Venezuela Aff Updates - Michigan7 2013

8/13/2019 Venezuela Aff Updates - Michigan7 2013

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Venezuela Politics DA


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Therefore, Tissot thinks Maduro has little choice but to shake things up when it comes to oil and gas matters.

One could expect a government more accessible to foreign investments, andforeign investors concerns (rule of law, security of payments, stability ofcontracts.) Although it is too early to say, one should expect the Venezuelan oil sectors after years of stagnation and mismanagement toperhaps start showing some signs of life again, he wrote in an email exchange. How soon and how deep is somethingthat will depend on how Mr. Maduros administration performs .

U.S. support will help Maduro make gradual changes and improveties with U.S. --- necessary to build coalitions at home and abroad tomaintain legitimacy.Payan, 13 --- visiting f ellow at the James A. Baker III Institute for Public Policy (3/6/2013, Tony, Chavez's death offers U.S. a chance tofoster change, http://www.chron.com/opinion/outlook/article/Chavez-s-death-offers-U-S-a-chance-to-foster-4334009.php, JMP)

The March 5 death of Hugo Chavez , Venezuela's president since 1998, means that change is coming. The change is not necessarily forthe better - but it may represent an opportunity to reboot the relationship between the U nited S tates and Venezuela, and perhaps between the U nited S tates and all of Latin

America .President Obama did the right thing by reaching out to Venezuela as a nation. He correctly sees Chavez's death as a "new chapter" in the history of Venezuela. But he should now reach out to Vice President Nicols Maduro. This may sound counterintuitive, but here is why.Chavez's death portends a perilous road ahead. The country will have to hold elections within a month, and Maduro will surely run. Within hours of the president's death, Maduro was laying the groundwork by accusing the United States of espionage, expelling an American diplomat, blaming a U.S.-led plot for the cancer that killed Chavez, and appealing to the United Socialist Party of Venezuela to maintain unity. Maduro soundedmore like a candidate than a vice president in mourning.The United States must look past this rhetoric. Maduro stands a good chance at winning the presidency and will need the domestic and internationalsupport that the charismatic Chavez did not require.In reaching out to Maduro, however, the United States must not overplay its hand. Doing so would make Maduro the inevitable successor - and createfor him the opportunity to rally support by portraying America as the enemy - instead of having to run on a crumbling economy and an excessivepersonalization of power in Venezuela. At the same time, the United States should assure the opposition that it supports no one in particular. Chavez's death will embolden a unitedopposition, which could rally around Henrique Capriles, the governor of Miranda, whom Chavez defeated in the 2012 elections.Capriles could win, but his election will be an uphill battle; to win he will have to appeal to many of Chavez's supporters. Were he to win, Capriles would face a deeply d ivided country and the monumental tasks of decentralizing power, restoring the economy and finding a way to unite a country burdened by crushing poverty, income inequality and high crime rates. If Capriles comes to power with only the support of theupper and upper-middle classes of Venezuela, he will not be able to effectively govern; interference from the military and a grassroots movementagainst his administration could cripple his government.Thus, Maduro may be the best hope for the United States. He would represent the interests of the many unhappy poor - not only in Venezuela butthroughout Latin America.

Chavez's death may create the opportunity for Maduro, with U.S. support , tomake gradual changes within Venezuela and the country's relations with the U nitedS tates.

What is not likely to change, however, is the flow of oil from Venezuela to the United States. Chavez's death does not r epresent a threat to oil supplyfrom Venezuela. The country remains an important energy exporter, and it depends on that income. Venezuela's relations with its neighbors - Brazil, Colombia and Cuba - will likely continue unchanged in the short term, precisely because Venezuela'scommercial relations are too important.If Maduro wins the presidency, a hard stand vis--vis the United States will benefit him and his party politically, and will represent an escape valve formany Latin American citizens who feel the continent's prosperity has done little for them. But this should not deceive the United States.

Chavez was , in a way, a one-of-a-kind man , and his power stemmed from his personality. There is no one who can take his place and whoever comes next will need to build coalitions athome and abroad to maintain legitimacy .

This is an opportunity for change, and it must be seized with thoughtfulness and diplomacy.
http://www.chron.com/opinion/outlook/article/Chavez-s-death-offers-U-S-a-chance-to-foster-4334009.phphttp://www.chron.com/opinion/outlook/article/Chavez-s-death-offers-U-S-a-chance-to-foster-4334009.phphttp://www.chron.com/opinion/outlook/article/Chavez-s-death-offers-U-S-a-chance-to-foster-4334009.php


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The foundations of economic freedom in Venezuela have crumbled. When Chaveztook office in 1999, Venezuela scored 54 out of 100 possible points in The HeritageFoundation/Wall Street Journals annual Index of Economic Freedom. Today,however, after 14 years of Chavezs soft authoritarian populism, Venezuela meritsa score of just 36 points. This nearly 20-point plunge is among the most severeever recorded by a country in the history of the Index . Its 2013 rank 174th out of179 countries places Venezuela among the most repressed nations in the world.[ 2]

Venezuelas dismal economic freedom score is reflected in statistics that translateinto real-time hardship for Venezuelans, who must spend more of their incomeson higher prices for necessities if they can find them on empty store shelves. There are scarcities ofnearly all staple food and fuel products . In fact, according to the Banco Central of Venezuelas (BCV) shortages index, Venezuela faces the most severe food shortages in four years.[3] And what food is available comes at a price: Mary OGrady re ports in The Wall StreetJournal that over the past 10 years inflation in food and nonalcoholic beverages is 1,284%.[4]

Financial disequilibrium in Venezuela is the result of a sharply widening fiscaldeficit that reached almost 15 percent of gross domestic product (GDP) last year .[5]Government control of the formerly independent BCV also contributed to a massive expansion of the money supply. There are anecdotal reports inCaracas of people paying as much as 23 bolvars for one U.S. dollar in the black market as of early April. The official rate is just 6.3 bolvars per dollar and that is after a significant 32 percent devaluation in February.[6]

