Table of contents
Description of issue
Venezuela is currently in the middle of a massive political and economic crisis. There has been hyperinflation with increases in disease, crime, hunger, deaths and massive amounts of people have been emigrating out of Venezuela. Economists from The Economist and the New York Times blame the negative populist policies of the“Bolivarian Revolution” that began under President Chavez’s administration rather than natural disasters. According to the Brookings Institute, “hyperinflation, the product of monumental government mismanagement, has continued to deplete Venezuelan salaries and savings” and this has further been exacerbated under the poor economic policies of President Maduro in August 2018.
Furthermore, economic crisis isn’t the only issue in the status quo for Venezuela. The Venezuelan government has been cracking down on political freedom, and humanitarian crises have been increasing leading to a deterioration of law enforcement and massive emigration. According to Brookings and the United Nations, “about 2.3 million Venezuelans had left the country, most of them since 2015”. The crisis in Yemen and Syria which have been deemed as the “worst humanitarian crises of our time by the UN” are the only crises with comparable refugee numbers to the crisis in Venezuela. This has lead to a massive political divide within the nation.
The majority of the nation does not support President Maduro, however, him and his closest allies have been able to consolidate the power and successfully rigged local and presidential elections in his favor. This has left opposition groups and the opposing political party losing hope in a political, democratic solution. This has led the international community also deeply divided. There are three primary parties in the status quo. The first is the anti-maduro coalition, where all the nations are willing to impose sanctions or take more forceful measures in forcing Maduro out of power. That coalition is primarily made up of the United States, and its allies (more on this later on formal nation stance), and the second party is another anti-Maduro coalition with more moderate intentions. They intend to use political pressure to force Maduro to negotiate peacefully, without the use of sanctions or military action. The last group is the pro-maduro group, mainly made up of China, Russia and Cuba, and they have made their intentions very clear. They intend to protect the President from any coups, or any other attempts to remove president Maduro from power.
Definition of Key Terms
Hyperinflation is when the prices of goods rise rapidly, typically to around more than 50 percent per month. Hyperinflation causes to a rapid devaluation of the nation’s currency while also leading to massive fluctuation of a nation’s currency. For example, one thing can cost 10 dollars in the afternoon and cost 20 dollars the very next day. The hyperinflation in Venezuela is staggeringly high with an inflation rate of 1,000,000 percent (according to the International Monetary Fund and Forbes).
In Venezuela, a cup of coffee used to cost 190,000 bolivars last April but now cost over 2,000,000 bolivars forcing citizens to use electronic transactions for even the smallest prices; otherwise, the people would have to bring cash in literally by the buckets. Hyperinflation is primarily caused when the government prints extra money in order to pay for its spending leading to devaluation as the excessive demand aggravates the inflation of the currency and the products in a country.
The Bolivarian Revolution is a political revolution/process that began under President Hugo Chavez, who founded the socialist party of Venezuela or PSUV, and the starter of the fifth republic movement. It marked the shift from neoliberalism in Venezuela towards socialism.
United Socialist Party of Venezuela(PSUV)
The PSUV is a political party that was founded by former president Hugo Chavez, and was formed by supporters of the Bolivarian revolution, and had around 7 million followers (until 2014), and new polls have not been conducted since. This party combines the smaller parties of People’s electoral movement (MEP), Socialist League, Tupamaro Movement, Venezuelan Popular Unity (UPV), and the Fifth Republic Movement(majority). The party currently holds 55 of the 167 seats on the national assembly and has lost the majority for the first time in 2015. The party is currently lead by President Nicolas Maduro.
Democratic Unity Roundtable (MUD)
This party holds 10 more seats than the PSUV and is the political opposition of the PSUV in the status quo. This party is primarily made up of less radical lawmakers, with some being center-right, and center left. This party is more centrist than radical left as is the PSUV, and the ideals within this party include, social democracy and Anti-chavism. As the ideology suggests, this party is made up of those that opposed President Hugo Chavez and his political ideals.
Chavism has become equivalent to socialism in Venezuela. Therefore, anti-Chavism is the ideology that opposes socialism in Venezuela. This is supported by the main opposition the MUD, (check previous definition), and is mainly supported by centrist lawmakers that go against President Maduro’s leadership.
