Venezuela's Long Slide Toward Chaos

As reformers' hopes fade, Washington has an opportunity to end its hands-off approach.

March-April 2016

VENEZUELA IS a failing state. Despite having the world’s largest proven hydrocarbon reserves, the nation is bankrupt. Basic consumer goods are scarce or unavailable. Purchasing power is falling fast as a result of the world’s highest inflation rate. The healthcare system is in a state of collapse. Infrastructure is in disrepair. Common crime is out of control as the social order begins to break down. The U.S. alleges leading government figures to be engaged in narcotics trafficking and money laundering.

Welcome to the Bolivarian Revolution.

Since 1999, Venezuela has been an experiment in governance and economics. Eschewing the center-left path of much of the rest of Latin America, Venezuela has pursued a more radical course: to remake society itself. The late Hugo Chávez and his successor Nicolás Maduro have intentionally, if incrementally, turned the nation toward a populist, authoritarian vision vaguely identified as “Chavismo.” Using the levers of democracy and the legitimacy bestowed by elections, Venezuela’s government has systematically brought its institutions under executive influence or outright control. Elections themselves have been skewed to provide every advantage to government-supported candidates. Meanwhile, democratically elected opposition leaders have been arbitrarily removed from office, stripped of their budget authority or jailed on trumped-up charges—and sometimes all three. From the courts to the security apparatus, the central bank to the national oil company, the education system and the press to the private sector, independent institutions and organizations have been under sustained Chavista assault.

The government has justified its actions as a defensive response to Washington’s supposed imperialistic designs, turning a long-standing friend and economic partner into an enemy, and seeking to convince the Venezuelan population that it is under active threat by “the empire.” When this approach loses credibility, Venezuela attempts to build nationalistic fervor by picking fights with its neighbors Colombia and Guyana, or its former colonizer Spain. Meanwhile, the government has worked diligently to build a cult of personality around Chávez, linking him in the eyes of the public to the liberator Simón Bolívar. At this point in Venezuela, Bolívar has taken on an almost mystical importance; presenting Chávez and Maduro as his heirs imbues the Bolivarian Revolution with legitimacy even beyond the ballot box, giving the government freedom of action they might not otherwise enjoy in their claimed march toward Bolívar’s vision of a united Latin America.

Despite such soft utopianism undergirded by strident anti-Americanism, the government can be pragmatic when it is in its interests. It has proved to be clear-eyed in pursuing its objectives. Most notably, Venezuela continues to be an important supplier of oil to the United States, its most lucrative market. U.S. willingness to pay market prices coupled with a (now receding) commodities supercycle provided significant resources to underwrite efforts to remake Venezuelan society. An almost unlimited spigot of hard currency over the years allowed the regime to build and maintain majority domestic support through both direct and indirect benefits including cash transfers, community-development projects and social programs. Sales of crude to China, India and others at concessional rates provided additional resources to build international support. In particular, billions of dollars in Chinese loans and assistance, to be paid back by future oil deliveries, have allowed Venezuela to temporize as its economy flags. The costs of such actions will be borne by Venezuelan citizens long after the regime has left the scene, having taken all the benefits up front and left only debts to repay. With so much money sloshing around and limited oversight brought on by atrophying institutions, corruption has exploded and a new class of elites, the so-called Bolivarian oligarchs, or “Boligarchs,” has arisen.

Ironically, the government has been able to reduce the attraction of any political alternatives by painting the opposition as dominated by a callous and cynical oligarchy interested only in self-enrichment, unmoved by the poverty of the majority of Venezuelan citizens. This is a powerful and effective storyline in a nation with an abundance of natural resources, yet a grossly unequal income and wealth distribution. Like most effective propaganda efforts, the government has built its narrative on an element of truth. Venezuela suffered from florid and ostentatious corruption with the arrival of the petroleum industry in the early twentieth century. Politics was seen as a means to distribute the spoils of governance among a well-connected elite. There was little concern for the public good or broad-based economic development.

The international development community also supported Chavista efforts that were intended to reduce poverty, no matter how ephemeral their impact. Various actors and Hollywood celebrities added their voices in support of the Bolivarian Revolution, seeming to value an association with Latin American leftist chic more than appreciating the longer-term damage being done in the name of socialism. Meanwhile, a Latin America that has elevated sovereignty to an absolute principle saw no need to urge Caracas to change course, particularly when the economy was robust and cross border business relations were strong and growing.