The Morning After Maduro in Venezuela

May 17, 2019

One day Venezuelans will wake up to the news that the Maduro regime has ended. Though it is impossible to know when that day might be (political markets site PredictIt puts the odds somewhere around 2 to 1 that Nicolás Maduro won’t be in power by the end of 2019), as a popular Venezuelan song by Carlos Baute says, “no hay mal que dure mil años” (“nothing bad lasts one thousand years”).

The day after the last day of the Maduro dictatorship, the work of rebuilding the country will start. Venezuela’s new government will face the hard task of rebuilding the economy, securing the country, and maintaining the support of the people. Transforming Venezuela back into the stable, prosperous country it was just two decades ago should be a priority for the United States and will require active American support. If benign neglect helps to partly explain how Venezuela arrived at its present state, benign engagement will certainly be necessary to rebuild the country after Maduro.

Venezuela was once a rich country: In the 1980s the Concorde flew between Caracas and Paris, and in 1983 Caracas became only the sixth city in Latin America to have a subway system. Its fortune depended then, as it will again, on oil. The first challenge facing the new government will be rebuilding the oil industry. Venezuela’s oil production has declined from nearly 3.5 million barrels per day in 1998, the year Chávez was first elected, to under a million barrels per day in April 2019. This decline is the consequence of two factors: a lack of investment in the industry and a loss of human capital. Recently the president of the state-owned oil company Petróleos de Venezuela, S.A. (PDVSA), a Maduro-appointed official, admitted that the country had underinvested in the firm for years, blaming “mafias” for the chronic lack of financial resources. In addition, PDVSA lost most of its talented, foreign-educated technocrats in the 2002-03 strike. Though PDVSA’s payroll swelled after this to nearly 53,000 employees, productivity declined. The new workforce could not replace the skills of the old. For comparison, Saudi Aramco, the world’s most valuable company, employs about 65,000 people and produces 5.4 million barrels per day, nearly ten times what PDVSA is expected to produce this year.

Ramon Espinasa, former chief economist of PDVSA, used to informally estimate that bringing the company’s production back to 1998 levels would take approximately one year for each year Chavismo had been in power. Recently, Espinasa estimated that bringing Venezuela’s production to 3.4 million barrels of oil per day (up from current levels of under 1 million per day) would require an initial investment of $9 billion, followed by additional investments of $10 billion per year for 11 years. (The calculation is based on Venezuela’s first experience with oil sector expansion from 1947 to 1958, which quintupled oil production and made the country into a serious exporter.)

In addition to the deteriorated infrastructure, the new government will face a dearth of human capital necessary to run PDVSA. Millions of Venezuelans have fled the country (2.7 million in the last four years alone). Since Chávez fired 18,000 PDVSA employees in 2003, the oil company has been steadily losing the expertise necessary to run the company well. It took Venezuela decades of investment in higher education to build a cadre of educated professionals capable of replacing expats. This home-grown talent has since left Venezuela and it might be difficult to convince them to come back.

The second challenge will be the security situation. To sustain power, Chávez created and Maduro expanded militia and paramilitary groups. Although one of these armed groups is formally part of the Armed Forces, its members are considered civilians and do not wear a distinctive uniform (though they are armed and do sometimes wear a khaki uniform that is more reminiscent of a cleaning crew than a tactical team), and they remain outside the chain of command of the traditional Armed Forces. They are less a fifth service (Venezuela has an army, air force, navy, and national guard) and more just an armed group. Relatedly, though the Armed Forces are at least in theory sworn to protect the Constitution, the paramilitaries are sworn to protect the regime. Maduro recently announced plans to swear 2.1 million people in to the militia, giving them arms so they can defend the regime. He indicated that with the inclusion of this new group, the number of armed paramilitaries would reach 3 million (about 10 percent of the population). A new government would have to figure out who belongs to the militia and find a way to get them to turn in their weapons.