These problems were aggravated by Chavezs foreign adventurism which drained billions ofpetrodollars from the economy to keep afloat the failed economy in Fidel Castros Cuba as well as generous subsidies to his Chavista cronies in theregion through such schemes as ALBA and PetroCaribe.Corruption and Weak Rule of Law As reported in the Index, political interference in Venezuelas judicial system has becomeroutine, and corruption is rampant . The landscape in Caracas and elsewhere in thecountry is littered with half-finished, publicly funded infrastructure and housingprojects. The government funds needed to complete them often disappear. As government expanded under Chavez, corruption became institutionalized. Chavez doubled thesize of the public sector, many of whose 2.4 million[7] employees have no real jobother than to work to keep the regime in powe r. A World Economic Forum (WEF) survey found little trust among businesses, politicians, the judicial system, and the police in Venezuela.[8] The tragic r esult is that Venezuela is now one of the most dangerouscountries of the world. According to the Venezuelan Violence Observatory, in 2012 nearly 22,000 people were murdered.[9]

An inefficient and non-transparent regulatory environment that is hostile toprivate foreign direct investment obstructs long-term development and hampersentrepreneurial growth . The investment regime is tightly controlled by the state and favors investors from China, Russia, Iran, andother democracy-challenged countries.[10] Investor protection in Venezuela is ranked at 140 out of 144 countries, according to the WEF report.[11] In1998, before Chavez took power, there were more than 14,000 private industrialcompanies in Venezuela; in 2011, after 13 years of extensive nationalizations andexpropriations, only about 9,000 remained.[12]The Chavez government did make one product very inexpensive for Venezuelans: Generous energy subsidies mean a car can be filled up with 15 gallons

of gasoline for less than one U.S. dollar.[13] Although that might buy short-term political advantage for the Chavista government, in the longterm these energy subsidies are very destructive to future economic growth, since

Venezuelan companies have a distorted cost base and thus cannot competeglobally . Operations of the state oil company, PDVSA, have also deteriorated significantly under Chavez. When he took office, PDVSA wasproducing 3.5 million barrels per day (bbl/d); today, it is down to 2.5 bbl/d.[14]Social Programs and Inequality

Ironically, Chavezs years in power did not result in much reduction of poverty andinequality . Although some measures of income inequality (such as the Gini coefficient) did improve under Chavez,[15] according to a recently

published research paper by Darryl McLeod and Nora Lustig[16] that used data for 18 Latin American countries, market democraciessuch as Chile and Brazil were far more successful at reducing inequality andpoverty than the populist Chavista regimes .Despite its vast oil wealth, Venezuelas economic growth performance has also been poor.Between 1999 and 2012, average annual per capita growth was just 1.1 percent , while inthe top four Latin American countries (Panama, Peru, the Dominican Republic, and Chile) the rate was 3.6 percent.[17] Not surprisingly, the rate ofprivate investment in Venezuela under 5 percent is also one of the lowest in the region. In Peru and Chile, it is almost 20 percent.[18]


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Maduro is politically tanked economy is in the rut and marginal victory discredits himPadgett 13 Miami- based journalist and writer for TIME (Tim, Venezuelas Election: Even if Nicols Maduro won, he lost, TIME: World ,4/15/13, http://world.time.com/2013/04/15/venezuelas-election-even-if-nicolas-maduro-won-he-lost/)

Here is the one unmistakable reality of Sundays special presidential election in Venezuela: even if Nicols Maduro won, he

lost . This r ace had a rarefied gauge, and it wasnt simply the vote tally. It was whether the authoritarian-socialistmodel left by the firebrand Hugo Chvez, who died in office because of cancer lastmonth after a 14-year reign, can survive without his demigod presence . That is, his actualpresence and not his reincarnation as a bird, as Maduro goofily claims the late Chvez appeared to him recently. By defeating hiscentrist rival Henrique Capriles by an embarrassingly tight margin of 50.7% to49.1% after Chvez routed Capriles just six months ago by 11 points Maduro,

whom Chvez had handpicked as his successor, laid bare two things aboutChavismo without Chvez . The first is that el comandante, who always ran a one-caudillo show, failed to groom anyone who could fill his red beret politically. Thesecond is that Venezuelans, with Chvezs blustering figure gone, now recognizethe raft of economic and social messes he left behind. And that makes the political landscape ahead in Venezuela, which holds the worlds

largest oil reserves, volatile if not potentially violent . Maduro, who to his credit said hed accept the full voterecount Capriles is demanding, called his win a fair, legal and constitutional triumph, and it probably was, despite opposi tion concerns about theChavista- packed National Election Council, known as CNE. But Capriles argued hed scored an equally important victory by exposing how vulnerable

Chvezs United Socialist Party (PSUV) is in the absence of the late Presidents charismatic bond with i ts base. This system,Capriles declared, is a sand castle. Yet however flimsy it may be and the Venezuelan opposition, despite Sundays impressive performance, is no reassuring rock, either Maduro and the Chavista leadership, including military honchos who havestrongly hinted they wont accept an opposition President , have insisted since Chvezs cancer wasdiagnosed two years ago that only their leftist, anti-U.S. Bolivarian revolution is divinely anointed to rule. Now, with their humiliated backs against a wall, and bereft of the political tools their exalted leader possessed, the question is how heavy a hand theyll resort to in order to preserve Chavismosdominance and the petrowealth it presides over.The wild card is Maduro himself, whose lack of an electoral mandate means he has to worry not only about an emboldened opposition but also aboutchallenges from inside his PSUV. Chvez was never quite the dictator his foes claimed, but he was notorious for measures like antidefamation laws

