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Opposition supporters holding a Venezuelan flag protest against Venezuela's President Nicolas Maduro's government during a rally in Caracas, Venezuela April 1, 2017. REUTERS/Carlos Garcia Rawlins - RTX33OG1
Report

Venezuela: A path out of crisis

Brookings Institution Working Group on Venezuela

In recent years, Venezuela has seen the rapid erosion of its economic standing and democratic credibility. Facing a global downturn in oil prices and an annualized inflation rate that is expected to exceed 1,000 percent in 2017, Venezuela’s economy is now one of the worst performing in the world. The resulting humanitarian situation is severe. Only 25 percent of the Venezuelan population is able to maintain a regular diet, while the poverty rate has grown to 82 percent and crime is widespread.

Yet despite these conditions, President Nicolás Maduro and his United Socialist Party of Venezuela have maintained their grip on power. One key to the durability of the Maduro government has been the choice to cultivate loyalty by filling senior government posts with officials who have the most to lose if ousted from power, including alleged narcotraffickers and other persons under investigation by U.S. federal prosecutors. More broadly, Venezuela’s system has become increasingly autocratic, undermining democratic institutions and elections, and repeatedly demonstrating its unwillingness to adapt social and economic policies to maintain a viable development model that satisfies the needs of the population.

Maduro has faced growing internal and external pressure to enact much-needed economic reforms. Domestically, the president’s approval rating has fallen below 30 percent, but the Venezuelan opposition is hampered by internal divisions, an inability to translate public mobilization into political victories, and repressive government action. Internationally, the government has received criticism from not only the United States, but also from regional countries and organizations that were previously reluctant to express concerns publicly.

The United States has struggled to exercise influence over Venezuela’s actions in recent years, but this moment of crisis could provide an opening for Washington to urge the Maduro government to change course. The United States should exercise leadership and support efforts to raise the Maduro administration’s costs of pursuing antidemocratic policies and lower the costs of a return to democracy. To this end, we recommend that the United States initiate an immediate and sustained dialogue with key regional partners including Peru, Argentina, Brazil, and Colombia on how to address the crisis in Venezuela, which should include consideration of the following continuum of policy options:

  1. The United States could expand its assistance to countries that until now have been dependent on Venezuelan oil, as a means to decrease regional support for and dependence on the Maduro government.
  1. The United States could increase monetary assistance to credible civil society organizations and nongovernmental organizations able to deliver food and medicines to Venezuelans. By doing so, the United States should make clear that international pressure aims to support democracy, not punish the Venezuelan people.
  1. The United States could support efforts by the opposition in Venezuela to build an “off-ramp” that would split moderate elements of the government away from hardliners, encouraging the former to acquiesce to a transition to democracy by lowering their costs of exiting government.
  1. The United States could coordinate with international institutions such as the International Monetary Fund (IMF) to offer financial incentives for holding free and fair elections in 2018, and for the opposition to unify and compete in those elections. Such coordination would also involve developing and publicizing a credible plan to restart Venezuela’s economy.
  1. As a last resort, the United States could consider raising economic costs to the government through an expanded sanctions regime that aims to limit Venezuelan earnings from oil exports and block further financing. This policy is risky, given that the Maduro government would be able to more credibly shift blame for the economic crisis onto the United States, and should be accompanied by well-publicized efforts to deliver humanitarian aid through credible civil society and nongovernmental organizations.

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