Compiled by Sean Goforth, and edited by Steve Keller.
Since 1999, Hugo Chavez has ruled Venezuela by exploiting the nation’s significant oil wealth to finance Latin America’s most ambitious and aggressive populist agenda—during which time most other countries in the region liberalized and globalized instead.
Having muscled his way to another election victory in October 2012, Chavez was officially set to rule until 2019. But on March 5, 2013, Chavez died soon after returning to Venezuela from extended medical treatment in Cuba. A replacement election is scheduled for April 14th. But it remains unclear what will happen to Venezuela, or to “21st-century socialism,” following Chavez’s departure.
This is the premise behind Venezuela Post-Chavez, a ten-day Wikistrat simulation that ran from January 29th to February 8th and benefitted from the insights of over 50 Wikistrat analysts. The simulation encompassed 20 scenarios, and weighed both plausible and fat-tail outcomes alike.
This report summarizes those insights.
***
Overview of Master Narratives:
The following chart represents the four Master Outcomes constructed by the scenarios generated in the simulation. Outcomes serve as organizing “crates” for the constituent scenarios.
The quadrants are organized along X-Y axes that reflect the common constructs of the scenarios generated:
- X: How does the international community respond to post-Chavez Venezuela?
- Y: What is the level of order in Venezuela’s political transition?
The prospects for an orderly transition from a caretaker government to a full-term successor to Chavez are plotted along the vertical axis. Complicating near-term projections over the April election is the possibility of fragmentation within Chavez’s party (Partido Socialista Unido de Venezuela or PSUV).
The horizontal axis measures the level of engagement by international powers—including Brazil, China, Cuba, and the United States.
Master Narrative I: Another Presidential Election
This Master Narrative involves scenarios where cohesion within the governing PSUV allows for presidential elections. The international response remains cautious.
Relevant Scenarios:
- New Elections, Maduro Wins
- A New Face for Bolivarianism
- Cabello Runs the Country from Behind the Scenes
- Chavismo Si, Bolivarian Empire No!
Venezuela’s caretaker government, which has run the country since late 2012, splits into two factions. Vice President Nicolas Maduro helms one faction that vies for power in post-Chavez Venezuela. Chavez explicitly anointed this group, and Maduro expects a widespread sympathy vote in his favor. Hence, Maduro has every reason to declare, “Chavez is dead. Long live Chavez!”
However, a second faction led by National Assembly President Diosdado Cabello can be expected to push for a transition after it shores up support from the military.
The two camps may divide before mid-April, casting a pall over elections. However, what’s more likely is that Cabello will remain supportive of Maduro in public while he positions himself as the real power behind the throne.
One thing is for sure: Every major political group, including Capriles’s opposition coalition, is eager to assert control in a post-Chavez Venezuela in order to guarantee that they are not punished by a spate of new laws.
Amid this power struggle, major features of Venezuela’s foreign policy will carry on:
- Oil continues to flow northward. Caracas lacks an alternative to the U.S. market and relies on oil revenue more than ever.
- Subsidies to the Bolivarian Alliance of the Americas (ALBA) continue.
- China and Russia continue to make partnership deals to drill with PDVSA, Venezuela’s state-owned oil company. If anything, these countries extend their influence over Venezuela as foreign loans and bribes become ever more critical to the political survival of Chavez’s successor.
- However, Venezuela’s financial support for Cuba may decline, especially if Cabello obtains power.
Master Narrative II: Venezuela Muddles Along
This Master Narrative looks past the short-term power grab. A frenzy of deals by multinational oil companies help keep Venezuela stitched together, despite the fact that a) the fissure between the country’s opposition groups and Chavez’s PSUV defies reconciliation, and b) the political left in Venezuela remains at risk of fragmentation.
Relevant Scenarios:
- Maduro and Venezuela Stumble Along
- Oil Investors Concerns and Influence
- The End of Iran’s Foray into Latin America
A soft authoritarian government takes over Venezuela, either headed by Maduro or Capriles. Not only did Chavez set a precedent for this, but Latin America’s return to democracy in the 1980s and 1990s was piecemeal. By this time, Mohammed Morsi’s Egypt has helped create a new model for would-be elected autocrats looking to consolidate power.
Whoever follows Chavez lacks his charisma and pocketbook, opening the way for Chavez’s foreign allies (such as Rafael Correa in Ecuador and Raul Castro in Cuba) to alternately try to steer Venezuelan affairs. Venezuela, long known for tampering in other country’s affairs, itself becomes the object of international meddling. In short, while another PSUV government would be avowedly populist, and instinctively authoritarian, it would also be weak.
- Soft loans from Brazil, China and Russia prop up PDVSA’s oil output.
