By Marco Aponte-Moreno, Associate Professor of Global Business and Board Member of the Institute for Latino and Latin American Studies, St Mary’s College of California. Originally published at The Conversation
The U.S. has announced an economic embargo on Venezuela, intended to put an end to President Nicolás Maduro’s authoritarian regime.
In an Aug. 5 executive order, President Donald Trump said that the tough new sanctions – which target any company or individual outside of Venezuela doing business directly or indirectly with Maduro’s government – were a response to the Maduro regime’s “continued usurpation of power” and “human rights abuses.”
All Venezuelan government assets in the United States are also now frozen.
The new measures represent a significant escalation from previous sanctions, which mainly targeted government officials and some key industries such as oil and gas, gold and finance.
But my analysis of Venezuela’s political and economic crisis suggests that an embargo alone will not provoke Maduro’s ouster. Here are five reasons why.
1. Venezuela’s Economy Is Already Broken
Embargos are a foreign policy tool meant to pressure rogue governments into changing their ways by cutting off their cash flow.
It’s too late for that in Venezuela.
After years of mismanagement and corruption by the Maduro government, Venezuela’s economy is in shambles. The GDP has contracted by more than 15% every year since 2016. Hyperinflation hit 10 million percent in 2019.
Maduro’s cash-strapped government defaulted on its dollar-based bondsin 2017. This year it has failed to make payments on US$1.85 billion that Deutsche Bank and Citigroup loaned Venezuela using the regime’s gold as collateral. Venezuela’s government is nearly bankrupt.
But since this economic decline has happened gradually, beginning in 2014, wealthy Venezuelans – especially corrupt government officials – have already put their money overseas, primarily in European markets. For example, Venezuelans own some 7,000 luxury apartments in Madrid, according to The New York Times.
American sanctions just can’t hurt Venezuela’s ruling class the way they might have several years ago.
2. The Embargo Leaves Some Cash Flows Untouched
Trump’s harsh new sanctions on Venezuela are not a full trade embargo like the Cuba embargo, which has almost totally isolated the island from world markets since 1962.
Imports and exports with the private sector – a still sizable marketdespite Maduro’s socialist policies – will continue to flow freely, as will remittances from Venezuelans living abroad.
These two income sources both come in dollars, which is far more stable and valuable than the local currency. Combined, they can keep the ailing Venezuelan economy afloat for some time.
An incomplete embargo, in other words, will not provoke complete economic collapse.
3. The Poor, Not the Regime, Will Be Hurt the Most
Venezuelans with access to dollars – through remittances or savings squirreled away before the crisis – are surviving this crisis. They can afford food, medicine and gasoline, and buy other goods to barter.
But most Venezuelans today are desperately poor. According to the United Nations, 90% of people there live in poverty. That’s double what it was in 2014.
The Venezuelan minimum wage of roughly $7 per month is not enough to cover a family’s basic needs. As a result, malnutrition is spreading. Last year, Venezuelans reported losing an average of 25 pounds, and two-thirds said they go to bed hungry.
The majority of Venezuelans rely on the government to eat. Its monthly delivery of heavily subsidized food and basic goods known as “CLAP” is a lifeline to the poor. If the government runs out of money, poor people will feel it the most – not the government officials and other Venezuelans with access to dollars.
4. China and Russia Still Support Venezuela
Maduro has few international allies. When the Trump administration led efforts earlier this year to recognize opposition leader Juan Guaidó as the legitimate president of Venezuela, 60 countries joined it.
But China and Russia continue to be the Venezuela’s most powerful international boosters and have bailed out Maduro by giving his government massive loans in the past. Both have vetoed every U.S. effort to pass resolutions against Maduro’s government within the United Nations.
China has exploited Venezuela’s vast natural resources for profit. Russia has made the South American nation a strategic geopolitical partner in the Western Hemisphere, a key ally in its efforts to undermine American influence.
Neither of the two countries are likely to comply with an economic embargo to Venezuela. Analysts expect them to continue buying oil, goldand other valuable commodities from Maduro’s regime, providing much-needed cash to his government.
5. Remember Cuba?
Embargoes rarely produce regime change of the sort Trump seeks in Venezuela.
Just consider Cuba, which this year celebrated the 66th anniversary of its communist revolution – 57 years after the Kennedy government imposed a trade embargo against it. The Cuba embargo didn’t end the Castro regime; it fueled anti-American sentiment, handing the Castros an easy scapegoat for all the country’s problems – thereby improving the government’s own popularity.
