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Venezuela protest

Venezuelan president Nicolás Maduro’s referendum aimed at writing a new constitution has led to fears the country is heading towards dictatorship. foreign investors – already wary after years of political instability – are beginning to back even further away. Michael Deibert reports

Well-known political figures spirited out of their homes by masked gunmen in the middle of the night is rarely a good look, and so it was in Venezuela at the beginning of August.

In the early hours of August 1, both Leopoldo López, the leader of the Voluntad Popular political party and former mayor of the Caracas municipally of Chacao, and Antonio Ledezma, the mayor of metropolitan Caracas for most of the past decade, were seized from their homes by agents of the Servicio Bolivariano de Inteligencia Nacional (both were returned to house arrest several days later). Thus, two of the country’s leading opposition figures (Mr López had been released to house arrest after a three-and-a-half-year spell in prison in July) were plucked from the national scene only days after a controversial referendum that many are calling the death of Venezuelan democracy. 

Post-referendum chaos

Called unilaterally by president Nicolás Maduro (who has ruled the country since the death of his mentor, the populist Hugo Chávez, in 2013), the referendum to create a “constituent assembly” tasked with writing a new Venezuelan constitution – and to definitively strip the opposition-dominated National Assembly of powers – was widely boycotted despite calls to state workers threatening them with termination if they did not participate, including at the state oil company Petroleos de Venezuela.

Polls show that 70% of Venezuelans oppose the creation of the assembly and, a few days after the vote, Smartmatic, the company that oversees Venezuela’s voting system, announced the result was manipulated by at least 1 million votes.

More than 40 countries – including the US, Canada, Argentina, Brazil, Colombia and Mexico, as well as the EU – refused to recognise the vote, while the advocacy group Human Rights Watch accused Mr Maduro of imposing a “dictatorship” on Venezuela. Meanwhile, at least 121 people have been killed in anti-government protests since April.

An isolated nation

As it splits apart, Venezuela, which by all normal indicators – vast oil reserves, abundant national resources and a large domestic market – should be a tempting jewel for foreign companies, has effectively scared away most investors over the past decade due to political instability and a politically fraught judicial system that is prone to trampling on private property rights and other protections. Indeed, in the World Bank’s Doing Business 2017 index, Venezuela ranked 187th out of 190 countries. 

As violence increases – the capital Caracas was ranked as the most violent city in the world in 2016 by non-governmental organisation the Mexican Citizens’ Council for Public Security and Criminal Justice – attempts to privatise ports and airports are faltering as the country finds itself ever-more isolated. At the end of July, Delta became the latest airline to cancel its service to Venezuela, joining other carriers such as United Airlines, amid a dispute centring around $3.8bn that airlines say the government owes them.

Ironically – or perhaps horrifyingly – Venezuela’s government has been selling discounted government bonds, which have been devoured by firms such as Goldman Sachs for about 40 cents on the dollar, meaning Mr Maduro’s much-vaunted revolution is meeting its debt obligations effectively on the back of its long-suffering citizens.

It seems like a lifetime ago, but in fact it was only the early 1990s when, despite Hugo Chávez’s failed 1992 coup, Venezuela was regarded as one of the most attractive destinations for foreign investment in the southern hemisphere. The failure of successive governments to address the country’s yawning inequality was in part to blame for the rise of ‘chavismo’ in subsequent years, but Venezuela’s fragile institutions managed to hold on. With Mr Maduro’s plebiscite, however, the last of those barriers towards a genuine dictatorship appear to be eroding before Venezuelans’ eyes, leaving the country’s future ever more fraught and uncertain.

This article is sourced from fDi Magazine
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