Caracas Chronicles

The second anniversary of Cinco8, CC’s Spanish language sister site, was a great opportunity to take two steps back and look at Venezuela’s transformation in the last couple of years. Although we usually write a yearly balance on the state of things in the country, we’re seeing these two years as a block that completely changed the power dynamics and the economy of the country. It may be bold to state this in 2021, but when we consider that the country was in an apparently stagnant situation by the end of 2018, Venezuela was probably one of the countries that changed the most in this time frame. Venezuela aged twenty years in just two: 2019 was the year of the national blackout, Juan Guaidó’s power play, a Pythonesque insurrection, and the advent of the unofficial dollarization; and 2020 was the year of the pandemic. Venezuelans went from having a murky shade of hope and a fragile collective enthusiasm for the possibility of democratic reconstruction to rock-hard resignation.

This year, the regime teases Venezuelans with the idea of an open economy while it continues to enforce its violent grip on power; and the opposition seems to be herded, by many different actors, towards a change of strategy. This mix of circumstances along with some very particular developments in Venezuela has turned our view of the world we live in upside down, as well as the mere understanding of who we are.

Ahead of a new negotiation cycle (sheesh), here’s where we stand today. 

The Main Worry

The last thing you can say about Venezuela’s economy today is that it’s functional. The government just announced the third currency redenomination of the chavista era, as we all expected, which would bring us a new incarnation of the bolivar in October: the “bolivar digital”. Hyperinflation is still hyper, over 5,000 percent in 2021, according to the IMF if we consider the price variation expressed in bolivars—but with a few key variations. 

Today, we are mostly talking about “inflation in U.S. dollars,” which is plain old inflation, and about how this has severed the value of remittances and increased inequality in Venezuela—which was already massive. Dollarization, must be said, has stimulated a timid, fragile, income recovery for some Venezuelans, as well as some interesting stories of entrepreneurship. Through imports and the reactivated production of some domestic manufacture, food shortages have decreased. 

However, food insecurity is still there. Besides the low purchasing power of millions of people, farm-to-market supply chains are usually threatened by fuel shortages. Because all attempts of economic recovery in Venezuela, and the mere struggle to survive, are still restricted by the country’s energy deficit. The decline of the oil industry and the power infrastructure keep the population paying asphyxiating costs in money and time to get gas for their cars and trucks. Trees and bushes are being used to provide firewood for households unable to find cooking gas. A nationwide blackout as the one in March 2019 hasn’t happened again, but people outside Caracas have to endure long hours without power, or even days. This means no fridges to store food, no internet, no phone, no pumps for water, no fans or air conditioners, no work, no study. There’s no way of getting a nation on its feet without reliable, continuing electricity.  

Any discussion on reactivation in Venezuela must start by assessing the status of oil production, which isn’t easy. Some sources say they have barely surpassed the barrier of 500,000 barrels per day; while others say they are producing more than 600,000.

Venezuela is now a shadow of the hydrocarbon powerhouse it once was. 2021 started with a promise of economic opening and privatization of the oil industry, but that hasn’t happened so far. You’d say that no one must be surprised when chavismo doesn’t honor a promise, and you’d be right, but in this case, it was the regime’s international partners (Russia, Iran, and China) who were taken by surprise, countries that were pressuring for increased participation in oil projects with lower interaction with the Venezuelan State. What we’ve seen are very few changes on the board, where previous players are being replaced by these new partners. A clear example of this is the recent announcement that Equinor and Total are leaving Petrocedeño. 

The Mirage of Reconstruction

Even in this economic context, dollarization has driven consumption and an illusion of stabilization—what political scientist Guillermo Aveledo Coll calls Pax Bodegónica, alluding to the stores selling Nutella, Ben & Jerry’s, and Stella Artois—and even a climate of economic reconstruction, made more of expectations and desire, if not pure and simple wishful thinking. Yes, the Caracas Stock Market is working, but with meager returns. Yes, there’s some investment coming from Miami, but it’s from groups of Venezuelan investors purchasing old companies depleted of their value during the economic catastrophe. At the end of the day, the Maduro regime refuses to relinquish control, on behalf of ideological dogma or because of political interest, and the sanctions are the official explanation for everything. Most of all, the regime doesn’t want anyone to think it’s going to lose its grip on the country, as was shown by Delcy Rodríguez’s attitude at the FEDECÁMARAS business chamber annual assembly.