that made insulting him a criminal offense. Maduro, 50, a former bus driver and union leader, is a die-hard acolyte of Cubas communist regime and its rigidly vertical power structure;and as a result, says Javier Corrales, an expert on Venezuelan politics at AmherstCollege in Massachusetts, the fear is that hell go after dissent now to make up forhis weak position, that hell see sabotage of the fatherland and the revolution allaround him . Thats an especially valid concern, Corrales notes, since Maduros wing of Chavismo is actuallynot the strongest. Chavistas like the National Assembly president, DiosdadoCabello, who wields closer ties to business and the armed forces than Maduro has,may now smell blood in the water, making Maduro a potentially more defensiveand authoritarian leader. But any new Venezuelan leader, mandate or no mandate, would chafe at the criseson his Bolivarian plate . Chvez certainly deserves kudos for using Venezuelas vast oil resources to reduce its inexcusable poverty.But his often reckless economic MO may have undermined that very crusade in the long run. L avish and indiscriminate socialspending has spawned a currency debacle the street exchange of more than 20

bolvares to the U.S. dollar mocks the official rate of just over six to the dollar which in turn has helped make Venezuelas inflation rate, which consistently tops20%, among the worlds highest . Chvezs nationalization of hundreds of privatecompanies has left the countrys nonoil sector woefully unproductiv e , but even the state-runoil monopoly, Petrleos de Venezuela, suffers from significant underinvestment. Food shortages, energy blackouts andinfrastructure breakdowns have become increasingly common as has officialcorruption, the plague Chvez came to power decrying.Some analysts insist the economic perils are exaggerated. Opponents of the Venezuelan government arehoping for an inflation -devaluation spiral that will help bring down the
http://world.time.com/2013/04/15/venezuelas-election-even-if-nicolas-maduro-won-he-lost/http://world.time.com/2013/04/15/venezuelas-election-even-if-nicolas-maduro-won-he-lost/


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government, Mark Weisbrot, director of the left -leaning Center for Economic andPolicy Research in Washington, D.C., wrote recently in the Guardian. But none of theseproblems present a systemic threat to the economy. Others, however, arent as sanguine: many ratings agencies now consider V enezuelan debt amongthe riskiest in South America. And thats hardly helped by the security emergency Chvez let fester during his presidency, which has saddled Venezuela with South Americas highest murder rate and made Caracas one of the worlds most dangerous capitals today. The violent crime crisis, in fact, points up Chavismos core flaw perhaps better than any other: Chvezs subordination of de mocratic pillars like thelegislative and judicial branches to his whims has handed heirs like Maduro a more institutionally dysfunctional Venezuela. If voters were trying to tellMaduro and the Chavistas anything on Sunday, its that Chvezs demise has made it more apparent to them that his revolution wasnt the 21st centurysocialism he insisted it was. Early on in Chavezs reign, I often sat down with his younger presidential aides and asked them about the international communitys fears that heaspired to be the next Fidel Castro something Chvez in later years would freely admit. Back then most of those Chavistas winced: Fid el is the oldLatin American left, they sniffed. Or about growing rumors that Chvez wanted to nix presidential term limits and rule for life. Thats exactly what helater did, but back then they insisted, No, he wont, that would be a return to Latin Americas bad old caudillo days. Or that hed nationalize largeswaths of Venezuelas economy and forge bosom -buddy alliances with human-rights pariahs like Iran just to spite the U.S. It all came to pass, of course but back then, I heard denial on all co unts from the 21st century socialists. Today, if I ever mention this to Chavistas, they dismiss my excessive bourgeois thinking. To which I can only say after Sunday: it looks like Venezuelans would like to see more bourgeois thinking. Maduro may well be savvy enough to get that(though his rather boorish campaign attempts to convince voters that the unmarried Capriles is gay make me wonder). But the irony is that a large blocof voters may well consider the 40-year-old Capriles who stumped for the socialist- capitalist third - way project that has proved so successful under

more moderate leftist leaders in Brazil to be a more 21st century socialist than Maduro is. E ither way, Sunday left littledoubt that while Chavismo narrowly won a presidential election, it certainly lostany divine claim to rule. And that was the voters talking, not a bird.

Maduros credibility is low economic reforms boost itLees 4/15 - an attorney in Washington, D.C., and editor of the comparative-politics blogSuffragio.org (Kevin, If He Holds on to Victory, Maduro Will Have an Extremely Hard Job, The Atlantics, Apr 15, 2013, http://www.theatlantic.com/international/archive/2013/04/if-he-holds-on-to-victory-maduro-will-have-an-extremely-hard-job/274984/, Daehyun)

But the curse is now on Maduro . Despite a flowery and defiant victory speech late Sundaynight after Venezuela's National Election Commission declared him the winner with just 50.66percent of the vote to 49.17 percent for his aggressive challenger Henrique Capriles, Maduro'stenure in office , whether it lasts six days or six years, will be haunted with the doubt ofhalf the nation's voters . In the short term, he faces an immediate crisis over theaudit of election results that could further delegitimize his victory. Capriles defiantlyrefused to accept Sunday's election results in an early morning address to the nation. Wielding athick stack of alleged election day violations, Capriles demanded a recount of 100 percent of the votes. While he stopped short of declaring victory himself, he ominously noted that hiscampaign had a different count of the results. Venezuela's army made clear last night that it wassiding with Maduro for now, but that could change if the audit doesn't line up with the electioncommission's declarations. Maduro was always going to face an economic crisis in thelong run. But now, just five weeks after Chvez's death, Maduro faces agovernability crisis as well. If his election is upheld and he serves until the end of his termin 2019, Venezuela will have marched through 20 years of chavismo. Maduro takes office

with an economy under siege -- the country has become increasingly reliant onimports ; PDVSA , its state-run oil company actually produces less oil today than it did

