Venezuela is in dire straits – just look at the statistics. The International Monetary Fund expects its gross domestic product (GDP) to decline by 10 percent this year. Inflation is running at more than 700 percent. The country’s single source of funding, state-owned oil and natural gas company Petroleos de Venezuela (PDVSA), has seen its debt grow from $3 billion to $43 billion in five years.
The country’s huge budget deficit (close to 20 percent by the end of last year) explains why it is accepting heavily discounted payments on debt owed by the PetroCaribe alliance, an organization that allows member countries to purchase Venezuelan oil at preferential rates. It is likely that many Caribbean countries will not repay the sums they owe Caracas, putting at risk its vital ties with PetroCaribe and the Bolivarian Alliance for the Americas (ALBA).
Cutbacks in concessionary oil shipments to Cuba show the financial pressure Venezuela is under. Declining production at PDVSA has worsened the problem, forcing these subsidized deliveries to be diverted into an already depressed world market. Since oil prices are expected to remain between $30 and $50 per barrel in the medium term, it does not appear that President Nicolas Maduro’s government will get a fiscal reprieve anytime soon.
If the macroeconomic picture is dismal, it is even worse for ordinary Venezuelans. Shortages of foods, medicines and services (blame the nationalizations and the brain drain) plus intermittent blackouts have made life enormously difficult. Compounding these everyday hardships are new regulations requiring state employees – whose workweek has been reduced to four days to save energy – to engage in farm labor to boost food production. The Ministry of Basic Industry and Mining has already warned that next year will be even harder. It expects that emergency measures will have to be introduced, including even tighter electricity rationing. This is a miserable performance from a regime that has made 10 vice presidents responsible for economic affairs and is advised by economists from Cuba and the Marxist Podemos party in Spain.
Many believe that the increasing deprivation will lead to social upheaval that will finally bring about the demise of the Maduro regime. The opposition Democratic Unity Roundtable (MUD) coalition, which controls three-quarters of the National Assembly, also holds this view. In a lengthy interview with Spanish newspaper ABC, MUD’s secretary-general, Jesus “Chuo” Torrealba, predicted that President Maduro will be “out” this year regardless of whether the opposition succeeds in holding arecall referendum. Mr. Torrealba reasoned that the “Takeover of Caracas” mass demonstration on September 1, 2016 would be the turning point. It drew thousands of people, but Mr. Maduro still clings to power.
The problem with these dire predictions is that they invariably use linear reasoning – things are so demonstrably bad that the Maduro regime cannot possibly survive. However, his ability to remain in power since the death of Hugo Chavez shows that words like “crisis” and “intolerable” are relative.
One thing is clear: there is a drastic asymmetry in the motivations driving the president and his opponents. Mr. Maduro is fundamentally ruthless. He vows that any attempt to overthrow him will provoke a response that will make Turkey’s President Recep Tayyip Erdogan – whose purges and reprisals after July’s failed coup were considered heavy-handed – look like “a suckling baby.” State employees who demonstrate anything less than total fealty are sacked. It is crystal clear that foreign pressure, including from the United States, the Organization of American States (OAS) or the new governments in Argentina, Brazil and Paraguay, will have little sway over him.
Scenario 1 (low probability)
In this scenario, the social and economic situation continues to deteriorate, leading to social unrest, looting and riots. The military splits, with the bulk of the armed forces and the National Guard (who have not shared in the spoils of the drug trade) joining the protests. As the situation spins out of control, new leaders emerge and demand President Maduro’s resignation. A civil-military junta is formed and calls for elections.
Scenario 2 (most plausible)
The power struggle inside the top military command ends with one faction taking control. This victorious group then negotiates with the political opposition. Despite the myriad challenges facing the regime, this scenario actually gives it a chance of survival. It seems the most likely outcome, for several reasons.
First, President Maduro appears ready to take the most draconian measures against popular unrest. He has already ordered that live ammunition be used for crowd control.
Second, continual purges have culled potential leaders from both the military and the civil service. Cuban intelligence has played a role in keeping tabs on any possible usurpers, and has a vital interest in the regime’s survival. Top military commanders, fearing an end to their drug profits and possible prosecution under a new administration, remain loyal to the regime and have the firepower to brutally suppress any uprising.
