Venezuelan Politics and Human Rights

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Nicolás Maduro After Six Months

David Smilde

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.

Average Venezuelans do not pardon their leaders for devaluations. Maduro’s popularity took a serious hit when he devalued the currency in February as acting president, and only recovered when Chávez passed away. Thus there is almost no chance his government will devalue the currency before the December 8 municipal elections. Nevertheless, the government needs to get ahold of this foreign exchange problem very soon as it creates irresistible incentives for corruption and capital flight. And this, in part, is behind the government’s push for an enabling law.

For months the government has seemed paralyzed with respect to the foreign exchange market and other basic economic issues. Indeed there are serious internal divisions on these issues and it appears that Maduro does not have the political capital to sit in a cabinet meeting, listen to alternatives, decide who wins, and then get his whole team to fall in line. The enabling law could provide him with the power to impose some direction on the government’s economic policy.

The enabling law is being framed as providing Maduro with the powers he needs to fight corruption and confront the “economic war” he says is being waged against Venezuela. At first glance the desire for an enabling law looks a little mysterious since he already has an absolute majority in the National Assembly. Thus any law he wants to decree, he could get passed by the National Assembly anyway.

But being able to decree laws instead of having them debated in the National Assembly would indeed increase Maduro’s power. First, it reduces public debate and potential opposition against the laws that he might want to decree. Chávez frequently passed laws that had been written behind closed doors in Miraflores and which had never seen the light of day until they were decreed. That reduces the possibility for criticism and negative publicity.

Furthermore, Maduro’s biggest problems are in his own coalition. There is a lot of discontent within the government at all levels, especially among people who think he does not have the power and vision to make the Chávez project work. The enabling law would increase his power within the government because it reduces the ability of pro-government legislators to alter his agenda and grab the spotlight.

Perhaps most importantly, insiders suggests that the government sees the enabling law as a message to China that Maduro is solidly in power, can impose his will and can guarantee that China will not lose its money.

Nobody knows what economic measures an enabling law might lead to, but they will likely be more rather than less restrictive. In recent weeks pragmatists like Nelson Merentes have been marginalized in favor of left idealists like Jorge Giordani. While three or four months ago it seemed like the government might refloat the legal “permuta” market, now it seems like, at least in the short term, the government will focus on trying to increase controls over who gets dollars.

It is easy to exaggerate Venezuela’s economic problems. It is not as if Venezuelans are destitute. When I was in Caracas two weeks ago the restaurants and shopping malls were all full, and the airport even fuller. Of course in a highly inflationary economy people want to spend their money as soon as they can. To my eye it seemed like most of the shortages had improved. Furthermore, the electricity didn’t go out for the 4 days I was there—however the situation is more precarious in the interior.

Venezuela is sitting on top of the largest oil reserves in the world and has a continual flow of dollars coming in. So they are not on the brink of a collapse. But they are progressively sliding into the swamp of serious economic dysfunction that will make sustained growth difficult and that could undermine Chavismo as a viable democratic political project.

And it should be pointed out that Maduro’s support is less tenuous than is often made out in the international media. The last trustworthy polling from September showed that while Maduro’s job disapproval had increased to around 50% his approval ratings were still in the mid-40s. These are numbers that have only changed slightly since the April election. In fact his favorability ratings have declined less than the leader of the opposition, Henrique Capriles, during the same time period. Average Chávez supporters are still giving Maduro the benefit of the doubt and unless there is a dramatic deterioration, Chavismo will probably do better than the opposition in the December municipal elections.

Filed under Nicolas Maduro Enabling law

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