when Chvez took office; both international finance markets and Chinese lendersseem unwilling to fund a growing public debt; and the country is plagued withgrowing inflation that was already in double digits before the government officiallydevalued its currency in February and a informally devalued it even more inMarch. It's far from certain that Maduro is up to the task of salvaging it all from a majoreconomic crisis or recession. That half the nation believes Capriles won certainly won't helpmatters. It will make Maduro's position even weaker within the inner guard of thechavistas who run Venezuela's government, and Maduro's weak victory essentiallymakes chavismo a lame-duck movement more than ever. But though Venezuela seemsin dire need of at least some basic changes in economic policy, Venezuela's problems runfar deeper in its society than even the most surgical reforms could fix. When the
http://www.theatlantic.com/international/archive/2013/04/if-he-holds-on-to-victory-maduro-will-have-an-extremely-hard-job/274984/http://www.theatlantic.com/international/archive/2013/04/if-he-holds-on-to-victory-maduro-will-have-an-extremely-hard-job/274984/http://www.theatlantic.com/international/archive/2013/04/if-he-holds-on-to-victory-maduro-will-have-an-extremely-hard-job/274984/http://www.theatlantic.com/international/archive/2013/04/if-he-holds-on-to-victory-maduro-will-have-an-extremely-hard-job/274984/


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smoke clears, the deeper curse Maduro faces will come from neither Maracapana norCapriles, but the curse that began in 1918 with Venezuela's oil exporting prowess -- theresources curse. At first glance, Venezuela's history makes it seem like any other South American country. Independence won in the 1810s. Check. Civil war between "conservative" and"liberal" oligarchs throughout the 19th century. Check. Military-backed caudillos in the early20th century. Check. Gradual advance of democracy in the late 20th century. Check. But though Venezuela shares many of the difficulties that its neighbors have faced, it assumed an additionalmacroeconomic burden as a petro-state with complications that plague Venezuelan governanceto the present day. Although Chvez came to power proclaiming a new, 'Bolivarian,' socialist fifthrepublic, he in many ways simply replicated what came before -- a relationship between thegovernment and the governed whereby Venezuela's leaders trade a slice of the country's oil wealth in exchange for the political support it needs to win and retain power. That's why thefiercest battles over chavismo came not in 1998 when Chvez was first elected, but in 2002, when Chvez took direct control over PDVSA. That year saw Chvez briefly fall from power for47 hours during an aborted coup and, later, a quixotic general strike among PDVSA employeesthat caused a minor recession. Chvez responded by replacing most of PDVSA's employees withloyalists and, increasingly, has used the oil company as a direct source to disburse funds forsocial programs, bypassing the formal government budgeting process. Before 1958, the system

was based on the caudillismo of military leaders like Marcos Prez Jimnez. For the next 40 years, the system was based on a two-party oligarchy, split between the nominally center-leftDemocratic Action and the nominally center-right Copei. Chavismo marked a rupture from thissystem in two ways. First, he diverted a larger share of Venezuela's oil wealth to the poor thanever before -- although the deployment of those funds was never incredibly efficient, nor was it without corruption. Secondly, he flattened the system through his own personality cult. PDVSA,the state oil company, has a stronger brand in Venezuela than the PSUV, the governing UnitedSocialist Party. It was Chvez personally who doled out the gifts. It's the second part that willmake Maduro's task especially difficult. Chvez would have been a hard act for anyone to follow, but Maduro is a bland apparatchik in contrast whose legitimacy, so long as heremains president, will forever be challenged by his narrow victory . He ran alargely defensive campaign, wrapping himself in Chvez's legacy. Provided that his

victory is upheld, it's hardly a mandate forchavismo, let alone madurismo , but it's notat all clear whether chavismo would ever actually work without Chvez, the personalembodiment of the latest iteration of Venezuela's petro-state clientelism. Maduro's weaknessmeans it's more likely than not that Venezuela is headed for tough times ahead,even beyond the economic turmoil. Maduro spent negligible amounts of timeadvocating anything more than the broadest slogans, but the opposition refrained fromcalling from any radical departure from Venezuela's fundamental system, offering essentially amore workable chavismo that retains social welfare programs, but with less crime and a better business climate.


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--- XT: Expanding Oil Production Saves Maduro

Expanding oil production is key to sustain Maduros presidency Kalms, 13 --- analyst specializing in Middle East and Latin American national security affairs, Masters in International Affairs fromColombia (3/29/201 3, Dominic, Hot Issue: After Chvez: Succession in Venezuela, http://www.jamestown.org/single-hot-

issues/?tx_ttnews[tt_news]=40669&tx_ttnews[backPid]=61&cHash=284ee84f6ffe1c0745b3f186a09e1dff, JMP)

Oil After Chvez

Oil not only plays an important role in Venezuelan foreign policy but is quiteliterally the economic lifeline of the country , accounting for 94 percent of total exports, 50 percent of its the budgetand 30 percent of its GDP; it is estimated that Venezuela has the largest oil reserves in the world with 297.4 billion barrels of extra-heavy crude and

bitumen in the Orinoco Belt. [6] Oil essentially propelled Chvez into the presidency and kepthim in power as he tapped the cash flow from the state oil company Petroleos de Venezuela (PDVSA) to initiate generous domestic spendingprograms. If Maduro expects to benefit similarly from this vast oil reserve, he will haveto address Chvezs reckless energy policies. From 1998-2013 Venezuela witnessed a 40 percent decline in total crude exportsand a 30 percent decline in total crude output costing the government billions in revenue. In addition, because Venezuela heavily subsidizes its domestic fuel, their gas prices are the cheapest in the world at $0.06 per gallon of premium gasoline, which led to a 39percent increase in domestic oil consumption over the last decade and further reduced supplies available for export (Bloomberg, February, 13). [7]

