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Collapse in Venezuela

Venezuela protest
Collapse in Venezuela SMALL PROMO IMAGE

“I can’t be standing in line for five hours to buy a carton of milk. This isn’t about what political party you support. We’re in a crisis and we need change.”

—Edwin Reverol, Venezuelan citizen, January 14, 2015

2.1 The Issue 

Home to thirty-one million people, Venezuela plays an important role in South America and the global economy. This role is largely driven by its energy wealth, which is powered by the world’s largest known oil reserves. This oil is important to the U.S. economy, but Venezuela also presents a significant challenge to the United States on other fronts. Over the decades, Venezuela’s politics have become increasingly anti-American, first under Hugo Chavez, a leftist leader who governed Venezuela from 1998 until his death in 2013, and then under his successor, Nicolas Maduro.

Under Chavez, the Venezuelan government enjoyed years of domestic approval, in part because of its extensive spending on social programs made possible by high oil prices. But Chavez’s economic policies—such as increasing market interventions and mismanagement of the state-owned energy company—spurred inflation and led to declines in investment and production in the non-oil sectors of the economy.

The Venezuelan government lost political support after Maduro, Chavez’s long-time deputy, took over as president in 2013. Maduro’s administration repeatedly responded to challenges by cracking down on dissent. It arrested opposition leaders and accused the United States of meddling in its domestic affairs. In 2014, the plummeting price of oil, which is the country’s only major export, drove Venezuela’s economy into further crisis. Meanwhile, crime escalated in many forms that continue today. In urban areas, including the capital Caracas, kidnappings, murder, and robbery plague both affluent and poor neighborhoods. The United States has also confirmed that terrorist organizations such as the National Liberation Army (ELN) use the rural Venezuelan-Colombian border as a safe haven and drug-trafficking corridor.

Decision Point

NSC Meeting

It is June 2018. Venezuela’s government recently announced that it was unable to make payments on certain foreign loans and was defaulting on them, triggering an economic collapse. With their money suddenly worthless and food and basic necessities in short supply, protestors stormed the Venezuelan government, prompting President Nicolas Maduro to flee the country.

Two members of Maduro’s party have since claimed the presidency, but neither has been able to establish control. Meanwhile, protests continue and factions of the military have abandoned the government. The country’s borders and coasts are increasingly unpatrolled, and activity by drug traffickers and insurgent groups in those areas has reportedly gone up. Petrocaribe, an oil alliance that allows many Caribbean states to buy discounted oil from Venezuela, has collapsed.

The disorder in Venezuela poses economic, political, and security challenges to the United States. But it also offers potential opportunities. The National Security Council (NSC) will need to recommend a course of action to the president. This entails considering how to prioritize and pursue the U.S. interests at stake, including economic stabilization, regional security, a stable flow of oil, protection of human rights, and restoration of democratic governance and the rule of law.

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