Simón Bolívar Great Patriotic Pole(GPPSB)
This is the coalition of lawmakers formed in 2012 that helped former president Hugo Chavez get elected. This coalition is led by the PSUV and the leader of this coalition as well is Nicolas Maduro. This party is led by the beliefs of Marxism, Chavismo, and Bolivarianism. This coalition currently holds 50 seats in the national assembly, second to the main opposition.
Marxism is another term for communism, because this political belief was started by Karl Marx in the Soviet Union along with Lenin creating the term Marxism-Leninism. This belief in its most ideal state has everyone sharing their holdings equally, but in many cases out of pure greed eventually leads to brutal dictatorships, as shown during the dictatorships of Joseph Stalin and Mao Zedong.
An economic or financial crisis is a broad term that occur when financial or economic assets or belongings lose a large part of their value, leading to recessions (as shown in 2008, and the Great Depression), affecting markets. Hyperinflation and devaluation is an indicator of an recession or an economic crisis.
Timeline of Key Events
Venezuela is an oil-rich country with oil reserves to rival nations in the middle east. Therefore, rich dividends were paid off in 1973, when Venezuela began to rely on their oil towards the US, and their currency briefly reached its highest point in relation to the US dollar. Furthermore, the oil and steel industries in Venezuela was nationalized (BBC), indicating a steady reliance on oil.
Former president Carlos Andres Perez is elected in the middle of a massive economic crisis(partly due to excessive reliance on oil), and Venezuela receives an IMF bailout loan, leading to large riots and anarchy within the streets of Venezuela. (BBC)
Hugo Chavez first emerges as a colonel and makes 2 attempts for a coup on President Perez. Over 120 people are killed as the coup is suppressed and put down by forces of President Perez and Hugo Chavez is taken into custody(BBC). Then within 2 years, “President Perez is impeached on corruption charges”(BBC).
1998(beginning of Chavez era)
Hugo Chavez quickly rises in popularity amid the distrust of President Perez’s party the Democratic Action Party and gets elected president. He immediately launches a massive campaign that overturns the core of Venezuela. This campaign is called the Bolivarian revolution, and it quickly sets out in setting a socialist framework in the region. A new constitution is written, and increasingly socialist/marxist and populist policies are all funded and supported due to high oil prices during the time. This also marks a major change towards the negative in terms of foreign policy towards the US.
Chavez uses his political power to begin executing his marxist policies by redistributing the wealth and land of the region increasing fears that he is trying to consolidate power inside his government similar to Cuban policies.
This is the first coup attempt that Chavez survives. Venezuelan state oil(monopoly) managers, and after a violent standoff between the union of the oil monopoly vs the government, Chavez is taken into military custody but the coup collapses and Chavez is returned to his office(BBC).
Chavez takes land from landowners and divides and gives it to the poor. According to the BBC, “ranchers consider it an attack on private property.”
Furthermore, new laws and regulations give penalties for attacks(verbal) on political figures or leaders, creating more fears of a dictatorship. Also, the majority is swiftly taken by Chavez’s party(SPUV) after opposition refuses to enter after the policies of Chavez. Chavez also takes an increasingly closer stance to Russia, and signs a weapons agreement worth 3 billion dollars, and wins the election for the third term with 63% of the vote.(BBC)
All telecommunication companies are now nationalised under government view, and shows critical of Chavez are banned. Also according to the BBC, two major US oil companies Exxon and Conocophillips, all refused to give up their oil interest rights to the government and are swiftly ejected from the country, indicating a further divide between the US and Venezuela. Also, Chavez loses an election for the first time, when the general public refuses to allow government control over the central bank.