Equally problematic is the Chavismo policy toward international oil contracts andInternational Oil Companies (IOCs). Chvez used oil as a tool of foreign policy, creating organizations like PetroCaribe and theBolivarian Alternative for the Americas (ALBA), which allow strategic allies of Venezuela to purchase Venezuelan oil under generous terms, such aspaying 5 percent to 50 percent of the bill within three months and 25 years to pay off the rest, at one percent interest (Council on Hemispheric Affairs,July 22, 2008). These generous subsidies end up costing the Venezuelan government over $4 billion a year in lost revenue.In 2007 Chvez went even further with his socialist policies when he made the decision to force foreign oil companies to give PDVSA a 60 percent sharein all production projects (Energy Information Agency, October 3, 2012). This caused a flight of foreign investment capital and a technical brain drainas foreign companies were forced to either accept this new Production Sharing Agreement (PSA) or surrender their assets and flee. Unable to acceptthese terms, many multinational oil companies such as ConocoPhillips and ExxonMobil were forced to exit the Venezuelan oil market, losing billions inrevenue and assets, which Chvez then nationalized (El Universal [Venezuela], September 21, 2012).Immediate changes to these energy policies seem unlikely, particularly given the assurances from the President of PDVSA Rafael Ramrez, who toldreporters outside the National Assembly on March 8 that while our government is here and the people remain in charge, our oi l policy will remain

unchanged (InfoLatam, March 12) . However, if Maduro is to succeed as president and revive the Venezuelan economy he will have to address these failed energy policies on three fronts.First, Maduro will need to find a way to bring back IOCs to Venezuela to boost

production output and bring back technical expertise and foreign investment, while

ensuring he does not lose political credibility with Chavistas. In the long run Venezuela will need to renegotiate the PSAs with IOCs and relax their strictcurrency controls allowing companies to repatriate profits.Second, Maduro will need to decide if Venezuela will reduce the volume of subsidized petroleum products it exports to Petrocaribe and ALBA, whichcost the government billions in lost revenue. However, if these subsidies are suspended or drastically reduced, it would cause gas price shocks for Venezuelan allies like Cuba and Nicaragua and likely cause political instability. It is therefore unlikely that Maduro wi ll go this route.Finally, Maduro must decide if he can cut the domestic petroleum subsidies that allow Venezuelans to enjoy such cheap gas. This popular domesticsocial program has further eaten away at oil export profits. However, the last cut to domestic fuel subsidies in 1989 caused the El Caracazo riots in thestreets of Caracas killing hundreds of people. [8]Economic Problems in a Post Chvez World

Beyond oil, Maduro will have to manage the shortages of everyday goods that haveplagued Venezuela for decades. It seems likely that some time post-election, Venezuela will see another currency devaluationin order to boost oil exports and gain hard currency to offset any increased cost of imports. The government is concernedabout political instability from shortages and has been handing out hard currencyrecently in order to boost imports. This policy is unsustainable in the long term

but the continued depletion of Venezuela's hard currency leaves little room forshort term economic policy. Fiscal stimulus packages are inflationary, as is thecontinued devaluation of the currency, thus the only long term solution forMaduro will be to increase oil exports to gain enough dollar reserves and hardcurrency to stabilize Venezuelas economic imbalances.
http://www.jamestown.org/single-hot-issues/?tx_ttnews%5btt_news%5d=40669&tx_ttnews%5bbackPid%5d=61&cHash=284ee84f6ffe1c0745b3f186a09e1dffhttp://www.jamestown.org/single-hot-issues/?tx_ttnews%5btt_news%5d=40669&tx_ttnews%5bbackPid%5d=61&cHash=284ee84f6ffe1c0745b3f186a09e1dffhttp://www.jamestown.org/single-hot-issues/?tx_ttnews%5btt_news%5d=40669&tx_ttnews%5bbackPid%5d=61&cHash=284ee84f6ffe1c0745b3f186a09e1dffhttp://www.jamestown.org/single-hot-issues/?tx_ttnews%5btt_news%5d=40669&tx_ttnews%5bbackPid%5d=61&cHash=284ee84f6ffe1c0745b3f186a09e1dffhttp://www.jamestown.org/single-hot-issues/?tx_ttnews%5btt_news%5d=40669&tx_ttnews%5bbackPid%5d=61&cHash=284ee84f6ffe1c0745b3f186a09e1dff


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Thumpers

Multiple issues thump Inflation, shortages, and crimeCSM 5/17 News S ource(Christian Science Monitor, Venezuela's Maduro still waiting on Washington's recognition, May 17, 2013,http://www.csmonitor.com/World/Americas/2013/0517/Venezuela-s-Maduro-still-waiting-on- Washington-s-recognition, Daehyun)

With neither side showing any inclination toward compromise, the standoff between the twocountries also shows no sign of ending. But Maduros long -term challenges are looming.Inflation in the socialist country is nearing 30 percent, there is public anger overthe chronic shortages of basic goods, and the ballooning murder rate exceedsEurope and the United Statess combined . Maduro is going to have to tackle theseproblems if hes going to last as president , says Mr. Munck. [U]nless theres somechange in the way he handles the situation, the US isnt going to budge.
http://www.csmonitor.com/World/Americas/2013/0517/Venezuela-s-Maduro-still-waiting-on-Washington-s-recognitionhttp://www.csmonitor.com/World/Americas/2013/0517/Venezuela-s-Maduro-still-waiting-on-Washington-s-recognitionhttp://www.csmonitor.com/World/Americas/2013/0517/Venezuela-s-Maduro-still-waiting-on-Washington-s-recognitionhttp://www.csmonitor.com/World/Americas/2013/0517/Venezuela-s-Maduro-still-waiting-on-Washington-s-recognition


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Maduro Cred High

Maduro credibility is increasing OAS and US support is increasingTimes of India 4/20 News Source(Backed by Latin America, Maduro sworn in as Venezuelan president, Apr 20, 2013, http://articles.timesofindia.indiatimes.com/2013-04-20/rest-of-world/38692755_1_nicolas-maduro-diosdado-cabello-presidential-election, Daehyun)

