By Evan Ellis / December 12, 2016
President-elect Donald Trump’s conversation with Taiwan’s President Tsai Ing-wen has put the People’s Republic of China on notice that his administration will not necessarily self-censor its activities to avoid a conflict. Experts will debate whether the move was diplomatically appropriate; yet in the Chinese tradition, it has sent a subtle yet powerful message forcing Beijing to re-assess its own strategy in Asia in light of evidence that President Trump may react more aggressively and more unpredictably to Chinese advances in Asia than did President Obama. Perhaps this is “The Art of the Deal.”
As with China, on the other side of the world, there is another regime whose advances have been similarly emboldened by the perceived unwillingness of the Obama administration to stand up for U.S. interests. In Venezuela, just across the shallow Caribbean from the United States, the country’s “Bolivarian socialist” regime has systematically dismantled democratic institutions and made it a hub for narcotrafficking, Russian and Chinese arms and the activities of Iran, and terrorist groups such as the FARC. Prior to the deepening of Venezuela’s economic crisis, its Bolivarian regime squandered the nation’s substantial revenues from oil to promote anti-Western institutions and political movements throughout the hemisphere. There are few regimes more in need, and more deserving, of being put on notice by a phone call and a few well-placed tweets from the incoming U.S. president, than that of Nicolás Maduro in Venezuela.
On October 20th, Venezuela’s Supreme Court suspended the constitutionally-guaranteed process to democratically remove Maduro on the spurious legal grounds of alleged fraud during the collection of signatures for petition required for that referendum. The entire referendum process was stopped, even though Venezuela’s pro-government Constitutional Court had already certified that the petition requirement had been complied with, and even though the number of signatures collected, 1.8 million, had vastly exceeded the 200,000 required.
The Maduro regime’s permanent blocking of the recall referendum eliminated any remaining doubt that it is now a dictatorship. Indeed, on top the decision to suspend the referendum, the Supreme Electoral Tribunal has also postponed state and municipal elections scheduled for December, raising the question of whether the Maduro regime will permit any elections, even new presidential elections at the end of his term, if there is a risk that the regime could lose.
Although the incoming Trump administration has many demands on its attention, both domestic and international, as with the Tsai Ing-wen call, “putting America first” implies putting those on notice who, such as Maduro, are working against U.S. interests, and where the implosion of a failed regime threatens neighboring U.S. friends and allies. A hopeful sign that the integral connection between Latin America and U.S. security interests will be highlighted to President Trump is his selection of retired Marine General John F. Kelly, former head of U.S. Southern Command, to serve as head of the Department of Homeland Security.
Venezuela is currently trapped in a downward spiral that will, sooner or later, end badly, possibly in widespread violence, chaos and waves of refugees. This would exponentially increase the already tremendous human suffering inflicted by the regime’s economic policies and create serious challenges for their neighbors, including Colombia, Brazil, Trinidad and Tobago, Aruba, and Curacao, which are already affected by Venezuela’s outflow of refugees and its role as the region’s new drug superhighway to the United States.
Wishful thinking cannot avoid where the mutually reinforcing confluence of maladies is taking the country. The problem is not low oil prices. Rather, 17 years of misguided, corrupt and ineptly implemented economic policies, including expropriations, price and currency controls, the persecution of businesses, and the absence of the rule of law have destroyed the ability of the country to feed itself or otherwise produce the most basic necessities. Had there been a Trump Tower in Venezuela, like the Hilton on Margarita Island and over 1100 other businesses in the country, it would have been expropriated long ago.
Complementing the destruction of the business base, oil production, which accounts for 96 percent of Venezuela’s export earnings, continues to collapse, down from 3.4 million barrels per day when Venezuela’s iconic populist leader, and Maduro-mentor, Hugo Chávez took power in 1999, to just over 2 million barrels today. Output is dropped not only because of declining production in mature oil fields that have been mismanaged and require new investment but also the withdrawal of oil rigs and other assets of western petroleum companies that have helped keep oil flowing but haven’t been paid.
Beyond declining production, an important part of the oil produced, approximately 600,000 barrels per day, is diverted to China to repay loans for which Venezuela now has almost nothing to show. Yet more oil is diverted to the member nations of Petrocaribe, with 50 percent financed at generous terms, in order to buy influence with those nations and their willingness not to support action by the international community against Venezuela’s disastrous Bolivarian socialist project. The confluence of destroyed domestic production and ever declining oil flows to pay for imports of basic necessities, has made hunger, food lines, child malnutrition, and even deaths due to the absence of basic medical supplies, part of the new Venezuelan reality.
