Yesterday I talked to several journalists about the events of the past week: the fight against “speculation” in electronics retail, leading to forced liquidation of inventories and in some cases, looting. Here is a quick review of the issues we talked about.
Why is the Maduro government doing this?
The government is fully aware of its declining polling numbers and has good reason to be concerned about the December elections. Of course who wins will not have an actual impact on the national government since these are municipal elections. But this will be the first electoral event since the contested April presidential elections and undoubtedly will be taken as a sort of plebiscite on the Maduro government. Should PSUV candidates fare poorly, it would energize the opposition, further weaken Maduro internally, and increase national and international perceptions that his government is unstable. Since the government is strong in rural areas with lots of municipalities but few people, and the opposition is strong in urban areas with lots of people and fewer municipalities, the government will undoubtedly win the majority of mayoralties. But polling suggests they will likely lose the popular vote, in other words the sum vote totals of all the municipal contests. They want to keep it close. To do so they need people to see them doing something about Venezuela’s economic crisis.
Will it work?
The number one problem challenging the Maduro government is the economy. Maduro inherited an unsustainable economic situation from the Chávez government that needed to be addressed months ago. But internal divisions hamstrung the government and prevented it from taking economic decisions. Now they are facing a wildly distorted foreign exchange situation, inflation and scarcities. Maduro has tried to frame this as an economic war being carried out against his government. Polling shows that Maduro’s various conspiracy theories only convince between 5 and 20% of the population.
However, I think publicly calling out electronics retailers for overcharging; forcing them to lower their prices and then presiding over a liquidation of inventory puts a name and face on the perpetrators of the “guerra economica.”
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During my last stay in Venezuela the handful of analysts I talked to with ties to the government all concurred on one point. Nicolas Maduro’s talk of an economic war is not a show used to distract followers. He actually believes the economy is being sabotaged by his national and international opponents.
Of course Venezuela’s economic performance is reaching crisis dimensions. Inflation reached 5.1% in October and 54.3% over the past 12 months. The scarcity index reached 22.4% (meaning in any given retail outlet 22.4% of basic consumer goods are unavailable) its highest level since early 2010.
But there should be no mystery regarding the causes, as the Venezuelan economy has the basic ingredients of any inflationary context: stagnant production and an expanding money supply.
While oil prices are still high, Venezuela’s oil production has stagnated in recent years. More importantly they get fewer dollars for their oil as a half million barrels a day go to China to pay for resources it has put into the China Fund.
This means not only that the government has less money to spend; it has fewer dollars to distribute to importers. Add to this a wildly overvalued exchange rate and the situation gets even more complicated as there are incredible incentives for dollars to be siphoned off into corruption and capital flight. The dollar crunch creates scarcities directly—by making it harder to import finished goods—and indirectly—by making it harder to import components needed to manufacture. It also creates a wildly undervalued parallel exchange rate that becomes a reference point for the pricing of many imported goods and even real estate.
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David Smilde and Hugo Pérez Henaíz
Change and continuity in Venezuela’s media landscape has complicated opposition to the administration of President Nicolas Maduro. The government is actively combating critical media coverage, and the political opposition finds itself with reduced space in broadcast media.
As was frequently the case during the Chávez years, critical media coverage has suffered legal pursuit at the hands of the government.
On Saturday November 1st, three reporters working for Venezuelan daily 2001, were detained for five hours by the Military Police while covering a government food distribution fair on the premises of military base Fuerte Tiuna in Caracas. Apparently the Military Police struggled to maintain control over the crowd and photographers from 2001 began to take pictures of the commotion. One of the reporters was detained, allegedly beaten and his camera confiscated by officers.
President Maduro referred to the incident the next day and said the reporters had been sent by enemies of the government in order to “soil” the beginning of the Christmas festivities. He added: “some reporters form the Bloque de Armas, from 2001, which is already facing a trial, were sent there in order to generate violence.” Maduro was referring to the investigation of 2001 by Venezuela’s Attorney General for its “criminal behavior” in reporting on fuel shortages.
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On October 2, the Venezuelan National Assembly (AN) created a special commission to investigate foreign financing of groups that “aim to generate social commotion and coup plans against the national government.” Three congressmen, including William Fariñas (Partido Socialista Unido de Venezuela [PSUV] – Nueva Esparta), the head of the Standing Commission for Security and Defense; Juan Carlos Alemán (PSUV – Distrito Capital) and Yul Jabour (Partido Comunista de Venezuela [PCV] – Cojedes) were designated members.
Fariñas stated that the special commission would first investigate funding provided by the US Department of State, the US Agency for International Development (USAID), and the National Endowment for Democracy (NED) for funding political organizations within the country, suggesting that these groups historically have supported and trained opposition parties such as Primero Justicia and Un Nuevo Tiempo.
On October 22, Alemán announced he had initiated an investigation into foreign financing for two institutions: the Metropolitan University and Súmate, an NGO that focuses on electoral institutions.
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On Saturday I did an interview on Aljazeera English regarding Nicolas Maduro’s first six months in office. Here I will quickly summarize my notes.
Maduro’s first six months as elected president (he was sworn in on April 19) have been rocky with no honeymoon. A contested election in April transitioned into food shortages in May, into an electricity crisis in July, into undeniable economic deterioration in the past couple of months. With inflation closing in on 50%, and a parallel exchange rate that is seven times higher than the official rate, economic distortions are becoming epic.
The baseline causes of these problems, of course, were inherited from Maduro’s predecessor and mentor, Hugo Chávez Frias. Serious shortages first appeared in early 2008. Electricity blackouts were one of the reasons that the government lost ground in the 2010 legislative elections. And foreign exchange distortions have been a mainstay over the past five or six years. In 2012 Chávez covered over this waning sustainability with $30 billion in loans from China against future oil sales.
