December 10, 2023 | Rome, Italy

Venezuelan snapshot

By |2018-03-21T18:18:52+01:00April 13th, 2014|"Foreign Affairs"|
Nicolás Maduro says growing social unrest — which has included both peaceful marches and street violence — is part of a U.S. plot to gain control of Venezuela's oil industry.

enezuela is a beautiful country with spectacular landscapes and huge water resources, mineral wealth, and oil and natural gas reserves. Parts of the territory, however, are still only partially known and can remind observers of Columbian writer Gabriel Garcia Marques’ fabled city of Macondo from “One Hundred Years of Solitude.”

A case in point is the township of Ciudad Tovar in western Venezuela. Around 1850, German immigrant settlers were given land on which to build a city. At the time, the Germans were considered ideal settlers, following the model of Argentina and other Latin American countries. The Venezuela Germans were moved into the mountainous jungles and then forgotten, as the dictator-led country was wracked by coup after coup.

Though communications with the rest of the country was all but impossible, the settlers went ahead with their town. Today, Ciudad Tovar is a major tourist attraction inhabited by the descendants of the original settlers many of who intermarried with local Indians to create a strange blend of blond and brown-skinned Lutherans.

Venezuela’s socio-political history is remarkable for its violent contrasts. The country was plagued by army upheaval in 19th and 20th centuries, and by conflicts within the ruling elites, consisting mainly the great landowners concentrated in the Llanos (the central uplands and the Andean West), the urban middle classes and the army.

From its origins, heavily indebted and frequently bankrupt Venezuela has had to face foreign interventions from its British, French and American lenders. These factors contributed to the growth of highly vocal nationalism but also to great dependency on the presence of outsiders, particularly the U.S. Large and easily marketable natural resources made Venezuela a strategic pawn of foreign interests, and especially of the major oil companies.

The late 1950s brought a new equilibrium, with a relatively friendly nationalization of the oil industry and a semi-democratic political system controlled by the social democrats of Action Democratica and the Christian Democrats of Copei. One of the two, or both, ran the government through the late 1990s. It was then that nationalist factions within the army joined forces with leftist dissident groups to change a system they considered corrupt, inefficient and harmful to most Venezuelans.

Venezuelan has some 30 million inhabitants and with a per capita income of around $14,000. But these European-style figures are distorted. The relatively well-off middle classes enjoy a per capita income of around $60,000 while most of the population earns less than $3,000 a year.

Income disparity helps explain why populist-nationalist military officer Hugo Chavez was elected president. His 10-year rule — ostensibly inspired by Simon Bolivar, the nation’s founder, later deposed by the military — helped change Latin American political equilibriums and contributed to more assertive nationalist policies recently picked up on by other regional governments.

But Chavez’s long rule also led to a deep and very bitter split within Venezuela’s economically unstable society. New President Nicholás Maduro, elected by a thin margin after Chavez’s death in 2012, lacks his predecessor’s charisma as well as the unquestioned backing of the armed forces. A former leftist leader, Maduro has had to face increasingly militant opposition, made more critical by the country’s worsening economic situation.

Under Maduro, the country’s gross domestic product has fallen by about 10 percent with inflation now running at around 50 percent and rising. Unemployment is also up, and the exchange rate has collapsed. Non-oil related export markets have disappeared and legal imports have been slowed by lack of credit and bureaucratic problems. Smuggling is once again growing.

In recent months, dozens of opposition protestors have died in clashes with Maduro security forces, putting his government at risk. Both government and opposition leaders have turned up the rhetoric, with Maduro recently alleging the unrest was a part of a “slow-motion” coup engineered by the U.S. to “get their hands on Venezuelan oil.”

Oil is in fact the common denominator. Traditionally, the national oil company PDVESA existed outside political rivalries, led instead by a technocrats who created a kind of state within a state. PDVESA aimed to find strategic oil partnerships and bypass the production limits set by OPEC (an organization, incidentally, invented by Venezuela). Accordingly, PDVESA purchased oil marketing companies in Europe and acquired CITGO, a major U.S. distributor of oil products. PDVESA also partially opened the oil sector to foreign companies.

Chavez’s ascent changed all that. The government took effective control of PDVESA and imposed a domestic pricing system that favored the country’s poor. Chavez sought to subsidize countries like Nicaragua and Cuba with heavily discounted supplies. Contracts with foreign companies were cancelled or put on hold. Investments in the oil and gas sector declined sharply. PEDVESA actively began looking for new politically acceptable outlets for Venezuelan oil, particularly in China and other Asian countries. To achieve this, Venezuela actively lobbied for and partly financed the project to ongoing Panama Canal expansion project.

But these populist policies drained resources and compounded the country’s economic woes. Their positive effects were gradually cancelled out by heavy costs.

Understanding Venezuela’s deepening social unrest and the decline of popular backing for the Maduro administration necessarily means assembling and studying all these historical pieces, which, taken together, bode more volatility ahead.

About the Author:

Vittorio Jucker was the author of the column "The Economist" from its creation in 2012 to mid-2017.