SAO PAULO: In a strong rebuff to Washington's refusal to "recognize" NicolasMaduro as the new president of Venezuela , leaders of the biggest Latin Americancountries, including Brazil, Argentina, Bolivia and Ecuador, on Friday attendedhis swearing-in ceremony in Caracas . Several South American presidents, including DilmaRousseff of regional heavyweight Brazil, flew to Caracas on Friday morning from Lima, wherethey had gathered for an "extraordinary session" to discuss the impasse in Venezuela. At themeeting, the leaders issued a joint statement saying it "congratulated NicolasMaduro for his election as president." The group also urged "all sectors involved inthe electoral process to respect the official results of the presidential election ". Later in the day, Maduro was sworn in for a six-year term before the National Assembly (NA). With 17 Latin American presidents and delegations from 47 countries present in the Venezuelanassembly, Maduro was administered the oath of office by NA chief Diosdado Cabello, and hereceived the presidential sash from Hugo Chavez's daughter, Maria Gabriela. During Maduro'sinauguration speech, a man grabbed the microphone and was dragged away. Since morninghundreds of thousands people gathered on the streets of Caracas to show theirsupport for the new president, who has received the backing of all countries in theregion. The meeting in the Peruvian capital was an important development for theregion as Maduro received the support of Unasur or the Organisation of South

American Nations for his new government hours before he was to be sworn in to succeed thelate Hugo Chavez who died of cancer on March 5. Before leaving for Lima, Maduro accused theopposition of triggering post-election violence with the help of the US embassy in Caracas. "Wehave stopped a coup in its first stage. They are beaten, but they are coming back with a newattack," Maduro said before flying to Peru for the meeting of South American leaders. SinceSunday, when Maduro was declared winner in the election, the country has been in a state offlux with the country's opposition refusing to accept the result and indulging in violence inCaracas and other cities. The situation became tense as Washington threw its weight behind the Venezuelan opposition by supporting its demand for a "vote by vote" recount and the EuropeanUnion suggesting an audit of the vote. The governments of Brazil, Peru, Ecuador, Colombia,Bolivia and Argentina, among others, had recognized Maduro's victory on Sunday itself, but Washington did not. With the US and EU continuing to raise doubts about the validity of the Venezuelan election on Thursday, the Lima meeting of the Latin American leaders decided tofully support Maduro even as the head of Venezuela's national election council (CNE) ordered to widen an electronic audit of the vote. The CNE announcement took the heat out of a dispute

caused by the opposition candidate Henrique Capriles Radonski who lost the election to Maduro by 1.8% margin or 300,000 votes. "We do this in order to preserve a climate of harmony andisolate violent sectors that are seeking to injure democracy," said Tibisay Lucena, the CNE chief,insisting that the expanded audit was not a recount, but would cover all ballot boxes not auditedon election day. Maduro also had the backing of the country's Supreme Court, which said it wasimpossible to conduct a manual recount. Capriles, who has been demanding a "vote by vote"manual recount since Sunday, accepted the CNE decision on Thursday. In Lima, the Unasurmeeting too welcomed "the decision of the CNE to implement a system that permits a full auditof election results." Nearly all Latin American countries have recognized Maduro's election,
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Plan kills Credibility

The plan kills Maduro s credibility hardline approach is keyFox News Latino 4/17 News Source(U.S. -Venezuelan Relations Remain Tense UnderMaduro, Experts Claim, Apr 17, 2013,http://latino.foxnews.com/latino/politics/2013/04/17/us-venezuelan-relations-remain-tense-under-maduro-experts-claim/#ixzz2b4pBZ0wz, Daehyun)

Chvez could overcome the detractors because he was viewed as a national hero, Madurodoesnt have that, said Larry Birns with the Council for Hemispheric Affairs. To maintain hiscredibility within the Chavista movement and fend off opponents from within hisown party, Maduro needs to maintain his opposition to the U.S. and continue topaint Americans as imperialist intruders, experts said. Hes got to worry aboutthe opponents that will pose a threat to his rule, Birns said. These are difficult timesfor Maduro and no one knows how the scenario will play out.
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American Politics


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Plan Popular

Bipartisan support for counter-narcotics cooperationNoriega 5 Assistant Secretary for Western Hemisphere Affairs(Roger, Plan Colombia:Major Successes a nd New Challenges, May 11, 2005, http://2001-2009.state.gov/p/wha/rls/rm/2005/q2/46564.htm, Daehyun)

Good afternoon. Mr. Chairman, Ranking Member Lantos, members of this distinguishedCommittee, I want to first express our appreciation for your leadership and ongoing interest inour policy toward Colombia and your steadfast support. Your willingness to receiveColombian government officials here, and your continued interest in sendingCongressional delegations to Colombia, is a crucial foundation for our Colombiastrategy. I would be remiss if I did not also express our appreciation for the manycontributions Speaker Hastert has made. U.S. policy toward Colombia supports theColombia n governments efforts to defend and strengthen its democraticinstitutions, promote respect for human rights and the rule of law, intensifycounter-narcotics efforts, foster socio-economic development, and addressimmediate humanitarian needs. We seek to help Colombia end the threats to itsdemocracy posed by narcotics trafficking and terrorism. The success of our policyis due in no small measure to the continuing bipartisan support we have receivedfrom the Congress for our programs in Colombia .

