Venezuela is at a crossroads

Venezuela is at a crossroads
GONZALO MOLINA, OILPRICE.COM
Jul. 7, 2015, 2:15 AM 33

Venezuela's legislative elections this coming December promise to be a
vote of confidence on President Nicolas Maduro's first elected term. If
Maduro's Socialist Party can hold onto its 98-seat majority in the
167-seat National Assembly, Maduro will hold Venezuela's domestic
balance of power until the next presidential election in 2019.

But if opposition candidates attract rural voters and add just 19 seats
to the current 65, opponents will finally have enough votes to challenge
Maduro's Socialist policies, including alleged human rights violations
and mismanagement of Venezuela's economy.

Maduro's domestic support is crumbling as barren grocery stores hold
lotteries to decide who will buy essential goods on which day. But
opposition party members and human rights activists think twice before
protesting Maduro's economic policies, fearing they'll end up in prison
like Leopoldo Lopez, founder of the Voluntad Popular opposition party,
and one of the few remaining descendants of Venezuela's revolutionary
founder, Simon Bolívar.

Lopez was arrested last year for allegedly inspiring a wave of political
protests that turned violent and left more than 30 people dead in the
streets. Lopez denies responsibility but remains in custody at the Ramo
Verde military prison outside Caracas.

In a bid of solidarity with Lopez and the opposition, last week a
delegation of Brazilian senators landed in Caracas and took a bus to the
prison to visit Lopez. Before they could reach the prison, a mob of
violent Maduro supporters stoned the bus and forced the senators back to
the airport. The senators returned to Brazil that day without completing
their visit.

While Maduro insists Lopez is a violent agitator, Lopez argues that only
respect for human rights and private property will bring prosperity to
Venezuela, and that protests will continue until Maduro changes his ways
or leaves office. But in spite of domestic pressure and U.S. sanctions,
Maduro entrenches himself by trading oil for favors around the world.

Maduro uses oil money the same way his predecessor and mentor, Hugo
Chavez did – to support ideological allies and frustrate foreign
enemies. Though this often raises criticism over mismanagement, Maduro
is more than willing to fund his ideology with oil profits. Indeed, oil
exports have made Maduro a global player, affecting relations between
North America, Europe, China, Brazil, and Iran, not to mention Cuba and
Colombia. Venezuela is a member of OPEC, and although Maduro does not
have as much influence within the cartel as he would like, it does offer
him an opportunity to have a say over the policymaking of one of the
most important institutions regarding global oil markets.

Hugo Chavez strengthened Venezuela's ideological and economic ties with
Cuba, the Western Hemisphere's last remaining communist stronghold. But
unlike Maduro, Cuba's Raul Castro is trying something new: convincing
foreign firms to invest in the Mariel Economic Development Zone, Cuba's
first experiment in Chinese-style hybrid capitalism. Raul knows Cuba's
socialist economy has always required a patron and, with Russia
sidelined and Venezuela now faltering, Cuba must attract foreign capital
if it wants to stand on its own. Will rising inflation, dwindling
currency reserves and pressure from opposition groups compel President
Maduro to follow Cuba's example?

Probably not. Venezuela is ideologically brittle and neither side is
willing to bend very far. The Socialists will not cave to opposition
demands for economic reform, no matter how many seats the opposition
wins on December 6. In any event, the opposition winning 19 new seats
and taking a majority of the National Assembly is unlikely.

The future is stark for Venezuela – on December 6, voters will choose
between the ideology of the past or something new . If Maduro's
socialist ideology wins, he will continue distributing oil (and oil
profits) inefficiently, further contracting the Venezuelan economy. The
opposition will have to wait until the 2019 presidential election to
challenge Maduro directly but, in the meantime, impatience manifest
itself in more protests and violent clashes.

On the other hand, if enough opposition candidates win on December 6,
they will introduce reforms to not only diversify Venezuela's economy
beyond oil, but also attract expert capital into the oil sector itself.
That could open up new opportunities for international oil companies
that have long been given the cold shoulder.

Source: Venezuela economy and government - Business Insider -
http://uk.businessinsider.com/venezuela-economy-and-government-2015-7?r=US