Venezuela: Time to Focus on a Transition
September 1, 2016
Venezuela is in the midst of one of the worst economic, social, and political crises in its history. Failed economic policies and the near total lack of accountability urgently signal the need for a dramatic change in direction. Venezuela’s current challenges are many and the daily news reports, heart-wrenching. Economic crises are known for hitting the lower classes early and hard, but in Venezuela not just the lower ends of the income spectrum have experienced this dramatic deterioration. The middle class now lacks basic necessities. Long lines for food and scarcity of medicines are daily challenges, with people dying in increasing numbers.
Extreme political tensions, including an unbalanced system of power and weak institutions vulnerable to executive meddling, have divided the nation. State intervention in the economy, including the imposition of currency controls and price ceilings, continued nationalizations of private enterprises, and a volatile regulatory framework are driving away most local and foreign investors. Macroeconomic distortions, ranging from the continued printing of money to the increasing budget deficit, have set Venezuela on an unsustainable path as foreign currency reserves dwindle. A possible official default on government debt is looming. Inflation is already projected to exceed 700 percent this year. Physical insecurity, an issue highlighted by the country’s record homicide rate, is relatively unchecked because of dysfunctions within the justice system and law enforcement. Widespread corruption has only intensified the ongoing economic and political crisis.
These challenges can only be mitigated through the application of reforms that would represent a stark contrast to the policies of the current government. Because Venezuela’s problems largely stem from poor government administration, a swift transition to a democratic, transparent, and efficient government is the only way to redirect the country. Venezuela needs leadership capable of uniting the country and instituting policies that stimulate the economy. The country requires short-term, fast-acting policies that allow for the receipt of international humanitarian and financial assistance to alleviate current suffering, in addition to longer-term policies to reverse the decline. It is well-past time for a political transition in Venezuela.
There are several ways by which this transition might come, including through a recall referendum now demanded by millions of Venezuelans. Whatever the path, transition is inevitable and the international community and regional leaders need to be prepared to respond. This will be a particular challenge for the United States as the U.S. presidential election this fall and change in leadership in January mean that Venezuela must be a top priority for the new president’s transition team.
A new administration in Venezuela, whenever it arrives, will require political, economic, and institutional reforms coupled with effective and unwavering accountability measures. Sustained and coordinated international support, supplemented by extensive foreign humanitarian aid and financial assistance, will also be required for the stabilization and rebuilding of Venezuela. There are at least six areas where urgent reform will be necessary to reverse Venezuela’s decline and set the stage for the country’s reemergence. Reforms must focus on:
- Rebuilding Venezuela’s institutions and the rule of law;
- Promoting social/political reconciliation for a population divided and polarized;
- Defining economic policies to promote domestic and international investment in production and infrastructure and to reverse a pending economic collapse;
- Redeveloping the energy sector and creating a comprehensive plan to diversify the economy in order to lessen the country's vulnerability to oil price fluctuations;
- Analyzing the key reforms needed to promote solutions for civilian-security challenges; and
- Preparing Venezuela to receive and distribute massive and broad-based international humanitarian assistance to address the most critical population needs and programs of technical assistance during the transition.
The transition will be a very difficult period for Venezuela, but positive movement towards a sustainable future will be far better than the policy paralysis, confrontation, and torture that the country’s leaders have subjected its citizens to in recent years. The economy will certainly deteriorate further before it improves, making broad social assistance an urgent priority for a significant period of time.
Regional and international cooperation will be essential for a successful transition in Venezuela. The challenges of this kind of coordination and assistance will be made more difficult by the current government's refusal to accept any help from abroad. In the face of such denial, one important step in the right direction has already been taken by Colombia, which has opened its border with Venezuela several times, and has offered to discuss permanently re-opening the border to allow Venezuelan citizens to buy basic necessities. The United States will have an opportunity, when the transition comes, to reset its turbulent relationship with Venezuela by showing willingness to assist in various areas, including diplomatic, technical, and humanitarian support. Multilateral institutions, other bilateral partners, and the private sector will also have to assist Venezuela with humanitarian and financial support until the country can put itself back on its feet. Its rich energy resources, properly managed and used to the benefit of all Venezuelans, not as a source of enriching corrupt government officials, will provide a solid base for rebuilding the country into a model of development.
While the transition in Venezuela will be very challenging, it is far better than the status quo, especially with the growing social and security threat to the region that the country now represents. To prevent Venezuela from turning into an even greater humanitarian crisis— potentially rivaling the tragedy being faced today by the Middle East—the international community, the United States, and other regional leaders must pay closer attention to this crisis.
Venezuelans of all political persuasions, including millions now living abroad, need to prepare for the transition to a new and more rational Venezuela. This can be done in part, by examining other transition experiences and applying the lessons learned from countries like South Africa, Spain, Chile, as well as a range of countries in Eastern Europe and the Middle East. Firm leadership enhanced by transparency and good governance practices can provide an encouraging model for the disillusioned population of Venezuela and set a precedent for the region and the world.
Michael Matera is a senior fellow and director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Moises Rendon a research associate with the CSIS Americas Program. Nicole Ghazarian is an intern with the CSIS Americas Program.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2016 by the Center for Strategic and International Studies. All rights reserved.
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