Even with the Venezuelan government permitting a rampant black market and the departure of hundreds of thousands of people who cannot find food in their own country, the situation continues to get worse by the day.
The Venezuelan people have repeatedly and overwhelmingly expressed their desire to remove the chavista government that has led their country to this crisis. In December 2015, Venezuelans voted overwhelmingly to elect the opposition coalition (known by its Spanish acronym MUD) to Congress, giving the MUD opposition a “supermajority” of seats, only to have that entire branch of government effectively nullified by the Supreme Court, which had been packed with an additional 13 government loyalists days before the outgoing pro-government legislators of the previous Congress abandoned their seats. When the government used issued its decision to cancel the constitutionally-guaranteed recall referendum in October, over a million Venezuelans took to the streets to protest. According to a recent poll by the respected firm Datanalysis, more than 78 percent of Venezuelans disapprove of President Maduro and the current regime.
One troubling aspect of the current crisis is the refusal of Venezuela’s armed forces to fulfill their sworn duty to defend the constitution and the nation. During 17 years of populist government, the military (and especially the National Guard), has become heavily involved in illicit activities. The arrest of a parade of well-connected Venezuelans for narcotrafficking, including the nephews of the first lady (the “narco-nephews” case), makes it clear that such corruption penetrates the highest levels of the Venezuelan government. Indeed, according to the January 2015 testimony of Diosdado Cabello’s former security Chief Leamsy Salazar, Cabello himself was the leader of Venezuela’s most powerful narcotrafficking organization, the “Cartel of the Suns,” whose name refers to the rank insignia of the generals who allegedly run the organization. Actions such as the arrest of the “narco-nephews” in Haiti, or the attempt to arrest former Venezuelan intelligence chief Hugo Carbajal in Aruba, are a constant reminder to the military that a loss of power for the chavistas could mean imprisonment for their longstanding involvement in criminal acts.
For the chavistas, the nomination by President-Elect Trump of Exxon Mobil CEO Rex Tillerson as Secretary of State should further dampen their spirits. Mr. Tillerson arguably will bring to Foggy Bottom an in-depth understanding of the machinations of the Venezuelan government, which mistreated Exxon in the country for years, expropriated its assets, and violated its contractual rights, for which Exxon was awarded $1.6 billion in damages in 2014.
Official negotiations between Venezuela’s chavista regime and the opposition, mediated by the Vatican, are now on hold until the end of the Christmas holiday and scheduled to resume January 13, 2017, just a week before Donald Trump is inaugurated in the United States. The first week of January would be an ideal time for Donald Trump to take a friendly call from Henry Ramos Allup and others in Venezuela’s democratic opposition. As with Tsai Ing-wen’s call and China, the position of democracy in Venezuela will be strengthened if Venezuela’s President Maduro (and those who stay out of jail so long as he remains in power) returns to the bargaining table knowing that the incoming Trump administration is paying attention, and not entirely sure what he will do once he takes office.
While no one is talking about U.S. intervention in Venezuela, Nicolás Maduro must know that there are many fine places for a Trump Tower in Caracas.
As an aside, as the media contemplates Mr. Trump’s nomination of Exxon Mobil CEO Rex Tillerson as Secretary of State, I would also suggest that the media’s initial take is wrong on this one; While some in Latin America may criticize Mr. Tillerson as a big business elitist, and others in the U.S. as too “pro-Russian,” I believe that the appointment just may be good news for U.S. global engagement (albeit traumatic for Foggy Bottom).
Given the importance of the petroleum industry in Latin America, and Exxon Mobil’s global reach, there are perhaps few better positioned to understand the structure of economic challenges in petroleum producing countries such as Venezuela, Brazil, Colombia, Ecuador, Peru, Argentina, Mexico and Trinidad & Tobago than Mr. Tillerson, and few who better know the strengths and shortcomings of extra-hemispheric players such as Igor Sechin of Russia’s Rosneft. Moreover, given Exxon’s partnership with the Chinese company CNOOC, and its ongoing partnerships and competiton with others from China’s CNPC to India’s Reliance, to Russia’s Lukoil, Gazprom, TNK, and Rosneft, may be few incoming Secretaries of State with a better refined understanding of China and Russia’s resource and financial plays in Latin America and the Caribbean. And for Guyana–site of one of Exxon’s most important offshore oil projects in Latin America–a slightly greater portion of the world may notice that the deceptively rich and complex country of gold timber and sugar, overlooked since World War II by the tide of geopolitics, is actually in South America, not Africa.