The Crisis of the Bolivarian Democracy in Venezuela: a necessary revision

By Blas Regnault[1]

March 2018

The Venezuelan Democracy is experiencing a complex crisis, in which the legitimacy of the political system and the economic model are on a cliff’s edge, creating a situation with few solutions in sight. This two-dimensional crisis has consequences on multiples levels of the social welfare: the political representation of interests, the political participation of social movements, the exercise of the right of equality before the law and the access to food and medicines. The crisis is forcing citizens to leave the country, expelled by the shortage situation, the social violence and the political repression. Let us describe some historical issues related to each dimension of the crisis.

1. The Unachieved Participatory Democracy (1999-2013) and the Authoritarian Twist (2013-2018)

The Participatory Democracy and its challenges. In 1999 Venezuela inaugurates a new Democratic Constitution, perhaps one of the most inspiring political models of the last 50 years in Latin America: The Participatory Democracy[2]. Despite the operationalization of this political model never took place, there were few laws that attempted to give body to political participation within this democratic model[3]. In that sense, the Participatory Democracy does not privilege a socialist model. Indeed, the Chavez's popularity was due largely to his ability to interpret the immense need of the Venezuelan population to participate in the conduction of their destiny. Popular participation was a marginalized promise in the Democratic-Liberal Constitution of 1961. So, once Chavez won the Presidential elections in 1998 and proposed the Constituent Assembly in order to re-found the Venezuelan democracy, his popularity was guaranteed.

From the “Participatory Model” to the “Twenty First Century ‘Real’ Socialism”. However, in 2007, after two unsuccessful coup d’états (2002/2003), two won presidential elections (2000 / 2006) and a defeated recall referendum (2004), Chávez proposes a constitutional reform in order to promulgate the socialist character of the Constitution. This referendum was the only electoral process that Chávez lost. The attempt to establish a Communal Socialist State was frustrated by popular election. Despite “El Comandante” struggles to lead the model towards a more conventional socialist system; the Constitution of the Bolivarian Republic of Venezuela remained formally untouchable. From 2007 until the announcement of his illness in June 2011, Chávez attempted try to “keep the party in peace”, consolidating even more the centralized style of power. As a leader, he leaves two uncompleted tasks: The institutionalization of the Participatory Democracy promulgated in 1999 and the deconstruction of the Liberal State promulgated in 1961. These two unachieved tasks created a political and institutional limbo that paved the way for the observed authoritarian twist since 2013.

The Authoritarian Twist. With the death of Chávez (5^th of March 2013), and the rise of Nicolás Maduro to power, the political forces (into and out of Chavismo) are recomposed, taking increasingly prominent role the military strata (more obvious since November 2013). The ruling party founded by Chavez (Partido Socialista Unido de Venezuela –PSUV–)[4] weakens and the chances of generating consensus in order to build an economic policy for managing the crisis (the falling of the oil rent since June 2014 and the oil production since 2015) are very low.  

In December 2015, the opposition won 2/3 of the deputies of the National Assembly, radically changing the configuration of forces within the public power. The elected National Assembly will have the control to elect the National Electoral Council (CNE), the General Attorney of the Republic (FGR) and the Supreme Court of Justice (TSJ). However, the outgoing governmental forces, in a fast track way, elect a new Court Supreme of Justice (TSJ) just before the installation of the new National Assembly. Thus, the TSJ remains in the hands of the central government, and its management systematically turns against the actions of the new National Assembly.

The TSJ, the FGR and Central Government against the Legislative Power. In February 2016, the TSJ authorized the President to move forward in opening oil sector to international Capitals. TSJ also empowers him to govern in a State of Exception and Economic Emergency, violating the constitutional framework. In March 2017, the TSJ declared in contempt of the National Assembly elected by the population in 2015, transferring its powers to the central government (Sentences 155 and 156 of the Constitutional Chamber of the TSJ). In those terms, the Supreme Court becomes a kind of supranational power, giving "legal" character to the actions of the central government.