An embargo will almost surely do the same in Venezuela. Trump has given Maduro even more ammunition to blame the U.S. for his country’s economic woes.
Maduro has been doing that for years anyway. Now, he won’t be totally wrong.
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Well, contrary to the article’s mostly MSM-derived narrative, the US sanctions were already described as ‘illegal’, ‘economic warfare’ and a possible crime against humanity by the UN special rapporteur Alfred de Zayas. So perhaps Maduro did already have cause the blame the ‘great Satan’.
That said, I agree with the conclusion that making the sanctions more severe will only increase civilian suffering without reaching the foreign policy goal (stealing all the oil) of the belligerent.
I think the oil is for the most part already stolen.
Most of the oil is still in the ground.
Venezuela’s oil is the dirtiest (sulphur-ridden) oil in the world, and is only worth extracting at high prices. The US going fracking-crazy was an international attack on Russia and Venezuela by lowering oil prices.
This article misses one crucial difference when it focuses on regimes blaming the blockade.
Castro is brilliant. Castro figured out how to use our blockade to strengthen Cuba’s own skills and resources, just as Russia and Persia have done later.
Maduro is incompetent. He took over from competent Chavez and ruined things. He did nothing in response to our aggression.
Russia’s support for Cuba and Persia is wholehearted. Not so with Maduro. Russia doesn’t need stupid friends.
Russia does not need stupid friends. And you don’t get to be head of the KGB/FSB by colluding with stupid people. Taking advantage of useful tools/idiots…
I’m sure the Chavistas are incompetent in many ways — but what does that say about Bolton, Pompeo, and Trump? If the US hadn’t taken any action Maduro probably would have lost the next round of elections. Instead he’s been able to consolidate domestic support against the “evil imperialist US”.
Trump opposed regime change wars until he became President. Then the brainworms set in and he reversed himself in country after country. He’s headed into an election with a policy most Americans oppose. Not a good look.
Bolton, Pompeo, and Trump want enemies, especially ones they can beat up with impunity. What Trump babbles probably doesn’t mean very much, at least not to him.
“He did nothing in response to our aggression?”
That remark triggered a chuckle recalling The Mouse That Roared. What might Maduro have done in response, invite allies who oppose US hegemony like Russia and China? Check. Ask for advice from allied neighbors like Cuba who have coped successfully with US embargoes? Check. Avoid giving the US an excuse to invade by exercising restraint and not jailing CIA recruits trying to topple your regime from within? Check. Maduro is no genius, but if he leads by listening, in the long run he may succeed where Chavez failed.
“After years of mismanagement and corruption by the Maduro government, Venezuela’s economy is in shambles. ”
Let me see if I follow this argument. Maduro is a corrupt, slimy, sleazy, incompetent, “authoritarian” despot. *But*… we don’t want to help him starve his poor citizens, do we? That will just give Maduro “more ammunition to blame the US” instead of fessing up to his own horribleness. He and his fat cat Socialist “ruling class” will continue living high on the hog and building mansions abroad while they let their people starve. Also, China has “exploited” Venezuela’s natural resources and Russia seeks to “undermine American influence.” The evil bastards.
Maybe it’s just me, but *something* seems to be missing in this account. At least he is opposed to the embargo — I think.
re -“Socialist “ruling class” will continue living high on the hog and building mansions”
well they come in 29th out of 64 for the average net worth of their billionaires so maybe those kinder gentler capitalists should step in with some privatized assistance?
https://www.forbes.com/sites/edwindurgy/2013/03/13/average-billionaire-net-worth-by-country-full-list/#6feda6281ac0
Pretty sure those billionaires are not socialists, but you could cite something and prove me wrong…
Sarcasm — based on the author’s allusions to the “ruling class” (the Forbes ranking based on *average* net worth is also problematic to me, but irrelevant here).
I’m agreeing with the above commenters. Something about this article makes me think “disinformation” campaign. It comes across as an exercise in “d—ing with faint praise.” The poor of Venezuela are being hurt even more than usual by the embargo. Maduro and his government are being blamed for a litany of sins. The next logical step in this process, were I cynically inclined, would be to urge a “surgical strike” against the Maduro government to “free” the poor citizens of Venezuela. Somehow, this piece looks like a propaganda step towards “manufacturing consent” for an American led invasion of Venezuela. I hope I am wrong.
When I read that Maduro is ‘corrupt’, I immediately think of the frequent MSM claim that Putin is the richest man in the world with billions stashed in some offshore account. I have no idea of the veracity of either, but both stink of regime change propaganda.
