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Aug 7, 2015 | 09:00 GMT

4 mins read

Venezuela's Crisis Nears the Tipping Point

(JUAN BARRETO/AFP Photo)
Summary

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.

At the heart of Venezuela's food crisis is the country's reduced foreign income from state-owned energy firm Petroleos de Venezuela (PDVSA) and the structural imbalances created by populist food distribution policies. Thanks to low oil prices, imports sharply contracted from late last year. But the government's unwillingness to allow food prices to increase significantly nationwide — thereby removing the incentives for food smuggling to Colombia and other nearby states — has only exacerbated the shortages. The ruling party's elite have seemingly chosen the path of inaction rather than implementing economic reforms that would actively worsen their political standing ahead of the Dec. 6 election. And Venezuela's limited economic lifelines are not going to provide enough foreign currency in the near future to reverse the situation. Consequently, further shortages will occur across the country between now and the end of the year, which will no doubt make incidents of looting more prevalent. While such incidents largely affect the country's interior and border regions, where food smuggling and logistical problems complicate food distribution, confrontations could spill over to larger cities, including Caracas. 

The Venezuelan government's reaction to such a deterioration of law and order will be important to monitor in coming months. President Nicolas Maduro and National Assembly Speaker Diosdado Cabello — the two individuals making most key decisions in the country right now — face a choice. They can either try to hang on at all costs, or they can begin discussions toward some political rapprochement with the opposition amid the uncertainty of losing a parliamentary majority and facing heightened unrest on the streets. While reaching out to the opposition might help Maduro and Cabello manage their political opponents, such an outreach may not be practical. Sections of the ruling party, including those who benefit from ongoing currency arbitrage and smuggling, would be unwilling to risk their privileged positions. 

It will be important to closely watch the reactions of politically powerful individuals around Maduro and Cabello as the crisis matures. Maduro will face increased risks as his presidency goes on, since the government is not in a position to stem the deepening social discontent brought about by food shortages. In 2016, political parties will also be legally able to mount recall referendums against the president, a threat that Maduro does not need. While such a referendum would have to be approved by the National Electoral Council, individuals within the ruling party understand that Maduro's low approval rating is a long-term risk to the party's continued rule.

While the president's departure would not fix the country's problems, the ruling party's short-term survival strategy could ultimately include separating the deeply unpopular Maduro from the government. Therefore, it will be important to observe whether referendum calls emerge from the ruling party itself or whether Maduro and Cabello band closer together in an attempt to ride out the crisis. Other key developments to watch for are any calls for Maduro's resignation from members of the military or the government, namely those most directly concerned about the country's domestic unrest. 

Finally, the more immediate issue of legislative elections will be a key indicator of what strategy the government intends to use in managing the crisis. It may be tempting for elements within the ruling party to simply cancel or delay elections. Such a decision would enable the government to crack down on unrest if it emerges and to better prepare an electoral strategy to undermine the opposition. Indeed, the foreign consequences of not holding or delaying the legislative vote are relatively minimal. Ruling officials may face additional targeted sanctions from the United States, but these are unlikely to be coercive enough to prevent the Venezuelan leadership from acting in its own interest.

The main risk of delaying the elections is domestic unrest. Postponing elections would provide a rallying point for the opposition to protest. The opposition is focused on getting elected at present, not on organizing protests, a focus that would shift if elections were postponed. In the current political environment, any demonstrations are likely to snowball into more threatening unrest. Therefore, it is unlikely that suspending or delaying the elections would be Maduro or Cabello's first choice, but would instead be an option taken out of desperation.

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