trade (also known as Corpovex) on May 26. Yoffreda will simultaneously control Corpovex and a separate state-controlled imports entity known as Venezuelan Imports and Exports. Together, these firms administer imports of supplies for the private and public sectors. The same day, Maduro named Tomas Andrea Schwab Romaniuk of Venezuela's air force head of state-owned steel firm Sidor, and he appointed retired Gen. Luis Motta Dominguez leader of a regional administrative network. On May 22, Maduro made Gen. Manuel Quevedo, who formerly led the Fifth Regional Command of the Bolivarian National Guard, the administrator of two social programs tasked with constructing houses for low income Venezuelans.

Venezuela map

Venezuela Baseline Map

Military appointments to civilian posts in Venezuela are not new. After Chavez came to power, he rewarded dozens of current and former military personnel who had accompanied him in his coups in February and November 1992. Many of these officials continue to hold key positions within the regional and national governments, including Cabinet posts and governorships. After the 2002 coup attempt against Chavez, this system of rewards was extended to additional active duty personnel who had remained loyal to the administration.

Such concessions are a necessary part of ruling Venezuela. Current and former military members in the Venezuelan government are not unified but instead split into several cliques. No single leader in Venezuela completely controls them, though National Assembly Speaker Diosdado Cabello has significant professional and personal connections to military officials in power. Even with these divisions, the Venezuelan military factions in government are pervasive enough that Maduro must take their interests into account when making decisions.

The Importance of Military Support

In Venezuela's traditionally tumultuous politics, the armed forces have acted as a central pillar of power behind the government's authority. The coups in 1992 and 2002 failed partly because most of the military remained loyal to the regime. However, the stakes are quite high for Maduro. A national poll by private firm Datanalisis released in mid-May showed that the president had the support of only 37 percent of the population. Given Venezuela's worsening inflation and cash flow problems, Maduro's approval rating likely will continue to drop. The post-Chavez era is growing more unstable, and it is in the Maduro administration's interest to keep current and former members of the military satisfied through appointments to political positions.

Like Chavez before him, Maduro has had to balance the interests of the military against the overall interests of the state. However, Maduro's unpopularity, coupled with a steadily worsening economic crisis, makes his situation more tenuous than Chavez's. Maduro will need to implement difficult economic decisions, and it is not clear that the military would back Maduro throughout such changes. If future reforms cost the president public support or threaten the welfare of military factions and their patrons, the military officials ensconced in government positions could turn against him.

Military officers have often been appointed to strategically important areas in which it is possible to benefit from illicit activities. The state tolerates certain corrupt activities, such as cocaine smuggling by military members or graft in state-run industries. However, other aspects of military corruption are more damaging. For example, control over imports and foreign exchange into Venezuela has traditionally been a lucrative bottleneck for the military.

A prominent political scandal in 2010 concerning imports through ports administered by military-controlled firm Bolipuertos illustrates this point. The scandal erupted over tens of thousands of tons of food imported and subsequently abandoned by the Venezuelan Producer and Distributor of Food, a subsidiary of state energy firm Petroleos de Venezuela, or PDVSA. The food imports were part of a money-laundering scheme in which importers at the food distribution firm benefited from Venezuela's subsidized exchange rate of 2.6 bolivars to the dollar for importing items deemed essential by the government. In this scam, importers overstated the price of food to be imported (pocketing the extra cash) and would often store food items for resale later on the black market at a hefty profit. Some of the stored food items rotted while awaiting distribution or were simply abandoned. Involvement in such schemes is likely widespread throughout the Venezuelan ruling elite. So far, the inefficiencies and product shortages created by this corruption have been tolerated, despite the scheme's capacity to severely disrupt food distribution and threaten social stability.

Maduro's Challenges

Maduro faces a fundamentally more difficult situation than Chavez ever did. Opposition-led protests against him have subsided since April, but he could still face challenges to his authority from within his own party. The president inherited a series of economic and social problems from Chavez, such as overvalued currency regimes, declining oil production and an unsustainable economic model that made PDVSA responsible for funding the government's social spending. To address Venezuela's cash flow problems, Maduro must undertake reforms. He likely will attempt to unify Venezuela's three existing exchange rates, raise state revenue and cut back on social spending.

However, Maduro lacks the charisma, popularity and influence among the military's factions to enact controversial economic decisions. Measures such as raising gasoline prices and electricity rates would generate additional revenue for the state but be highly unpopular. Cutting back on social spending would relieve the burden on PDVSA but would also cost the president political support. If he undertakes such reform, he could alienate voters and potentially imperil the United Socialist Party of Venezuela's base of support. This is most likely why, on May 27, the government indefinitely deferred any public debate on raising gasoline prices.

However, such losses are unsustainable for the Venezuelan government. According to an estimate by private firm Ecoanalitica, the country's subsidized gasoline and petroleum products will cost the government about $6.9 billion in the first quarter of 2014. The government has slowly raised the price of regulated food items in state stores, but such piecemeal measures will not be enough. Maduro cannot postpone major reforms until the end of his term, but he probably will delay any decision on reform packages until it is economically unfeasible to wait any longer.

Maduro likely will proceed carefully in implementing such reforms because of potential dissent from his political colleagues, particularly those in the military cliques. Because Maduro lacks effective control of all branches of the bureaucracy, he relies on powerful individuals like Cabello, Planning Minister Jorge Giordani, PDVSA President Rafael Ramirez and Interior Minister Manuel Rodriguez Torres to coordinate policy. If economic reforms cost Maduro voter backing, the military cliques could move to undermine his rule. Cabello and Rodriguez have significantly more influence within the government's military cliques (for example, Yoffreda is rumored to be an associate of Cabello). If Maduro loses their support, they could use their weight among the various military factions to rebuff the president's demands.

Maduro's authority over other government officials is already shaky. In October 2013, a dispute between Giordani and former Central Bank President Nelson Merentes over implementation of a new foreign exchange regime (which Maduro initially backed) resulted in the latter's removal from his post. In late December 2013, Maduro and Cabello appeared to disagree on an amnesty law for political prisoners, a law that would never be implemented. Maduro is also unlikely to crack down on the military and ruling party's foreign exchange scams, even if they do threaten social stability. Although it is in the government's interest to unify the foreign exchange mechanisms into a more realistic exchange rate, the military and other elites who benefit from this corruption are likely to resist.

Therefore, Maduro remains in an increasingly untenable position. Eventually, he will have to at least attempt economic reform, despite the risks of destabilizing his presidency. The penetration of military factions into Venezuela's political and economic bureaucracies means that they will play a large role in any future reform or government transition. For now, their interests align with those of Maduro, and there is no need for them to meaningfully challenge his authority. However, if Maduro loses support, the cliques in power eventually will have to choose whether to remain with him or back an alternative. For now, Maduro is staving off that decision by avoiding reform, but this inevitably will catch up with him, as it would with any personality at the helm of the Venezuelan regime

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