There is certainly systematic corruption in Venezuela (as in every other country I am familiar with) but I have seen no evidence that Maduro is corrupt or enriching himself personally. And I’m still waiting for the evidence of Putin’s stolen billions.
Western journos and politicians, lacking any real power, don’t understand that the excercise of real autonomy is worth a lot more than money.
Regime, Regime, Regime, sounds like Russia, Russia, Russia, crowd. Here’s some interesting news.
NPR strikes again
https://venezuelanalysis.com/analysis/14616
The front page of site
https://venezuelanalysis.com/
Who is Who at the site that the story came from, interesting.
https://theconversation.com/us/partners
Maduro is not Hugo and V isn’t Honduras yet:-(
if I needed another reason to avoid npr you just provided it, thanks. Not sure what to glean from the long list of uni’s and foundations in the third link…
In Canada, CBC (our state broadcaster) is as guilty. The unquestioned, recycled propaganda of the empire is constant – seemingly an oath of loyalty. It drives me nuts
I too live in Canada. The mainstream news is useful for sports scores, city news, traffic reports and the weather. Occasionally it will have informative articles on social issues. On foreign affairs it is all propaganda all the time except for a rare opinion piece outlining an alternative view.
Canadian talk radio “comment” (in Toronto and environs) is worse than the news itself — an outright sewer of neoliberal effluent from the Montreal Economic Institute, The Fraser Institute and their fellow travelers in the Oil Party. Feh.
I guess I’ve gotten it wrong. Here I’ve been under the impression that Venezuela’s woes were due to the deliberate sabotage of their economy by the US and its puppets, er, allies. But, apparently, it’s really the fault of that evil, authoritarian socialist (OMG! OMG!) Maduro.
Oh well – live & learn.
Gunna be tough doing an embargo on Venezuela. The Coastline itself is about 2,800 kilometers (1,700 miles) long and the land border between Venezuela and Colombia is 2,217 kilometers (1,378 miles) alone. The US cannot even control their own border with Mexico so how are they going to stop food and the like crossing these porous borders?
Well USA do not really want to control the Mexican border since it would be the end of the 1% cheap labour and the drug smuggling run by CIA
Venezuela is a political will of demented neocons (incl. the meaning of scammers) and where there is a will there is a way. Colombia is a willing partner to NATO so they can help sending missiles on the ships coming in.
We’ll build a fence… /s
Was the author trying to offer or signal that there is some type of qualitative difference between: “China has exploited Venezuela’s vast natural resources for profit”; versus after years of the United States and other international energy importers exploiting Venezuela’s vast natural resources (oil) for profit, America is now cutting Venezuela off and will no longer exploit such resources for profit?
Everything in this article stinks of imperialist propaganda. Even the author’s pseudo-pacifism.
This is just speculation, but is it possible that Maduro’s toleration of whatever corruption exists, as well as Chavez’s inability to do the land reforms that I believe were intended, are the price of the loyalty of the highest levels of the military that have been evident since the coup attempt about 20 years ago?
So some religious lunatics in the U.S. try to convince Americans that it is illegal to boycott one preferred country while it supports the enforcement of a boycott of another country?
Where’s Adam Smith when you need him?
Me thinks Marco is angling for an invite from the CFR since his talking points mirror theirs.
https://www.cfr.org/interactive/global-conflict-tracker/conflict/instability-venezuela
A friend who visited a couple months ago, then gave a talk on the visit, stated that her conversations and observations (“people’s jeans were still tight”) suggested hunger was not a problem but that medicine was.
I think the greyzoneproject, moonofalabama, therealnews, and theintercept paint a better picture of what is going on.
https://grayzoneproject.com/2019/01/29/the-making-of-juan-guaido-how-the-us-regime-change-laboratory-created-venezuelas-coup-leader/
https://www.moonofalabama.org/2019/02/venezuela-us-aid-gambit-fails-war-plans-lack-support.html#more
https://theintercept.com/2019/03/10/nyts-expose-on-the-lies-about-burning-humanitarian-trucks-in-venezuela-shows-how-us-govt-and-media-spread-fake-news/
https://therealnews.com/stories/col-wilkerson-us-would-face-a-unified-venezuelan-military-in-an-armed-intervention
The Cuban analogy seems fatuous. The regime there may be authoritarian, but (at least until recently) it’s not been a statesocialist-capitalist hybrid like Venezuela. I doubt that there a comparable number of overseas properties owned by Cuban officials. Castro-ite Cuba has survived, at least in part, because it delivers a minimal standard of living to most of its people, and while the people at the top may live ‘well,’ most are not enriching themselves. The Maduro regime no longer provides its people with an adequate living, while it and its core constituency live very well. .
