In Stratfor's 2017 Fourth-Quarter Forecast, we wrote that the ruling United Socialist Party of Venezuela would continue to focus on protecting itself and its future survival. Despite increasing pressure from the country's economic decline, dissatisfaction from the armed forces, and attempts at diplomacy by more powerful states in the region, that analysis is likely to hold true going into 2018.
Venezuela's neighbors, particularly Mexico, are seeking a negotiated solution to the country's political standoff. For almost two years, Venezuela's government has refused to recognize the authority of the opposition-controlled legislature. In an effort to resolve this, Mexican Foreign Minister Luis Videgaray will participate in talks between Venezuela's ruling United Socialist Party of Venezuela (PSUV) and the legislature on Dec. 1-2. For right-leaning Latin American nations — including Mexico, Argentina, Brazil, Colombia, Paraguay and Peru — finding a peaceful solution to Venezuela's political confrontation is a priority. The interested nations are also, by extension, advancing the aims of the United States, which is hoping to guide the Venezuelan crisis toward a resolution that doesn't involve a dictatorship of Venezuelan President Nicolas Maduro.
Despite the best efforts of the United States and its Latin American partners, a solution to the standoff will be elusive. Venezuela's opposition is looking to extract concessions in the talks, including a free and fair presidential election in 2018, humanitarian assistance for many Venezuelans, and government recognition of congressional authority. The Venezuelan government, however, will likely demand amnesty from prosecution, possibly even using free elections as a bargaining chip to ensure an exit strategy for Maduro.
But Maduro isn't the only obstacle to free elections in Venezuela. Cuba, which depends on Venezuela for oil and fuel supplies, is unlikely to support any election Maduro's government could lose. Cuba's hesitance could disappear if Mexico were to step in as the country's new energy patron, but that would still leave issues with Venezuela's ruling party. Politicians and military leaders in the party greatly benefit from the current economic arrangement. For nearly 15 years, currency controls have allowed political elites access to cheap U.S. dollars through overvalued exchange rates.
They have little incentive to let go of their benefits, even as the country sinks into a hyperinflation spiral. Moreover, their influence is deeply embedded in state institutions, such as state energy company Petroleos de Venezuela. Even if Maduro or other leaders reach an agreement for free elections, the politicians and military officers benefitting from the country's corruption will remain in place and continue opposing economic recovery measures proposed by the opposition, such as removing currency controls. Because of this, the ruling party is more likely to hold a presidential election in 2018 that they know will be deemed unfair by outside observers, than allow an election that Maduro could conceivably lose.
Mexico, the United States and their Latin American allies all have a vested interest in seeing Venezuela resolve its political impasse, but none of them have the power to make it happen. Only Venezuela's political elites, who have had nearly two decades to cement their political power and protect their interests, will decide the country's direction. In the near future, that path will likely involve continuing their slide toward a one-party state.