In reality, the promise of a free-market economy is no more than a political marketing tool to counterbalance the political violence of the State, by feeding the belief in an eventual metamorphosis of the chavista regime into a pragmatic autocracy. This seems to be embraced by more people every day. In the meantime, the absence of a formal economic reform keeps pumping a bubble economy, where many people depend on services—that imitate those of the developed world—to tiny domestic consumption markets where most of the wealth of the country is accumulated. 

The sources of wealth in Venezuela have shrunk dramatically, and what is being distributed reaches just a few and is diminishing. According to the IMF, the country lost 3 % of its GDP in 2020 and will lose 10 % in 2021.  

The Double Layer of Covid and Sanctions

It’s difficult to discern the impact of international sanctions on the Venezuelan economy when the pandemic is hitting it at the same time. Both factors reduce Venezuela’s already thin interconnection with the rest of the world, and are systematically manipulated by the propaganda apparatus to hide the facts from public knowledge and accountability, and to produce narratives in the regime’s interest.

However, there are some things we can agree on regarding sanctions: they have caused problems to the state-owned oil industry (all but totally dismantled before the sanctions arrived, let’s not forget that). They are making it more difficult to produce and import fuel; they have no impact on the bodegón economy; and they have no impact on imports of medicine. Also, and perhaps less agreed upon, sanctions were probably important factors in forcing the government to lift or waive some economic control measures, when it found itself unable to sustain the subsidized economy. And on the political arena, although sanctions didn’t shatter the ruling alliance, they may be the only reason pushing the regime to accept a new negotiation. 

Normalizing the Suffering

Apparently, Venezuelans normalized COVID-19 as they’ve with so many other problems. The country is still enduring a complex humanitarian emergency, and people are still dying of preventable diseases. In fact, the coronavirus crisis has hidden parallel challenges such as the spread of malaria and the delay of surgical interventions and treatments. 

People find medicine more easily, but now the problem is that it’s too expensive, and health has been privatized with incredible speed. One day in a private hospital to treat COVID-19 can cost over 1,000 dollars. We think there’s more humanitarian assistance than in August 2019—the UN food relief agency was finally authorized to operate in Venezuela. However, NGOs are under threat and international aid is far from being enough. The pandemic made the logistics of humanitarian assistance, like importing supplies or distributing them, even more complicated. 

Even more difficult to assess is the social impact of the combination of this weird economy, the sanctions and the pandemic. How could we measure the effect on so many kids that have not attended school or college since the first half of 2020? How could we measure the effect, on their present and their future, of those kids left behind by parents who emigrated?

Yes, the economy could have improved in some aspects since 2019, but the social catastrophe is intact. The murders of girls and women increased during the pandemic, as well as domestic violence, something also registered in many different countries. Violence persists. 

El Koki As a Symbol

The sense that crime has declined began to dissipate with the constant challenge of the mega gangs in the northeastern and southwestern tips of Caracas: Petare and the Cota 905. The State has been dealing with these mega gangs for years; how they affect the regime is something that could only be estimated on a local basis. Depending on the place, those criminal organizations are the government’s ally or foe. But the gang led by a.k.a. El Koki is unique as a symbol of the paradox: the Maduro regime is able to suffocate protest and subjugate the opposition, but is unable to neutralize an adversary that insists on defying security forces not far from Miraflores Palace. 

Even if—as the Colombian police suspects—the gang leader crossed to Colombia after escaping the two-day battle with FAES in Caracas, his story shows that the Venezuelan dictatorship isn’t identical to its Cuban counterpart, which preserves a solid control over its entire territory. Besides the power such heavily armed gangs have over entire slums in Caracas and other cities, even after the increasingly violent battles with security forces, different kinds of criminal organizations are the de facto ruling entities in several parts of the Venezuelan mainland, a phenomenon that doesn’t exist in Cuba but is present in other failing states in Africa, Central America, and Asia. 

The explanation for this resides in the logic of criminal enterprises. In a sort of return to the violent and chaotic past of Venezuela, the border regions became porous spaces of unraveling state governance and intense irregular activity, where Colombian guerrillas and paramilitary, and Venezuelan gangs, colectivos, police and the military compete for the lucrative traffic of minerals, drugs, fuel, food, and migrants. You don’t have to travel that far to see those gangs working, of course; a big part of Aragua, for instance, is under extortion, and some critical roads that connect the farms to the cities are controlled by pirates. 