Strengthening relations with Venezuela has bipartisan supportNoriega 4 - ASSISTANT SECRETARY OF STATE, BUREAU OF WESTERN HEMISPHERE AFFAIRS, U.S. DEPARTMENT OF STATE(Roger, THE STATE OF DEMOCRACY IN VENEZUELA, Jun 24, 2004, http://www.gpo.gov/fdsys/pkg/CHRG-108shrg96730/html/CHRG-108shrg96730.htm, Daehyun)

Mr. Noriega. Thank you very much, Mr. Chairman. First of all, I apologize for being tardy. I willnot offer any excuses. We thank you, Mr. Chairman and Senator Nelson, for your interest andengagement in U.S. policy toward Venezuela. That is very critical. I will summarize my writtenstatement, Mr. Chairman, and submit it for the record. I want to express my appreciation, firstand foremost, for your clear and thorough statements , both of which I think reflect astrong bipartisan consensus behind our policy toward Venezuela, and it reflectsan agreement , a meeting of minds between the executive branch and the legislative branch,

which I think is also very helpful as we pursue our interests . My statement will seek toupdate you on the current conditions and current challenges that Venezuela is facing and ourefforts to help the Venezuelan people strengthen their democracy and bring a peaceful end tothe political unrest in that country. My colleague, Ambassador Maisto, will address the

important role that the Organization of American States has played and will continue to play in Venezuela. Mr. Chairman, the administration's policy in Venezuela has been and remains to work with our international partners, led by the OAS, the Friends of the Secretary General,coordinated by the Brazilian Government, and the Carter Center, to support the efforts of the Venezuelan people to achieve a constitutional, democratic, peaceful, and electoral solution tothe current political polarization in that country, as called for by OAS Resolution 833. Mr.Chairman, our engagement is entirely consistent with the commitments that we andthe Venezuela Government have made under the Inter-American Democratic Charter,and it is a statement of solidarity with the Venezuelan people who, as all of the people of the
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Americas, have a right to representative democracy. In addition, our bilateral interests areto recover a cordial, constructive and mutually-beneficial relationship that Venezuela and the United States had enjoyed for decades.


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Mercosur DA


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UQ Collapse Inev

Mercosur is collapsing on its own the US isnt relevantLBC 6/6 - a division of the Latin Trade Group, offers key market intelligence beyond the dailyheadlines, through extensive rankings, indexes and statistics(Latin Business Chronicle, The beginning of the end for Mercosur?, Jun 6, 2013,http://www.latinbusinesschronicle.com/app/article.aspx?id=6056, Daehyun)

Argentinas Interior Minister Florencio Randazzo announced yesterday that hisgovernment would be renationalizing two rail concessions held by the Braziliancompany Amrica Latina Logstica (ALL) . The announcement came almost a year afterthe country renationalized a 51 percent stake in oil company YPF from Spains Repsol, and amida number of high-profile cases of Brazilian companies abandoning the Argentine market. Thedecision was poorly received by Brazilian industries, who are increasinglyexhausted by the difficult of conducting business with their Mercosur associate.The move also comes at a time when Brazilian business seems more interested in

bilateral agreements with other South American countries, say analysts.D ysfunction within Mercosur especially disputes between Argentina and Brazil is nothing new. The bloc long ago abandoned its founding mission of a common market withthe free movement of goods, services, and currency across borders. More often the story todayis of protectionism, trade disputes, and diplomatic rows. Both countries haveestablished long lists of exceptions to free trade, and goods often get stuck at the

borders of member countries for weeks. Brazilian companies have alsoincreasingly been frustrated by the Argentine market . In April, Brazilian mining giant Vale abandoned a $6 billion potash mining project in the country citing inflation and currencycontrols as impediments to doing business. In late May, Brazilian state-oil company Petrobrasconsidered divesting its Argentine assets, but abandoned the idea after failing to secure a buyer. Officially the Argentine government said it seized ALLs lines due to the companysserious and repeated failure to comply with the terms of their contract . In line with rationales of other Argentine nationalizations, it said that company had underinvested inthe tracks, and had failed to pay a number of fines and royalties. The Brazilian company which has held the lines since 1999 said the countrys political and economic situationhad made the concession impossible to run and that it was looking for buyers. Inresponse to the move by Argentina, the Industry Federation of the State of SaoPaulo (FIESP) said Brazil should free itself from the straitjacket of Mercosur ,adding this country is going nowhere with partners like Argentina and Venezuela .In an op-ed the editorial board of O Estado de Sao Paulo, said the decision came at aparticularly difficult time for Argentine -Brazilian relations, and gave moreammunition to critics of the fractious trade bloc . The op-ed also notes that this comes ata crossroads for Brazilian business: Afte r years of seeking protection from the government,Brazilian industry is realizing the internal market is no longer sufficient to

guarantee its future success. As their share of exports is falling, and they losemarket share in South America, the industry is now pushing the government topursue more bilateral agreements. Regional attention for trade integration haslargely moved from the bloc to the open-market and Asia-focused Pacific Alliance,consisting of the continents Pacific -coast economies. To that end, Mercosur juniorpartner Uruguay announced this week that it would be seeking full membership inthe Pacific Alliance . The country, which already has free-trade agreements with thefour Pacific Alliance members (Chile, Colombia, Mexico, and Peru), cited inactivity
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and protectionism within Mercosur and said they believed the Pacific Alliance would offer great integration potential for their economy.

Mercosur is dead and Argentina has killed itBarillas 7/15 Spero News editor, former US diplomat, who also worked as a democracyadvocate and election observer in Latin America. He is also a freelance translator(Martin,Argentina is killing MERCOSUR trade group, Spero News,http://www.speroforum.com/a/YRMQEHBXOV48/74181-Argentina-is-killing-MERCOSUR-trade-group#.Uf_kJZLOuaU, Daehyun)

Speaking for a Brazilian business association in Sao Paulo, Rubn Barbosa accused thegovernment of Argentina of dealing a mortal blow to MERCOSUR the regionalgrouping that was originally focused on economic integration that has since become a politicalforum for the regions leaders. Over the last few months, said Barbosa, there weremeasures adopted that killed MERCOSUR. Argentina is responsible for putting anend to MERCOSUR . Barbosa, who is the president of the foreign trade council of the SaoPaulo Industrial Federation, was interviewed on Radio Mitre a station in Buenos Aires.