Finally, the opposition coalition is paralyzed, divided between those who favor active confrontation (led by Leopoldo Lopez, the former mayor of the Chacao, now a prisoner of the regime) and proponents of a negotiated outcome (including Henrique Capriles, the governor of Miranda state).
All this suggests that political action by civilians will not topple the Maduro government. Only a disintegration of the military leadership could bring about change, whose exact nature is difficult to predict.
Guns and drugs
The key to regime cohesion is the drug trade. Although there is no coca grown or processed in Venezuela, 80 percent of Colombia’s supply now transits through the country. The flow goes through three routes controlled by the military: 1) via Margarita Island to the Dominican Republic, Haiti and Puerto Rico; 2) airdrops by Venezuelan planes off the coast of Jamaica, where well-organized groups collect and ship the drugs to the U.S. and Europe; and 3) delivery by fishing boats to Trinidad, where the drugs are transferred to large yachts and expedited to the eastern Caribbean and Europe.
Profits from drug trafficking have allowed the military to set up its own farms and run most nationalized businesses, making it virtually self-sufficient. Administratively, active-duty or retired officers hold all but three state governorships and a third of the government ministries. They are ready to govern.
The commander of the armed forces is General Vladimir Padrino. He presides over a “Civilian-Military Presidential Command” with President Maduro, holds the defense portfolio in Mr. Maduro’s cabinet and is also in charge of food and medicine distribution. Despite these lofty positions – and the fact that he does not yet face any U.S. indictments – General Padrino’s hold on power could be challenged.
One possible rival is General Nestor Reverol, whom Mr. Padrino beat out for the country’s top military post. Having lost this “mano a mano,” General Reverol resigned from his position as commander of the National Guard. However, in August, President Maduro appointed him as Minister of Interior and Justice. This put him in charge of the National Guard, the police, public prosecutors and the National Anti-Drug Office. He is also in charge of the so-called People’s Liberation Operations (OLPs), an officially sponsored vigilante-type force that raids neighborhoods controlled by petty hoodlums. All of these levers of power have been placed in Mr. Reverol’s hands, despite his indictment in New York for drug running.
As if to drive home the message, President Maduro appointed another military man under a U.S. indictment, Major General Gustavo Gonzalez Lopez, as director of the country’s intelligence services (SERBIN). According to Chuo Torrealba of MUD, these appointments were made to please Tarek El Aissami, the governor of Aragua state and reportedly an advisor to the Reverol wing of the military.
Divided and entrenched
Two conclusions can be drawn from all of this. First, the top military command is divided into two camps, each disposing of considerable forces. Mr. Padrino has direct command over 120,000 soldiers in the regular armed forces, while Mr. Reverol controls 87,000 National Guard troops and (indirectly) 435,000 well-armed reservists (including the feared “colectivos” – motorcycle-riding militants).
Second, the only outside actor that could conceivably sway either of these two groups – the U.S., in particular the Drug Enforcement Administration – has shown itself to be virtually powerless. A case in point is General Hugo Carvajal Barrios, the former head of military intelligence. Sought by the U.S. for extradition as a drug trafficker with powerful Colombian contacts, he was posted as consul general to Aruba (part of the Kingdom of the Netherlands) in January 2014. Under heavy pressure from the U.S., the Dutch authorities arrested Mr. Carvajal instead of accepting his credentials. But he was soon released, and brought home with great publicity to a presidential reception in Caracas.
This kind of official support makes analyzing, let alone predicting, the behavior of men involved in the drug trade difficult. Nevertheless, we can identify certain patterns. For example, contrary to the hierarchical, single-leader cartels in Mexico and Colombia, the Venezuelans are organized horizontally. This allows the benefits to be spread across the country, but always kept under senior officers’ control.
Mr. Padrino and Mr. Reverol might not like each other, but as long as each holds on to his slice of the pie, a precarious equilibrium can be maintained. What could bring the criminal status quo to an end is the situation in Colombia. If the recently signed peace treaty puts the Revolutionary Armed Forces of Colombia (FARC) out of the drug business and cuts supplies to Venezuela, then competition for the decreased supplies could splinter the military.
Only this outcome would give the civilian opposition leverage to make a Mephistophelian deal. In return for legal immunity and control of the narcotics trade, the military will support new elections. Venezuela would not be the first country in Latin America to allow such an arrangement for the sake of “democracy.”