Now Maduro is presiding over a distorted economy with limited alternatives. Venezuela’s bonds have descended into junk territory, and China does not seem willing to hand over big cash infusions as in the past. Devaluing the currency and pushing forward a structural adjustment would send the economy into recession and be political suicide.
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Hugo Pérez Hernáiz
On September 30, at a military commemoration for a battle for the war of independence, President Maduro used a presidential decree to create the Strategic Center for Security and Protection of the Fatherland (CESPPA), which will be headed by Major General Gustavo González López, the former Secretary of the Intelligence and Security Unit of the Electric System. Maduro explained that the new intelligence agency will “coordinate, organize, and elevate our capacity to recognize and overcome, before it happens, any plan against the country.”
At this stage, very little is known about the functions and reach of the CESPPA. What is known however is that it will centralize intelligence information, respond directly to the Presidency, and replace the Centro de Estudio Situacional de la Nación (CESNA) created by Chávez.
Local organization and analysts have reacted critically to the creation of CESPPA. In the weekly online edition of SIC, a magazine published by the Jesuit Centro Gumilla, Laura Weffer wrote that several aspects of the promulgation decree were particularly troublesome. Article 3 of the decree states that CESPPA will answer to the requirements of the “Political-Military Direction of the Bolivarian Revolution,” a political organ that does not figure in the Venezuelan Constitution. Furthermore, Weffer points to the fact that the same article speaks of “internal and external” enemies, without defining who they might be, and that Article 9 states that the President of CESPPA has the right to censure any information provided by the agency.
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Rebecca Hanson and David Smilde
In our previous post we asked who gets the blame for crime in Venezuela. In this one we ask what Venezuelans think can be done to reduce that crime. Since 2008 the Chávez and now Maduro governments have increasingly taken on the issue of crime, often in quite contradictory ways. Here we look at if and how these strategies resonate with citizens’ opinions.
To do so we added a question to Datanalisis’ July-August Omnibus survey that asked respondents what they thought would reduce crime. The question provided respondents with a list of measures (improving the values taught to children by the family; decreasing poverty and social inequality; professionalizing police officers; reforming the judicial and penal systems; a permanent deployment of military in sectors with high rates of crime; improving access to sports and cultural activities; and improving access to public space) and asked them to rank the three most important in fighting crime.
The first table presents the percentage of number one responses each measure received.
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Hugo Pérez Hernáiz and David Smilde
Given its internal heterogeneity, candidate selection posed a serious challenge right from the beginning for opposition coalition Mesa de la Unidad Democrática (MUD). The MUD decided that most of its candidates would be chosen by primaries, but that others would be negotiated among the parties. The primaries were held in February 2012. However, successive postponements of the elections now means that the candidates for the December election were chosen almost two years before the actual election.
In September 2011 the CNE announced a chronogram that divided elections for three levels of government. The presidential election would be October 7, 2012, the gubernatorial elections would be December 16, 2012, and the mayoral elections would be April 24, 2013. Already in 2011 some in the opposition argued that February 2012 was too early for primaries considering the mayoral elections would be more than a year later.
However, events of the following year, most importantly the death of president Hugo Chávez, led the the CNE to change the dates two more times, first pushing back the municipal elections to June 2013, and finally to its current date of December 8. The change in dates has generated debate inside the opposition about whether to repeat at least some of the primaries. However the MUD decided to stick to the candidates selected in February 2012.
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Rebecca Hanson and David Smilde
In the first half of this year we ran a series describing Venezuela’s comprehensive efforts at citizen security reform. We have also traced the process over the past six months, whereby the civilian character of this reform has lost out in favor of militarized policing strategies. In the coming months we are going to run a series on public perceptions of citizen security in order to shed light on why reform has been so difficult to implement.
In March and April of this year, Nicolás Maduro made citizen security a campaign issue in a way that his predecessor never did. As we analyzed here, it was a somewhat risky strategy insofar as polls consistently showed that Hugo Chávez did not pay much of a political price for declining citizen security (we will unpack this phenomenon in a future post). Indeed, in 2009 a survey question asking about Hugo Chávez’s responsibility for crime found that almost 60% of respondents thought crime was such a difficult problem that no president could solve it. Only a little more than 25% thought that a different president would be more effective.
This was one of the reasons that it took the Chávez government so long to confront crime. It knew it did not pay politically for the issue and had no interest in altering this fact. Even when they began a comprehensive effort at citizen security reform in 2009, there was little public fanfare. Indeed it was not until January 2012 that Chávez publicly and forcefully addressed the issue by announcing Misión Seguridad.
In this piece we would like to ask whether the government increasingly “owns” the issue of citizen security in the eyes of the public. Put differently, have five years of citizen security reform and six months of Nicolás Maduro openly addressing the issue changed public perceptions? Is the government increasingly taking the blame for crime?
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Today’s issue of the Inter-American Dialogue’s Latin America Advisor has a Q&A on the Air France bust and drug trafficking in Venezuela with Nicholas Watson, Julia Buxton and myself.
Watson suggests that anti-drug operations in Venezuela have progressively declined since Venezuela stopped collaborating with the US Drug Enforcement Agency in 2005 and says the involvement of the armed forces is extensive. Julia Buxton argues that increased drug trafficking in Venezuela is a side-effect of US counter-narcotic strategies which has displaced routes through Central America and Mexico, towards Venezuela. She argues that Venezuela has been proactive, arresting 100 top drug traffickers since 2006.
In my comments I suggested that there is no evidence that tolerance for drug trafficking is official policy, but that politicization of public administration has allowed corruption of all kinds, including participation in illicit markets, to thrive.