According to Barbosa, MERCOSUR of today, as an instrument of commercial policy,is done. It doesnt serve to open up trade, having become a political forum. What

we have seen is the judgement on Paraguay and the entry of Venezuela withoutnegotiation or accord. He also denounced restrictions imposed by Argentina,

while also referring barriers certain Argentine products (e.g. wine, grapes, citrusproducts, and medications) encounter in entering the Brazilian market. Barbosarecalled on June 30 that the Asuncin Treaty had opened up trade between the countries ofMERCOSUR. The current situation, said the business leader, is quite the opposite. Uruguayan business against MERCOSUR Uruguayan business sectors have denounced the 45thMERCOSUR Summit Meeting for having focused on political issues while putting trade issueson the back burner. This has meant, say some Uruguayan business interests, that MERCOSURhas not functio ned as it should. We believe that MERCOSUR is not working as it

should on the trade barriers between countries, which do not produced exchange but impedes it, said Teresa Aishemberg the chief executive of the Union of UruguayanExporters. She added that the leaders of the internal block formed by Argentina,Brazil, Uruguay and the new member, Venezuela, should have focused onaccelerating trade and eliminating barriers found within them that impedefree markets. Another failure on the part MERCOSUR, according to the Uruguayanassociation, is that it has not encouraged foreign trade. Aishemberg said Since the1990s, tariffs have gotten better within MERCOSUR, thus increasing trade, but now we needthem to honor their promises. Economic and trade issues were given just a few linesin the final document issues by this years MERCOSUR summit meeting. Thedocument noted a perceived need to proceed towards facilitating trade withinMERCOSUR, while emboldening the regions economy . The statement also promised

joint action in addressing the current world economic crisis while reaffirming the governmentsinterest in signing a balanced and mutually beneficial trade agreement with the EuropeanUnion. Bolivia is now in the process of joining MERCOSUR, which was originally conceived as agrouping of the southernmost countries of South America. In 2012, following the impeachmentand removal of Paraguays President Fernando Lugo, Paraguay was suspended fromMERCOSUR. In its absence, Venezuela was admi tted despite Paraguays previous objections.

Adding Bolivia would continue MERCOSURs leftward and anti -American course.Ever since mid-2012, Argentina has waged a soft trade-war against Paraguay byimposing onerous inspections and other delays for Paraguayan exporters who
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must pass their products through Argentine territory on its way to the worldmarket.


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Link Turn

Current Venezuelan policies wreck the Mercosur the plans reformssolve

Kotschwar 12 research fellow, has been associated with the Peterson Institute forInternational Economics since 2007(Barbara, Will Venezuelas Entry Be Mercosurs SwanSong?, Jul 31, 2012, http://www.piie.com/blogs/realtime/?p=3035, Daehyun)

Today, July 31, 2012, Venezuela officially becomes a full member of the Mercosur customsunion. But Venezuelas accession nearly a decade in the making effectively puts to restthe pretense of Mercosur as a serious economic integration arrangement. Mercosur,the acronym for the Common Market of the Southern Cone, started promisingly enough, apolitical triumph of cooperation over conflict with former nuclear arms competitors Brazil and Argentina pledging instead to work towards a common economic future. But in recent years,Mercosur has gone through backsliding and missed out on opportunities seized byother Latin American countries engaging in trade deals with Asia and other partsof the world. Adding oil-rich Venezuela, with its disdain for trade liberalizinginitiatives, would likely not contribute to a further easing of trade restrictions. Inaddition, membership by Venezuela led by the increasingly autocratic andeccentric Hugo Chavez would make a mockery of the compacts statedcommitment to democracy. The Treaty of Asuncin, signed on March 26, 1991, created afree market among Argentina, Brazil, Paraguay, and Uruguay and bound them together with afour-tiered common external tariff, common trade rules and regulations, and the objective ofmacroeconomic policy coordination. Mercosur was seen at the time as a shining emblem ofLatin Americas new regionalism a new type of Latin American economic integrationarrangement that, unlike its predecessors in the 1960s and 1970s (think: the Andean Pact, theLatin America Free Trade Association, or LAFTA, or the Central America Common Market, orCACM) was aimed towards liberalization, competitiveness, and global integration. Mercosur hashad its detractors. The World Bank famously published a paper whose title implied thatMercosur would bring down world welfare as a result of its potential for trade diversion.1 Butmany studies predicted welfare gains for Mercosur members from further integration andliberalization.2 Mercosur is also largely credited with bringing Venezuela back from the brink ofdictatorship. In 1996, in a meeting at San Luis, Argentina, Mercosur added a so-calleddemocratic clause, requiring democratic institutions for membership. In the period 1990 1999,intra-regional exports grew by an average annual rate of 24.5 percent, compared to exports tothe rest of the world, which grew by 8.7 percent. In the 2000s, intraregional exports grew by 6.3percent, compared to growth for the rest of the world of nearly 10 percent. Intra-regional tradein Mercosur took off in the early days, initially comprising 5 percent of the regions exports in1990. Intraregional flows reached a high of 25 percent of trade flows by 1998. Intraregionaltrade has ebbed and flowed, however, largely with the fortunes of the Mercosur membereconomies, falling to a low of 11 percent of total exports in 2001 and leveling off at 15 percent in

the last few years, displaced by dynamic exports to East Asia. As seen in the figure below, afterinitial success, Mercosur has stagnated. Mercosur has weathered many crises: the 1996Paraguay coup attempt; Brazils 1999 devaluation; Argentinas 2002 currencycrisis; and the 2008 2009 world economic slowdown. The customs union hasperiodically been dogged by economic tensions between the members that havecaused key players Argentina and Brazil to bend Mercosurs rules to the extentthat analysts have often predicted their break3 . From Argentinas 3 percent statistical taxapplied to imports (including from other Mercosur countries) in the 1990s, to recent non-automatic import licenses from Brazil and Argentina, Mercosur members have applied
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Venezuela Aff Updates - Michigan7 2013

Documents

Transcript of Venezuela Aff Updates - Michigan7 2013