To blame Venezuela’s problems entirely on Maduro is absolutely absurd on its face. In regards to the lack of economic diversification, that is a defining feature of developing countries. According to the IMF, about two-thirds of developing and underdeveloped countries rely on five or less raw materials for at least 60% of their export revenue. Among large oil producers, something like 80% of Saudi Arabia’s export revenue comes from oil. About 80% of public revenues in Iran comes from oil. So, lack of economic diversification is a problem with major oil producers especially. In the 1970’s the price of oil went up and Venezuela used that money to invest more in social programs and to fund the diversification of the economy. It failed then too, because diversifying the economy and supporting industries that can produce value added products with good terms of trade is hard for any developing country. This is nothing new.
What about Venezuela’s economy before Chavez? According to World Bank data, from 1980 to 1998, the Venezuelan economy SHRANK by about 26%. It was so bad that by the late 80’s it was home to the first “IMF riots” in the region. The government responded by slaughtering people by the thousands. The unrest went on and there were coup attempts in the early 90’s, one of which Chavez took part in and the coup attempts had broad popular support. Inflation was actually worse in the years leading into Chavez than it was during Chavez’s time in office, the hyperinflation happened after he died and coincided with the intensification of the economic war, and the hyperinflation was one sign that the real economy had utterly collapsed. The majority of households were in abject poverty in the years directly before Chavez was elected. And there were clear advancements made during Chavez’s time, domestically and what he sought in regards to regional integration outside of the control of the US. But, underlying problems remained. Corruption is one of them. Corruption is certainly an issue, it was under Chavez too (and decades before him), and it has gotten worse under Maduro, but how exactly do people think that the oligarchy in Venezuela was created in the first place? How does it maintain its wealth and power? We know from things like the Panama Papers that countless “opposition” leaders formed businesses that essentially stole state subsidized food and sold it at a mark-up in neighboring countries like Colombia. We know that a good portion of the corruption is not those around Maduro, but the right wing and it is in places where the reactionary right has some sway, like sectors of the military and the police. We also know that the private Venezuelan economy is highly concentrated, and a small handful of companies produce goods that people need, basic necessities. Well, those businesses are owned by far right interests and they openly announced that they would cut back production so as to cause mass harm to the people in the country in the hopes that they would overthrow the government. The far right has also gotten massive amounts of help from the US through the NED, the CIA, USAID, the International Republican Institute and private organizations like the Atlas Network.
Then there is the intense and comprehensive economic war against the country. Studies have shown that tens of thousands have already died because of the economic war. It has stolen and frozen assets, barred the government from re-negotiating its debt, barred it from having access to financial capital outside the country, cut off aid and needed supplies, basic medicines. There have been mistakes and corruption to be sure, but those things would be far more manageable if it wasn’t under intense attack from the most powerful country in the hemisphere.
Maduro is not great, he is no Chavez, but to blame him alone or to call him a dictator is a bit absurd. And I am sick to death of the media pretending that Trump is doing this for humanitarian reasons when Bolton outright admitted that it was largely about oil and geopolitical interests on live TV. The US’s largest alley in the region is Colombia (Venezuela’s neighbor) and Colombia also has the worst human rights record in the hemisphere. Since the 1980’s, thousands of politicians, activists and organizers on the left have been killed by right wing terror squads. Over 80 priests have been killed in recent decades because of right wing paramilitaries. It is the deadliest place in the word for union organizers, among the deadliest places for journalists and human rights workers, dozens of indigenous groups are disappearing because of violent land grabs (which our own state department admits), and millions of Colombians are fleeing the country. Hell, many were fleeing the right wing paramilitary violence of the country and were living in Venezuela as of a few years ago. Look at CIA net migration data. But, does the country say anything about our biggest ally Colombia and its horrible human rights record? The country has gotten more aid from the US in the post WWII era outside of Israel and Egypt. No, the media talks about it being an ally in the fight against the brutal socialists in Venezuela. As bad as things are in Colombia, what state would IT’S economy be in if it didn’t get all that aid and instead was on the receiving end of the economic war like Venezuela has been?
We should be ashamed that we allow our country to this to Venezuela, and the media coverage is just shameful. Keep in mind that the NY Times proudly supported the coup against Chavez in the early 2000’s, and was embarrassed by him getting put back by the people. It has done constant propaganda since Chavez was elected, and lied about things left and right. Look up the coverage of the RCTV incident in Venezuela in the NY Times. Look what RCTV did during the coup and the slap on the wrist it got, then read how the Times covered it. Again, utterly shameful, and the media gives an illegal coup puppet Guaido (a literal creation of the NED) space to spread lies. I remember reading about some of what the Church Committee uncovered in regards to the CIA and the intelligence agencies and the US media. Little seems to have changed.