Another Migratory Circuit

Migration became more complex as well. By August 2019, there wasn’t much awareness of the perils migrants faced at sea and the trafficking of girls and women to Trinidad. Nor did we have the images of Venezuelans crossing the Rio Grande to Texas. Today, we know that the routes to Colombia include the Amazon rivers; that at least hundreds of migrants had to return when the pandemic took their jobs or the dollarization in Venezuela made useless the meager remittances they could send from Peru or Ecuador; and that people aren’t leaving at the pace they did in 2018 and 2019. 

The exodus, mind you, hasn’t ended. Perhaps it entered a mature stage.

Venezuelan communities in Peru, Colombia, Florida or Spain have grown enough to have a political impact, whether they are used as a cautionary tale about what the Left could do to a country, or exploited as the scapegoat by xenophobic populists. The more relevant change isn’t of a numeric nature, but in terms of how hosting countries manage the Venezuelan migration: it’s seen as a fait accompli, a reality that came to stay, not a sudden explosion. Certain landmarks show how this realization informs policy decisions, such as the waving of expired Venezuelan passports in certain countries, and especially the measures of temporal protection given to migrants with irregular status in Colombia and the U.S.

Going Along With Reality

We left politics for the end—as it’s become truly hard to explain Venezuelan politics of late. In August 2019, the hope tsunami around Juan Guaidó was already dissipating, and some events like the fiasco of the so-called Operation Gedeon, Trump’s bluff about “all options being on the table” and, above all, the persecution, destroyed the opposition’s capacity to pressure the regime and silenced the “end of usurpation” mantra. 

Today, even under sanctions, Nicolás Maduro looks comfortable in his seat. His courts and security forces have divided the opposition and quenched all unrest on the streets or in the barracks. His main problem isn’t the opposition at all; on the contrary, he seems to use its existence to access internationally arbitrated negotiations where he could get sanctions relief in exchange of celebrating regional elections with minimal foreign approval, that could leave some opposition politicians as mayors or governors of little importance.

The chances of Cape Verde extraditing Alex Saab (the brain of the financial and foreign trade operations of the chavista elite) to the U.S., seem to occupy more space in the government’s mind than the threat posed by the FARC dissidence, a new armed actor that just made a relevant muscle flex: the faction led by a.k.a. Gentil Duarte humiliated the FANB in the conflict in Apure, seems to have killed a.k.a. Jesús Santrich, and is maybe prevailing at the control of a drug trafficking corridor from the rivers on the border with Colombia to the beaches of western Venezuela.

The regime is comfortable because it isn’t even damaged by the demolishing human rights reports from High Commissioner Michelle Bachelet or the Fact-Finding Mission. Maduro has seen the international and domestic response to the repression in Nicaragua and Cuba and knows what he can get away with when he uses brute force. Now he needs those regional elections to get some sanctions off his back. He doesn’t expect the removal of all sanctions, having his Cuban and Iranian friends as examples in preserving power under sanctions. And the political map the regional elections can produce presents no risks, given that chavismo is advancing in the old project of the communal state. 

The international community should want to reopen embassies in Caracas, to end this bizarre situation of having, in some cases, two Venezuelan ambassadors in their capitals, to restore ties in case Venezuela launches an energetic or economic reactivation that could offer opportunities for foreign investment, and most of all, to alleviate the pressure of the Venezuelan migration problem. 

Back in the country, many opposition politicians have abandoned the goal of removing the dictatorship to aspire to, at least, a city hall. Many actors want to go along with reality. The regime knows it, and is aware it has a lot on its side to stay on its feet in the upcoming transformation.

Common Venezuelans say in polls and on social media that they understand they are on their own, that no one will come to save them, and that when the State doesn’t get in the way they can develop their entrepreneurial instincts and improve their quality of life. It’s extremely difficult to live in Venezuela, but society appears to realize it has to generate wealth, without counting on remittances or on a famelic petrostate not only unable to drive the economy, but to light the entire country at the same time.  

We’ll have to wait to see which kinds of organizations and survival skills are to prosper in the near future, and how this disappointed Venezuela, left to survive, will deal with itself and the rest of the world.