- Brazil, unbothered by the wave of authoritarianism in South America, helps Venezuela keep membership in regional bodies such as MERCOSUR and UNASUR.
- Stung by sanctions, Iran cannot compete against the likes of Brazil, China, and Russia for influence in Venezuela; its influence in Venezuela withers.
- Although Washington issues half-hearted calls for the return of democracy in Venezuela, the United States appears satisfied to keep importing crude oil while maintaining its decade-long disengagement from Caracas.
Master Narrative III: Venezuela Implodes
This worst-case Master Narrative involves Venezuela descending into cocaine-fueled anarchy or civil war. Here—despite an initial vow to hold elections—the elections are not free (or are nonexistent), there is no handover of power, and potential foreign powerbrokers focus instead on domestic sources of economic growth.
Relevant Scenarios:
The drawn-out standoff between Maduro and Cabello comes to a close, thanks to a power-sharing agreement brokered by a politically savvy group of generals. But under the veneer of stability at the top, the military officers set about gaining control of the drug trade, thus transforming Venezuela into a narco-state.
PDVSA, long overburdened by the redirection of its revenues to social welfare programs, lacks the technology needed to extract oil from its tar sands in the Orinoco Belt and its oil output declines significantly. This makes drug money all the more essential to the government.
Venezuela’s fiscal position erodes. After a decade-plus of economic mismanagement, coupled with lavish foreign subsidies and declining oil revenue, Venezuela suffers a debt crisis. The modern world record holder when it comes to sovereign default, Venezuela has a level of debt intolerance lower than that of other developing countries.
Meanwhile, a still-communist Cuba would provide extra medical personnel and military advisors to aid the drug-addled country in the hope of staunching the spread of drug trafficking in the Caribbean.
For this dystopian vision to be realized, regional powers will have to disengage from Venezuela. But this could actually prove the case with the United States and Brazil, as each becomes preoccupied with a domestic energy bonanza. All China and Russia have to do in this regard is narrow their interest in Venezuela to securing fuel from each of the oil patches that are already operational.
Brazil would have to overcome its non-interventionist streak in order to thwart this scenario. But, by pushing for the return of accountable government in Venezuela, Brazil could combat the corrosive influence of China and Russia. The key means of doing so would be public disclosure of massive foreign aid to Venezuela. Brazil’s incentive: Stabilizing Venezuela would not only help secure one of Brazil’s many borders, but it would also boost Brazil’s influence in Latin America.
Master Narrative IV: The Post-Chavez Revitalization
In a “best case” scenario, Maduro and Capriles face off in a constitutionally mandated election to replace Chavez in April. The election is hotly contested, but chavistas and the opposition both accept the results. Once in office, Chavez’s successor quietly replaces Chavez cronies with political allies and apolitical technocrats. Venezuelan foreign affairs take a pragmatic turn, linking more closely to Brazil, the EU, and China.
Relevant Scenarios:
- The Prolonged Farewell
- The Long Game
- Death of ALBA, Rise of Latin America’s China
It is impossible to authoritatively project the winner of the April election. Regardless, both sides have reason to accept the results: Should Capriles lose, the democratic opposition he leads will remain cohesive and focused on future legislative elections while Maduro’s PSUV deals with a lurching economy, declining oil output, and rising crime.
On the other hand, losing in April could spell the end of Maduro’s political career. However, he’s an untested politician who lacks the military support needed to stage a coup. Instead of trying a coup or ordering mass strikes, Maduro apes Chavez’s rhetoric, accepting the results por ahora, and devotes his efforts to securing control over the fractious PSUV.
Chavez’s successor, be it Maduro or Capriles, recognizes the need to secure stability and solvency by increasing oil output, bringing down the murder rate, and reducing inflation. To address these problems, PhD-toting experts replace Chavez appointees at key government ministries.
Venezuela’s key foreign partner in this era of post-Chavez revitalization will be Petrobras, Brazil’s state-owned energy giant.
Although Venezuela under Maduro is slow to mend ties with the United States, he curries investment from European energy companies, especially Spain.
As the Venezuelan President looks to secure his position at home by focusing on oil output, subsidies for ALBA countries shrivels. Cuban president Raul Castro’s February announcement that he will not seek re-election in 2018 further mellows Venezuelan foreign policy.
Conclusion
Expect Chavez to cast a long shadow over Venezuela’s future. Not only has he paved the way for one-man rule, which increases the likelihood of a messy power grab after his death, but the full extent of Chavez’s wreckage to the Venezuelan economy remains to be seen. As this report demonstrates, in the years ahead there are several ways for Venezuela to spin out of control, but precious few avenues for neatly negotiating the tracks laid down by Chavez.
Photo: Luigino Bracci (cc).
