Marcos Oliveira
World News /15 Aug 2014
08.15.14

Boosted by Party Congress, Venezuela Proposes New Reforms

In February 1989, a popular uprising in response to a fuel price increase paralyzed the Venezuelan capital of Caracas for days, and the subsequent crackdown by police and security forces left thousands wounded and many hundreds dead. Since the Caracazo, as the event has been named, fuel prices have remained a third rail in Venezuelan politics, unmentioned even during immensely popular late-President Hugo Chávez’s 15 years in office. That trend was bucked in early August, when Chávez’s handpicked successor President Nicolás Maduro closed the 3rd Socialist Party (PSUV) Congress by calling for national discussion of fuel price increases. So how did Maduro, whose party and leadership have been divided and contentious, find himself in a position to suggest a policy change that his predecessor avoided? Because during the week of the party congress he scored some limited but vital political victories.

The problems faced by Maduro’s government in the months before the July 26th opening of the party congress were well known. Rampant shortages of consumer goods have increased hardships for Venezuelans, and an annual inflation rate above 60% has further shaken an unsteady economy. Months of violent protests in the spring left dozens dead and the political and social discord that sparked them remain unresolved, as internationally mediated negotiations between the government and the opposition coalition Mesa de la Unidad Democratica (MUD) fizzled in April and May. This spike in political tension and protracted economic woes led to increased dissatisfaction with Maduro’s government, even among the poor, an important part of the government’s political base. Maduro’s administration has also been under mounting international pressure throughout this year, as countries in the region pushed the government to resolve its political disputes, and the United States threatened sanctions.

For Maduro, this international pressure increased dramatically when former high-ranking security official and retired Army General Hugo Carvajal was arrested in Aruba on July 24 at the behest of the U.S. government.

Carvajal stood accused of aiding drug-traffickers and of ties to Colombian rebel group FARC during his time as a government official. Carvajal arrived in Aruba as a diplomat but the Dutch government never confirmed his status, and a court on the island initially determined the arrest was legal.

The Venezuelan government threw its full support behind Carvajal, described his arrest as a ‘kidnapping,’ and temporarily suspended flights to and from Aruba. The Maduro administration is also accused of a more hostile response. According to Aruban officials, Venezuelan navy ships approached Aruba and Curacao as the government there was debating how to handle the Carvajal situation. “We don’t know what their intentions were, but I think a lot of people in Aruba were scared that something would happen,” said Chief Prosecutor Peter Blanken.

Whatever the nature of Venezuela’s pressure, it secured Carvajal’s release. On July 27th Dutch Foreign Minister Frans Timmermans agreed that he did have immunity, but determined that Carvajal was persona non grata, a declaration that forced Carvajal to return to Venezuela. On his return to Venezuela later that day, Carvajal was given a hero’s welcome, and taken directly from the airport to the party congress in Caracas, where he appeared on stage with Maduro. Maduro praised Carvajal, claiming the latter’s work led to a world record 75 drug bosses handed over to Colombia and the United States.

Carvajal’s quick release not only helped Maduro avoid a protracted international incident that could have led to damaging revelations about Venezuela’s ties to drug trafficking, but also helped the Venezuelan President bolster his political position. The diplomatic success achieved over Carvajal very likely helped legitimize the plaudits heaped upon Maduro, including his designation as new party president. Even though PSUV leadership, Venezuela expert and Tulane Professor David Smilde noted, had been able to “domesticate” the event and its participants, the high-profile dispute with the U.S. confirmed again for many throughout the country that the real struggle was with imperialists who sought to dictate events in Venezuela. Stoking anti-U.S. sentiment has long been a tactic of Chávez and Maduro, used to rally support and ease domestic pressure on their governments.

Venezuelan officials did not escape unscathed, as the U.S. State Department announced travel bans on unnamed members of the government. Sources said the State Department’s real intention was to head off a push for stronger sanctions – including asset freezes – for which members of Congress have been agitating. The Senate’s effort to pass a sanctions bill was recently checked until September by Louisiana’s Mary Landrieu, who blocked it after Citgo, a subsidiary of Venezuela’s state oil company, raised concerns over oil imports. As Smilde and other observers have argued, the push for sanctions gives the Maduro administration political ammo and is likely to be counterproductive.

The PSUV Congress, orchestrated by Maduro and other high-ranking government officials, went smoothly in part because of deep turmoil in, and therefore lack of resistance from, the opposition. Opposition coalition group MUD has been divided in recent months over how to work towards Maduro’s ouster. One faction, spearheaded by the imprisoned Leopoldo López, has pushed for Maduro’s removal through protest and popular outcry. Another faction, aligned with former Presidential candidate and Miranda state governor Henrique Capriles, has pushed for a long-term strategy, believing that an inevitable economic crisis will erode Maduro’s support. This internal disagreement has kept the MUD from presenting a united front and played into government hands.

In another blow to opposition unity, MUD Secretary General Ramón Guillermo Aveledo announced on July 30th that he was stepping down. Aveledo stressed that he was not leaving the MUD, merely turning over his position. But his implicit reference to a MUD political scandal earlier this summer signaled that the opposition group’s internal divisions continue to drain its political strength.

U.S. Deputy Secretary of State Roberta Jacobson said in May that MUD members had asked the U.S. government not to sanction Venezuelan officials out of fear it could harm the internationally mediated peace negotiations. Aveledo’s response did not explicitly dismiss Jacobson’s story, and he and other members of the MUD came under suspicion of helping government officials avoid punishment. The MUD itself denied such a request was made, and Jacobson later amended her comments, but Aveledo’s resignation letter hinted at a government propaganda campaign, welcomed “with lasciviousness” by “foolish” elements in the opposition, to discredit and smear him. While his assertion cannot be confirmed, his resignation again reveals that all is not right within the MUD, rendering it unable to make headway or even take advantage of opportunities to level legitimate criticism at the Maduro administration. Aveledo’s acrimonious exit, a sign the MUD is still far from consensus, came at an opportune time for Maduro and his government.

In spite of Venezuela’s problems and the PSUV’s shortcomings, the Maduro administration was able to emerge from the 3rd Party Congress in a relatively stronger political position. Indeed, even with myriad political, social, and economic challenges facing the country, Maduro holds an approval rating of around 40%, far less than a mandate, but considerable under the circumstances. The government’s burnished position also gives it a stronger footing from which to launch its proposed economic reforms. Just days after Maduro was anointed President of the Party, Economic Vice President Rafael Ramírez confirmed that the government would combine its tiered exchange rate system, a contentious plan that many have called a stealth devaluation. On August 11th, the government moved forward with that plan when it announced that the automotive sector would pay 43% more for imports, as the exchange rate for those goods rose from 6.3 bolivars to 11 bolivars to the dollar.

The government has admitted that these measures, as well as the proposed gasoline price increase, are part of a plan to deepen State involvement in the economy. The end result of that plan is hard to predict; while economic rebalancing (as well as the proposed sale of Citgo) could bring more funds to state coffers, it comes with a expansion of the socialist model that is to many observers the origin of Venezuela’s current problems. Moreover, between now and the November conference in which Maduro plans to discuss the economic transition, as well as during what is sure to be the tumultuous roll-out of various new policies, it is still possible that the opposition or factions within the PSUV could upend Maduro’s designs. What is certain is that without timely political maneuvers and opposition missteps, President Maduro would not be in a position now to push ahead with his controversial reforms.

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