Protests 2017. In April 2017 a new wave of protests began, which ended in July with young protesters dead and several prisoners, in a clear criminalization of the protests.

New Constitution? The government of Maduro called for elections on 31^st of July 2017, to set up a new National Constituent Assembly, parallel to the National Constituted Assembly. This National Constituent Assembly will draft a new Constitution. However, unlike what happened in 1999, little is known about this national political contract. The Constituent Assembly has served to ratify the power of a new FGR and CNE, in clear ignorance of the Bolivarian Constitution and also elections of the National Assembly in December 2015.

The Dialogue in Dominican Republic: towards a Transition? Since October 2016 until February 2018 several meetings have been held in Dominican Republic between the visible opposition (mainly established in the Constituted National Assembly Dec. 2015) and the Government in order to re-establish political conditions and stop political violence. Some international mediators have participated in the dialogue. These negotiations did not have any positive results for re-establishing the constitutional order. On contrary, it seems these dialogues contribute even more for delegitimizing the current political forces and then the political system. At the time of the writing (24/02/2018), the presidential elections will take place on 22^nd of April; a unilateral decision took by the government. The visible opposition has decided to no participate in these presidential elections.

2. Massive crisis in an oil exporting economy dependent on oil rent[5]

Why the falling oil rent is the crisis of the national economy? In Venezuela, the problem is not the oil rent. In the last 100 years the oil rent has been a historically and recurrent income for the Venezuelan economy. The oil rent is a fluctuating income, linked to the global productivity of the oil wells in the world market (Differential Rent or Ricardian Rent). Both, National Oil Companies (NOC) and Majors Oil Companies (MOC) have taken advantage of the oil rent in historical terms. Thus, the oil rent is an inevitable and specific remuneration into the oil business. In fact, like every oil landowner (in Texas, Alaska, Saudi Arabia, Kuwait, Norway, UK or Nigeria) Venezuela has exercised their sovereignty over the oil wells belonging to the nation through its fiscal regime[6]. Thus, the oil rent is a widely accepted income in the global oil regions. The problem is when a country, an entire economy, makes economic policies (both, in the oil and non-oil sectors) counting on the oil rent as if it was a stable and an inexhaustible income over time. Indeed, one of the ideological risks of the oil rent is what to do with such large sums of money[7]. Among other risks, it supposes the fiction of having that income in the future, committing the majority of the time to the country with external debt. This was the case during the 80's and it is what is happening now.

The economic crisis in an oil rent dependent economy occurs when oil prices fall below the commitments made in the national budget. If the economic system is not prepared for the fluctuations of the oil rent, a crisis ensues, whose dimensions will always have the size of the commitment acquired. However, the Venezuelan case has two additional characteristics: on the one hand, the national oil industry has suffered a significant deterioration in its productive capacity[8], fact that OPEC and Non-OPEC countries have taken advantage. On the other hand, the non-oil sector devoted to food production (dependent also on the oil rent), has also suffered very serious consequences in its productive capacity, bringing serious shortage of goods.

The inefficiency in public management and unsustainable exchange rate parity creates profound distortions throughout the whole economy[9]. This also causes a drastic reduction of foreign currency and a generalized deterioration of the productive sectors, having an effect on the import and production of medicines and food. In the case of medicines, it is important to refer to enormous difficulties of population to get treatment of chronic diseases such as high blood pressure, cancer, diabetes and renal dialysis.

Hyperinflation touched food and several goods that often serve for survival. In 2017, non-official figures indicate inflation was near of 2,616 percent. For instance, by February 2018, a person that earned an integral minimum wage (basic salary plus food allowance) only had the capacity to buy 10 percent of the food basket and 8 per cent of the basic family basket. A graduated public servant could acquire 19 per cent of the food basket and 13 per cent of the basic family basket.