The post-Maduro government will also have to rebuild the military itself. Venezuela had a proud tradition of institutionalized Armed Forces. Unlike many of its neighbors, its experience with military rule was brief (1952-1958). The country enjoyed a close defense relationship with the United States, too: In 1982, Venezuela became the first country in Latin America to buy advanced defense technology from the United States when it acquired 18 F-16s. Under Chavez, relations with the United States soured and cooperation ceased. In parallel, the Armed Forces changed and began to reward loyalty with economic power. The Armed Forces were awarded economic concessions and split into regional commands, and then even smaller zone commands. Thus, under Chavismo, the Armed Forces went from being a capable, outward-facing military to a loyal group tasked with quashing dissent internally.

 

 

A new regime would have to reform the military, or at least return it to its role as a defense institution rather than an economic and political one. It will face this task  in a new environment that includes linkages to Russia, China, and Turkey, among others, none of which are traditional Venezuelan partners. The majority of these links are economic and ideological: China, Russia, and Turkey are deeply invested in the country, especially in the oil sector, and Russia and Turkey have been using Venezuela to flex their muscle on the world stage. These economic and ideological ties, however, have security implications, as indicated by Russia’s recent deployment of two planes — presumably to protect the regime. A new government in Venezuela will have to contend with these existing ties and find a way to realign itself with the West if it so chooses.

Lastly, a new government will have to win and sustain the support of the people in a challenging economic situation. Venezuelans are going to want to see immediate improvements following regime change. Many of the improvements they seek — a reliable electric grid and power supply, infrastructure upgrades, safer cities — will be impossible to deliver in the short term. Others — access to food and medicine, for example — can be achieved quickly with help from foreign donors.

To be successful, a new regime will need extensive support early on from international financial institutions and the United States. Christine Lagarde, head of the International Monetary Fund, and President Donald Trump have said they are working on an aid package for Venezuela to be delivered as soon as democracy is restored in the country. A new regime faces the task of gaining the trust of its citizens and of potential investors. To achieve the first, a new regime will need an immediate influx of capital directed toward delivering basic services. But the relationship with international investors works the other way around: A new regime will have to inspire trust in order for much-needed capital to flow into the oil sector. In both cases, Venezuela faces one additional challenge: its isolation. Most foreign airlines have stopped flying to the country, some in response to unpaid debts from the Venezuelan government, others citing the safety of their crewmembers. To achieve the necessary influx of assistance, it will be important to connect the country to potential partners through commercial air travel.

A new regime should be able to count on the Venezuelan diaspora to help with some of this. An estimated four million Venezuelans have left the country since the regime came to power. While the latest waves of migrants have been driven out by the humanitarian emergency, earlier waves have settled abroad and prospered. Many of these people remain interested in the situation in Venezuela. A new regime could count on the return of some of the human capital that left with them.

Venezuela veered into authoritarianism during a period in which the United States was practicing benign neglect of the region. Chávez and Maduro capitalized on this inattention to grow their authoritarian projects and build support for them throughout Latin America. A successful transition back to democracy will require benign engagement from private corporations, multilateral institutions, the U.S. government, and Venezuelans themselves. Private corporations will have a role to play in reviving the Venezuelan oil sector, as well as in reestablishing commercial air traffic and the availability of basic food and medicine. Clorox, General Mills, and Pepsi, to name a few, once had operations in the country. In the future, Venezuela will need these firms’ investment again. Multilateral institutions will be needed to help finance repairs to the country’s crumbling infrastructure, much of which was built over half a century ago.

Finally, the U.S. government may well have the expertise necessary to advise the new government in the rebuilding of its institutions. Moreover, to counter the investments that extra-hemispheric actors have already made in the country, it will be important for the United States and nations in the region to show that they are willing and capable partners interested and invested in a democratic future for Venezuela. Ultimately, it is in the best interest of the countries of the hemisphere and of the United States that Venezuela return to being a stable partner in the region.

 

 

Dr. Fabiana Sofia Perera is an assistant research fellow at the William J. Perry Center for Hemispheric Defense Studies. She is a 2016 alumna of Bridging the Gap’s New Era Workshop and a Foreign Policy Interrupted fellow. The views expressed here do not reflect the views of the Department of Defense or the U.S. government. The author wishes to dedicate this article to the memory of Ramón Espinasa, chief economist of PDVSA (1992-1999), who passed away on March 21, 2019.

 

Image: Wikimedia