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Venezuela Post-Chavez
March 20, 2013
Compiled by Sean Goforth, and edited by Steve Keller.
Since 1999, Hugo Chavez has ruled Venezuela by exploiting the nation’s significant oil wealth to finance Latin America’s most ambitious and aggressive populist agenda—during which time most other countries in the region liberalized and globalized instead.
Having muscled his way to another election victory in October 2012, Chavez was officially set to rule until 2019. But on March 5, 2013, Chavez died soon after returning to Venezuela from extended medical treatment in Cuba. A replacement election is scheduled for April 14th. But it remains unclear what will happen to Venezuela, or to “21st-century socialism,” following Chavez’s departure.
This is the premise behind Venezuela Post-Chavez, a ten-day Wikistrat simulation that ran from January 29th to February 8th and benefitted from the insights of over 50 Wikistrat analysts. The simulation encompassed 20 scenarios, and weighed both plausible and fat-tail outcomes alike.
This report summarizes those insights.
***
Overview of Master Narratives:
The following chart represents the four Master Outcomes constructed by the scenarios generated in the simulation. Outcomes serve as organizing “crates” for the constituent scenarios.
The quadrants are organized along X-Y axes that reflect the common constructs of the scenarios generated:
- X: How does the international community respond to post-Chavez Venezuela?
- Y: What is the level of order in Venezuela’s political transition?
The prospects for an orderly transition from a caretaker government to a full-term successor to Chavez are plotted along the vertical axis. Complicating near-term projections over the April election is the possibility of fragmentation within Chavez’s party (Partido Socialista Unido de Venezuela or PSUV).
The horizontal axis measures the level of engagement by international powers—including Brazil, China, Cuba, and the United States.
Master Narrative I: Another Presidential Election
This Master Narrative involves scenarios where cohesion within the governing PSUV allows for presidential elections. The international response remains cautious.
Relevant Scenarios:
- New Elections, Maduro Wins
- A New Face for Bolivarianism
- Cabello Runs the Country from Behind the Scenes
- Chavismo Si, Bolivarian Empire No!
Venezuela’s caretaker government, which has run the country since late 2012, splits into two factions. Vice President Nicolas Maduro helms one faction that vies for power in post-Chavez Venezuela. Chavez explicitly anointed this group, and Maduro expects a widespread sympathy vote in his favor. Hence, Maduro has every reason to declare, “Chavez is dead. Long live Chavez!”
However, a second faction led by National Assembly President Diosdado Cabello can be expected to push for a transition after it shores up support from the military.
The two camps may divide before mid-April, casting a pall over elections. However, what’s more likely is that Cabello will remain supportive of Maduro in public while he positions himself as the real power behind the throne.
One thing is for sure: Every major political group, including Capriles’s opposition coalition, is eager to assert control in a post-Chavez Venezuela in order to guarantee that they are not punished by a spate of new laws.
Amid this power struggle, major features of Venezuela’s foreign policy will carry on:
- Oil continues to flow northward. Caracas lacks an alternative to the U.S. market and relies on oil revenue more than ever.
- Subsidies to the Bolivarian Alliance of the Americas (ALBA) continue.
- China and Russia continue to make partnership deals to drill with PDVSA, Venezuela’s state-owned oil company. If anything, these countries extend their influence over Venezuela as foreign loans and bribes become ever more critical to the political survival of Chavez’s successor.
- However, Venezuela’s financial support for Cuba may decline, especially if Cabello obtains power.
Master Narrative II: Venezuela Muddles Along
This Master Narrative looks past the short-term power grab. A frenzy of deals by multinational oil companies help keep Venezuela stitched together, despite the fact that a) the fissure between the country’s opposition groups and Chavez’s PSUV defies reconciliation, and b) the political left in Venezuela remains at risk of fragmentation.
Relevant Scenarios:
- Maduro and Venezuela Stumble Along
- Oil Investors Concerns and Influence
- The End of Iran’s Foray into Latin America
A soft authoritarian government takes over Venezuela, either headed by Maduro or Capriles. Not only did Chavez set a precedent for this, but Latin America’s return to democracy in the 1980s and 1990s was piecemeal. By this time, Mohammed Morsi’s Egypt has helped create a new model for would-be elected autocrats looking to consolidate power.
Whoever follows Chavez lacks his charisma and pocketbook, opening the way for Chavez’s foreign allies (such as Rafael Correa in Ecuador and Raul Castro in Cuba) to alternately try to steer Venezuelan affairs. Venezuela, long known for tampering in other country’s affairs, itself becomes the object of international meddling. In short, while another PSUV government would be avowedly populist, and instinctively authoritarian, it would also be weak.
- Soft loans from Brazil, China and Russia prop up PDVSA’s oil output.