No plan for the massive economic crisis. The national government is still far from initiating a plan of economic reactivation oriented to the national production. On the contrary, the fall in rentier oil income has led the government to look for other sources of rent, exacerbating the extractive condition of the economy. At present, the government is trying to recover revenues through indebtedness with a cryptocurrency called Petro, committing future barrels of oil in private hands. The unconstitutional privatization of the barrels for the future is a reversal of the rights obtained in 2001 with the Hydrocarbons Law. Petro is a form of debt that will undoubtedly have a direct consequence on national sovereignty. In addition, government has created the Orinoco Mining Arc (Arco Minero del Orinoco), for the exploitation of gold and other minerals, placing more than half of the southern state of Guayana (Bolívar) at the disposal of large transnational mining corporations. The Orinoco Mining Arc is devastating the socio-environmental conditions of indigenous peoples in the Amazon rainforest (Lander, 2017).

3. The state of the Democracy in Venezuela

In terms of the most basic rights, the Venezuelan Democracy is failing. Access to basic goods is not guaranteed. There is an increase of dependency on direct subsidies through the so-called CLAP, a consumption card provided by the central government. This “positive concession” (“inclusion from above” García Guadilla, 2018) limits autonomy and alienates the fundamental freedoms to food. Other social consequence of the food crisis is the malnutrition that is preventing children from attending schools (UNICEF, 2018)[10]. In addition, the access to both, public health service and medicines are not guaranteed.

In terms of the working opportunities, far is the economic system to provide a decent job for the working class. In the name of socialist ideology and the “economic war”, the authoritarian regime has alienated the fundamental right to a decent salary. Indeed, the central government has insisted that the crisis has been produced by “an economic war that foreign countries have initiated against Venezuela”. The author of this article has no doubt about the special interest of traditionally colonialist nations as well as those that have been emerging since the last decade, to control the natural resources of Venezuela. However, the “economic war” is a “Manichean” argument. One can deconstruct it using a little common sense walking on Caracas’ streets, where one can corroborate that people are feeding from garbage. This is one of the most painful verification in an historical oil country with no war at all.

In political terms, the government did not activate the Participatory Democracy to fight against the supposed “economic war”. The government excluded criticism from their own followers. It seems that once again the central power marginalized people, this time privileging a new emerging social class lead by the military forces. 

The forced migration. The number of people expelled from the country is increasing. The main reasons of migration are low wages and shortage situation. Unofficial figures estimate that 4.5 million people have emigrated in the last 5 years[11]. People have started migration to neighbouring countries such as Colombia and Brazil. Other important contingent of people are migrating to other Latin American countries, such as Ecuador, Peru, Argentina, Chile, Bolivia, Panama and Costa Rica, and European countries such as Spain, Italy and Portugal. Many of the migrants to Europe are descendants of refugees arrived to Venezuela after the Spanish Civil War and The Second World War. There are also political refugees; however, they are lesser in quantity and importance.

The crisis of democracy in Venezuela is fundamentally due to two historically unsolved puzzles. On the one hand, the frustrated “Participatory Democracy” pending since 1961. On the other hand, the misunderstanding of the oil condition, and its consequent mismanagement of oil rent. To solve these puzzles, politicians and social scientists should pay more attention to the social and economic history of such a diverse and particular country as Venezuela.

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[1] The author is grateful for the observations and criticisms of the following colleagues: Cecilia Torres, Jose Luis Fernandez-Shaw, Beatriz Barrot, Larissa Barbosa, Daniela Andrade, Brenda Rodriguez and Tefera Negash. However, everything here exposed is the sole responsibility of the author.

[2] Sometimes understood in opposition sometimes understood as a complement of the Liberal and Representative Democracy

[3]  The Organic Law for Potable Water and Waste Service is one of the law, other policies were set up by Presidential decrees, or volunteer willing expressed by Chavez during his allocutions in “Aló Presidente” (García Guadilla, María PIlar, 2018).

[4] The 5^th of February 2018, Nicolás Maduro registered in the National Electoral Council (CNE) a new political party called “Vamos Venezuela”, setting up as a separate party from the PSUV.