Excellent comments, Grant
Embargos and draconian sanctions imposed on Venezuela also amount to crimes against humanity according to Article 7 of the Rome Statute of the International Criminal Court.
The professor proceeds to blame most of the problems on “years of mismanagement.” This line of argument is like a lawyer arguing. “Your honor, my client did shoot the victim but he would have died anyway.” There is no question that the Maduro government has mismanaged the economy by not diversifying the economy enough (that being said, the previous neoliberal regimes were much worse), not being prepared for the drop in oil prices, and most importantly managing the hyperinflation problems. No question that all of these combined factors have contributed to the economic decline but the sanctions and economic blockade definitely are the major factors that have caused this precipitous decline the last 4 years since Obama imposed sanctions in 2015 by declaring Venezuela as
This paper by CELAG, a think tank operating out of Argentina, shows how the $320 billion Venezuelan economy has been bleeding a whopping $22 billion per year due to economic sabotage and sanctions: https://www.celag.org/economic-consequences-boycott-against-venezuela/#_edn2. The paper was written last year so it does not include the latest rounds of sanctions that were imposed in January or the latest oil embargo. Even without these draconian measures, the paper argues that the boycott has lost $245 billion-$250 billion. This come s out to $8,400-$12,000 per capita. This is clearly is not pocket change.
The great thing about the paper is that it attempts to model where the economy would be without the sanctions and uses the Maduro government’s management practices and comes up with 3 different scenarios to try to predict how the government would have reacted to the economic conditions. In all scenarios, it shows the economy would have been doing significantly better and 1 scenario it concludes that the economy would have recovered by 2017.
The professor clearly does not have an understanding of the Venezuelan economy by stating that “The embargo leaves some cash flows untouched.” Venezuelan Economist (who is opposed to the Maduro government) declared, “given that oil makes up 95% of Venezuelan exports to the U.S., there is no meaningful economic distinction between a general embargo and an oil embargo.” https://twitter.com/frrodriguezc/status/1158925079906050048. Given this harsh reality, there is not much of cash flow at all. How can he minimize the impact of this embargo?
He also goes on to cite a debunked 2017 study written by a member of the opposition that may have an ax to grind by linking us to her study claiming the average Venezuelan has lost 25 lbs in 1.5 years. Based on this logic this means Venezuelans have lost at least 50 lbs by now!!. This clearly is not happening. This isn’t even happening in nations like Chad that has the worst famine in the world. CEPR already addressed this study and criticized the media for propagating this study. http://cepr.net/blogs/the-americas-blog/the-media-venezuela-and-hunger-statistics-a-case-study-in-careless-reporting Professor Aponte-Moreno did not get the memo.
This does not mean that Venezuela does not have a food insecurity problem. The FAO has reported that there is a hunger crisis in Venezuela, and it is worsening. The embargo is clearly going to make this situation worse and there is no question that it will make the humanitarian crisis worse. Even before this embargo was announced there had been calls for an “oil for food program” to prevent a situation where hundreds of thousands of Iraqis that died as a result of the sanction imposed on that nation. https://www.nytimes.com/2019/07/10/opinion/venezuela-sanctions.html. Now that there is an embargo an “oil for food” program is needed more than ever or the US government is going to have blood on its hands once again.
*********!
Since much of the commentary is about Maduro and his policies, perhaps some of you would be interested in what he has to say about it:
https://www.truthdig.com/videos/john-bolton-tried-to-assasinate-me/
Didn’t Max Blumenthal, acclaimed journalist, say that things were seriously not as bad for the regular person in Venezuela as the media reported? He showed video of markets full of food – he has spent a lot of time there recently. ‘ people won’t buy cigarettes, but they are definitely eating’ We know about him because these videos and commentaries have been posted on NC
Several of the claims in this article seem to be have been somewhat opposed by Blumenthal, to some extent.
It’s a shame to see another anti-venezuela article (propaganda posing as reasonable). Kudos to the great commentators above who have spelled out the details. I won’t repeat what they’ve said.
Do refer to Michael Hudson’s insightful article earlier this year which appeared here on NC, Hudson made the point that Chavez and Maduro had an impossible situation to deal with regarding corruption–that no one would have been able to get rid of it quickly.