Maduro as President of Venezuela: What to Expect

On April 15, the Comisión Nacional Electoral (CNE) confirmed Nicolás Maduro as the next president of Venezuela, following the death of Hugo Chavez on March 5 and presidential election on April 14. The Organization of American States and the U.S. government have both asked for a 100-percent recount “necessary to ensure than all Venezuelans have confidence in the results” (as White House Press Secretary Jay Carney explained). However, this is unlikely to occur.

What happens next and what should we expect from President Nicolas Maduro? The opposition, led by Governor of Miranda state Henrique Capriles Radonski, called for a recount and gathered his supporters to bang their pots and pans during the night of Monday April 15 in protest the CNE’s definitive result. The cazerolazos (pot bangers) would let Venezuelans and citizens throughout the hemisphere know of their call for a recount through non-violent protest. Thousands responded, reflective of the 49.07% of Venezuelans who voted for the opposition party, Mesa Unidad Democrática (MUD); they lost by only 262,000 out of 14.9 million votes. There are 3,200 formal claims of electoral fraud, as well as countless claims of intimidation, but they are unlikely to change the CNE’s decision because 4 out of the 5 commissioners were appointed by Hugo Chavez and are members of his political party, the PSUV.

Beyond pot banging, it is unlikely that the opposition’s protest will turn violent or endure. Maduro will be sworn into office on April 19 and will have to confront serious problems. Inflation has increased from 20 percent year-on-year in December 2012 to 23 percent in February 2013. Furthermore, the currency is overvalued, despite a recent 32 percent devaluation and stable oil prices. Consequently, slower economic performance is expected in the 2013-2014 period. Nevertheless, Maduro is expected to continue social spending for housing, education and health in order to demonstrate that Chavismo, the philosophy of the late Hugo Chavez, is not dead. Scotiabank has also warned its customers that interventionist public policies will continue. In the last year these policies resulted in shortages of basic foods and medicines for all Venezuelans.

With oil production down from 3.3 million barrels per day (mbd) to 2.4 mbd and a $42.5 billion debt to the China Development Bank (CDB), Maduro will face a shortage of cash. He can persuade Venezuelans that they should tighten their belts and endure a period of austerity, but that could provoke protest from the very constituency who supported his election. He could approach the multilateral banks, but Chavez rejected these institutions as being tools of the U.S. “empire.”

Maduro’s supporters in Cuba are reliant on the continued provision of 90,000 barrels per day of subsidized oil to the island, preventing him from drawing down that account to sell the oil on the open market. Maduro has two options: seek a further loan from CDB, similar to the $12 billion that Chavez obtained in June 2011, or renegotiate the repayment terms on the current Chinese loans. (Currently 21 percent of Venezuela’s debt goes to Chinese institutions.) The Chinese government response is critical.

Discussions with officials from the Chinese Academy of Social Sciences at the Inter-American Dialogue in Washington in late March revealed that continued Venezuelan oil production and political stability are necessary for the Chinese authorities. Since 2007, the Chinese National Petroleum Corporation (CNPC) and the China Petrochemical Corporation (CPC) have gained large stakes in Venezuela’s oil industry after Exxon Mobil and ConocoPhillips abandoned the country under the threat of nationalization. If continued oil supplies and political stability are important to the Chinese government, its institutions may agree to renegotiate the loan terms. However, extended repayment schedules will probably come with the condition that more effective management be put in place at Venezuela’s national oil company (PDVSA) as well as the housing and agricultural projects financed by CDB. That means additional Chinese personnel operating within Venezuelan projects.

Sun Hongbo from the Chinese Academy of Social Sciences saw great benefit to China from a “strategic partnership based on long term complementarity.” The CNPC relies upon 800,000 bpd which Venezuela promised in 2007 as collateral for its $14 billion loan under the China Venezuela Joint Fund. We should therefore anticipate increased Chinese influence within Venezuela, as well as demands for greater efficiency both within PDVSA and the delivery of social services. However, payment on the Chinese loans implies lesser revenues from oil sales on the open market. Therefore, Maduro may seek to reduce the amount of subsidized oil that Venezuela provides the Caribbean nations and Nicaragua. Cuba will be an exception with its reliance on 90,000 bpd.

Given the reliance on China to keep the Venezuelan economy afloat, what else might we expect? Politically, the poor showing of the PSUV in this April election reflects the diminution of the Chavez’ aura. Maduro waged his campaign as “son of Chavez,” but it was not good enough to ensure a clear victory. He is now alone to run the country, but he has competitors. According to the Venezuelan constitution, the president of the National Assembly, Diosdado Cabello, should have assumed office pending elections when Hugo Chavez failed to assume office on the constitutionally determined date of January 10. The Supreme Court decided in favor of continuity backing Vice President Nicolas Maduro, but Diosdado now claims through his Twitter account that he would have been more successful in last Sunday’s presidential election. The rivalry between the two men will become more evident throughout the six-year term that Maduro begins this week.

What does this mean for Venezuela? Maduro’s authority to lead the country will be contested. Based on the 3,200 claims of electoral fraud, his legitimacy as president has already been challenged. Without the compelling charisma that Hugo Chavez exuded and without plentiful resources, Maduro will come to rely on authoritarian means. Opposition political figures and student leaders may find themselves in pre-trial detention for varying lengths sufficient to scare them from open protest. Current criminal inmates of Venezuelan jails are reputed to be violent, using rape and threats of murder to control the penitentiaries. Most political opponents will probably choose to shut up or seek exile rather than face jail terms.

Under these circumstances, what should the U.S. government do? I anticipate that President Obama will recognize Maduro as president in the near future, and cannot prevent growing Chinese influence. However, Washington should not accept the abuse of human rights and the denial of the rule of law. Together with the democratic countries in the hemisphere, it should use the weight of the Inter-American Commission on Human Rights and its effective court system to protect Venezuelan citizens and prevent the consolidation of authoritarian rule in the hemisphere.