[5] The performance of the national economy, as well as of the different public institutions cannot be evaluated rigorously given the absence of updated official data since, at least, 2013. Most of the information has been obtained from data disclosed by academic centres, international institutions or policy analysts, presenting significant differences between them.

[6] Between 1993 and 2001, the Venezuelan Fiscal Regime changed as a part of deregulation reforms of the oil sector, causing 20 Billion Dollars losses for the Nation in the three first years. In 2001 a New Hydrocarbon Law recovered the historical role of the State as landowner in the oil business. This new Hydrocarbon Law increased the oil rent income of the economy in about 65 percent.

[7] In Venezuela an historical discussion started in 1934 is still going on about the uses of the oil rent in the national development. However, the continuous political changes occurred every 40 years have prevented a consensus resolution on the uses of oil rent. Norway uses to be one of the examples used by Venezuelan analysts because of the creation of its Intergenerational Saving Fund and the Macroeconomic Stabilizing Fund. In the case of Alaska every year the oil sector generates surpluses which are distributed among the population.

[8] According to the OPEC in the Monthly Oil Market Report, 12^th February 2018, Table 5-10: OPEC crude oil production based on primary sources, the Venezuelan Oil production losses 604,000 barrels per day since 2016 (2,373 MBD 2016/ 1,769 MBD Jan 2018).

[9] Since February 2018, the official exchange rate changed from 10.00 to 30,000.00 bolivars per dollar, while the Parallel dollar parity, which has a significant impact on the pricing, was 230,000.00 bolivars per dollar on February 23, 2017.

[10] Statement published the 26th of January 2018 in New York: “In Venezuela, prevalence of malnutrition among children grows as economic crisis deepens. UNICEF urges coordinated national action to reach children most in need” https://www.unicef.org/media/media_102501.html

[11] According to the last Census, in 2018 Venezuela reach 32 Million of people.

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References and Sources

• Betancourt, Rómulo (1956). Venezuela Política y Petróleo. FCE: México. 886 pp.
• García Guadilla, María PIlar (2018). The Incorporation of Popular Sectors and Social Movements in Venezuelan Twenty First Century Socialism. In Eduardo Silva and Federico Rossi (Editors). 2018 “Reshaping the Political Arena in Latin America: From Resisting Neoliberalism to the Second Incorporation” (Pitt Latin American Series)
• Lander, Edgardo y Santiago Arconada (2017). Venezuela: un barril de pólvora. Nueva Sociedad No 269, mayo-junio de 2017, ISSN: 0251-3552, <www.nuso.org>.
• Regnault, Blas (2013). Neither a Blessing nor a Curse: Natural Resources and the development in oil-exporting economies. International Initiative for Promoting Political Economy. IPPE, 2013. Den Haag.
• Regnault, Blas (March 2018). “Synchronicity between recent transformation in liberal institutional frame in Venezuela and the new challenges of the global oil business”. Mimeo.
• Mendoza Pottellá, Carlos Ramón (Dec. 2017). Consideraciones sobre la industria petrolera venezolana y sus perspectivas a corto y mediano plazo. Mimeo.
• Mommer, Bernard (1989). ¿Es posible una polítcia petrolera no rentista? In Revista BCV: Caracas, Volumen 4 – No. 3 – 1989; pp. 56-107
• Murshed, S. Mansoob (2004) ‘When Does Natural Resource Abundance Lead to a Resource Curse’, IIED-EEP Working Paper 04-01, www.iied.org.
• OPEC (2018) Monthly Oil Market Report, 12^th February 2018. Available in http://www.opec.org/opec_web/en/
• UNICEF (26^th January 2018) “Urges coordinated national action to reach children most in need” https://www.unicef.org/media/media_102501.html

Blas Regnault (Institute of Social Studies, Erasmus University of Rotterdam, The Netherlands ISS-EUR PhD Candidate) is a Venezuelan Sociologist, devoted to the study of global oil price cycles and its impact on the sustainable development in oil exporting economies.

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