- Brazil, unbothered by the wave of authoritarianism in South America, helps Venezuela keep membership in regional bodies such as MERCOSUR and UNASUR.
- Stung by sanctions, Iran cannot compete against the likes of Brazil, China, and Russia for influence in Venezuela; its influence in Venezuela withers.
- Although Washington issues half-hearted calls for the return of democracy in Venezuela, the United States appears satisfied to keep importing crude oil while maintaining its decade-long disengagement from Caracas.
Master Narrative III: Venezuela Implodes
This worst-case Master Narrative involves Venezuela descending into cocaine-fueled anarchy or civil war. Here—despite an initial vow to hold elections—the elections are not free (or are nonexistent), there is no handover of power, and potential foreign powerbrokers focus instead on domestic sources of economic growth.
Relevant Scenarios:
The drawn-out standoff between Maduro and Cabello comes to a close, thanks to a power-sharing agreement brokered by a politically savvy group of generals. But under the veneer of stability at the top, the military officers set about gaining control of the drug trade, thus transforming Venezuela into a narco-state.
PDVSA, long overburdened by the redirection of its revenues to social welfare programs, lacks the technology needed to extract oil from its tar sands in the Orinoco Belt and its oil output declines significantly. This makes drug money all the more essential to the government.
Venezuela’s fiscal position erodes. After a decade-plus of economic mismanagement, coupled with lavish foreign subsidies and declining oil revenue, Venezuela suffers a debt crisis. The modern world record holder when it comes to sovereign default, Venezuela has a level of debt intolerance lower than that of other developing countries.
Meanwhile, a still-communist Cuba would provide extra medical personnel and military advisors to aid the drug-addled country in the hope of staunching the spread of drug trafficking in the Caribbean.
For this dystopian vision to be realized, regional powers will have to disengage from Venezuela. But this could actually prove the case with the United States and Brazil, as each becomes preoccupied with a domestic energy bonanza. All China and Russia have to do in this regard is narrow their interest in Venezuela to securing fuel from each of the oil patches that are already operational.
Brazil would have to overcome its non-interventionist streak in order to thwart this scenario. But, by pushing for the return of accountable government in Venezuela, Brazil could combat the corrosive influence of China and Russia. The key means of doing so would be public disclosure of massive foreign aid to Venezuela. Brazil’s incentive: Stabilizing Venezuela would not only help secure one of Brazil’s many borders, but it would also boost Brazil’s influence in Latin America.
Master Narrative IV: The Post-Chavez Revitalization
In a “best case” scenario, Maduro and Capriles face off in a constitutionally mandated election to replace Chavez in April. The election is hotly contested, but chavistas and the opposition both accept the results. Once in office, Chavez’s successor quietly replaces Chavez cronies with political allies and apolitical technocrats. Venezuelan foreign affairs take a pragmatic turn, linking more closely to Brazil, the EU, and China.
Relevant Scenarios:
- The Prolonged Farewell
- The Long Game
- Death of ALBA, Rise of Latin America’s China
It is impossible to authoritatively project the winner of the April election. Regardless, both sides have reason to accept the results: Should Capriles lose, the democratic opposition he leads will remain cohesive and focused on future legislative elections while Maduro’s PSUV deals with a lurching economy, declining oil output, and rising crime.
On the other hand, losing in April could spell the end of Maduro’s political career. However, he’s an untested politician who lacks the military support needed to stage a coup. Instead of trying a coup or ordering mass strikes, Maduro apes Chavez’s rhetoric, accepting the results por ahora, and devotes his efforts to securing control over the fractious PSUV.
Chavez’s successor, be it Maduro or Capriles, recognizes the need to secure stability and solvency by increasing oil output, bringing down the murder rate, and reducing inflation. To address these problems, PhD-toting experts replace Chavez appointees at key government ministries.
Venezuela’s key foreign partner in this era of post-Chavez revitalization will be Petrobras, Brazil’s state-owned energy giant.
Although Venezuela under Maduro is slow to mend ties with the United States, he curries investment from European energy companies, especially Spain.
As the Venezuelan President looks to secure his position at home by focusing on oil output, subsidies for ALBA countries shrivels. Cuban president Raul Castro’s February announcement that he will not seek re-election in 2018 further mellows Venezuelan foreign policy.
Conclusion
Expect Chavez to cast a long shadow over Venezuela’s future. Not only has he paved the way for one-man rule, which increases the likelihood of a messy power grab after his death, but the full extent of Chavez’s wreckage to the Venezuelan economy remains to be seen. As this report demonstrates, in the years ahead there are several ways for Venezuela to spin out of control, but precious few avenues for neatly negotiating the tracks laid down by Chavez.
Photo: Luigino Bracci (cc).