Another major shift in foreign policy was the increasing ties with China. After more weapons deals with Russia in 2008, a Russian navy presence is established in the region, for the first time since the cold war(in the Americas). Voters vote to remove term limits allowing Chavez to serve indefinitely. (BBC)
The assembly in Venezuela grant special powers to Chavez amid disaster response (in a natural disaster), and government begins control on prices for the first time, and companies that do not cooperate are “expropriated”. Also, media is continuously censured and anchors and corporations paid a fine of 2.1 million dollars for covering a government censured public riot. Chavez dies in October 2012(due to cancer) after winning a 4th term with 54% of the vote. (BBC)
Maduro is chosen to be the successor of Chavez, and 70% of the electricity is cut in Venezuela and is blamed on “right wing saboteurs” (BBC).
Inflation rises to more than 50% sparking alarms of a financial crisis, and the socialist party continues to win elections, although by continuously slimmer margins. Protests begin to take place, and opposition arrests happen for the first time in 2014. Government forces ruthlessly destroy coup attempts and 28 people are killed in increasing crime and violence. Furthermore, oil prices also hit a four year low, lowering the already reeling economy.
Also in 2015 and 2016, lawmakers from the opposition resign under government pressure in order to block the two thirds supermajority that enables them to block Maduro’s policies and powers. Finally, hundreds of thousands of people take to the streets to protest Maduro’s leadership. 2017
People continue to die in clashes with the government and people seem increasingly unhappy with the leadership. In unofficial referendums, 7 million people have expressed unhappiness towards Maduro forming new leadership policies and a new assembly that expands his power.
In 2018 may, Maduro won the election for another term, and a plot of assassination is foiled when two drones with explosives detonate near him in a televised public speech. He accuses the US and Colombia of trying to kill him. Amid massive hyperinflation Maduro also removes 5 zeros from the end of the currency in an effort to keep down inflation.
Positions of Key Nations and Bodies
The US used to be close to President Perez but drifted apart with the election of Chavez. His socialist policies are detested by US leadership, and expulsion of two US corporations only added salt to the wound. Furthermore, Chavez and Maduro ran their campaigns on the basis of threats and bluster towards the United States and Colombia creating a major rift between the two parties. Recently President Trump has even threatened military action in order to keep Venezuela “in line” amid the increasing tensions between the two nations.
Russia has become very close with Venezuela and is part of the group along with China that aims to keep Maduro safe at all costs.
There is a Russian military presence in the region (the navy) and ongoing weapons contracts between the two nations encourage a strong relationship. Furthermore, Maduro and Chavez have both notably leaned on Russian aid, and support for their military weapons and operations creating a very strong alliance. Also, this is Russia’s primary base of operations in their influence on the Americas. It is also worth noting that the leadership is socialist/marxist similar to Russian politics.
China has also dealt with Maduro and Chavez and made it clear that their stance would be to help Maduro stay in power. They have participated in weapons treaties and arms dealings as well, and share a strong relationship. China is part of the group that aims to keep Maduro in power and directly goes against the US in their stance, and also their political beliefs and stance remain very close to the stance of Maduro and his government. Furthermore Venezuela has also become the center of operations in the Americas for China as well.
The two nations are not the closest of friends. Maduro has called a drone attack an attack from the US and Colombia with no evidence and has used strong rhetoric to characterize Colombia.
Furthermore, the border between Colombia and Venezuela have grown increasingly tense as Maduro increases his threats, while the Colombian leadership have not taken kindly to their remarks as well. Also, Colombia shares a closer relationship with the US than Venezuela creating another area of tension between the two nations. Suggested Solutions Brookings and the New York Times argue that there must be an injection of cash from the IMF in order to get the economy up and running, similar to the Greek bailout. Also, Brookings also points out that there must be coordinated South American response between the neighboring nations to handle the 2.1 million Venezuelan refugees leaving the country. Furthermore, there also must be a restructuring of the government and give more freedom to the people rather than the government.
Therefore, Maduro must be forced out of power or negotiated with to provide more political freedom to the opposition and install policies that are less harmful to the economy. The economy must also stop relying excessively on its large oil reserves. There must be research into other industries, because otherwise, the Venezuelan economy would have to go through fluctuations whenever the oil price went down or up. The Brookings Institute also recommends the creation of the group, “Venezuelan Friends with Democracy” through UN mediation in order to instill democratic elections rather than rigged elections that aim to dismantle opposition. The other route could be strengthening sanctions in order to force Maduro to the negotiation table.
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