Previous Quarterly Editions
Expropriation Risk: 78 72 72 74 Political Violence Risk: 90 85 80 76 Terrorism Risk: 60 58 61 62 Exchange Transfer and Trade Sanction Risk: 94 94 95 95 Sovereign Default Risk: 96 94 95 96
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As the international dispute continues around the legitimacy of Nicolas Maduro’s re-election as president in May 2018, his government is pushing ahead with legislative elections at the end of 2020. In June 2020, the pro-Maduro Supreme Court appointed a new president and board of rectors for the country’s National Electoral Council (CNE). The new CNE head then quickly confirmed that National Assembly elections will be held in the second half of December 2020 and that the number of deputies to be elected will rise from the current 167 to 277. Currently 28 national parties, 52 regional parties and six organisations representing indigenous peoples meet the requirements to participate. For Juan Guaido, recognised by the US and other countries as the interim president, this was a contentious move as agreement over new appointments to the CNE has been the starting point of dialogue efforts over recent years. European and regional countries have been supporting Guaido’s demand for a new and transparently appointed CNE as a condition of fair, free and credible elections. However, the Supreme Court’s appointments to the electoral body followed a legal appeal by non-Guaido aligned opposition and pro-government parties frustrated by what they see as efforts by Guaido to derail elections by not participating in discussions around CNE candidates. With the COVID-19 lockdown making mass demonstrations impractical as a means of driving Maduro from office and amid an erosion of support for Guaido himself, there has been speculation that Guaido’s next step may be to establish a government in exile. Allegations that recent mercenary and paramilitary ventures to capture Maduro have been organised by Leopoldo Lopez, Guaido’s former mentor and leader of his Voluntad Popular Party, has further undermined Guaido while destabilizing Venezuela-EU relations. Lopez is housed at the Spanish Embassy in Caracas, where he has sought political asylum since being freed from house arrest during an aborted Guaido led uprising in May 2019. However, July 2020 saw an unusually positive development as the Maduro government backtracked from expelling the head of the EU delegation in Caracas after discussions between its foreign minister and his EU equivalent. Had relations worsened further, it would have been a major setback for diplomatic efforts to secure a negotiated exit from the crisis as the EU has been acting as a bridge between countries sympathetic to Maduro, such as; Russia, Turkey and China, and those led by the US that oppose him. Compared to regional neighbours, particularly Brazil and Colombia, the Maduro government has been relatively successful in containing COVID-19 beyond hotspots in border areas as an estimated 70,000 Venezuelan migrants crossed back into the country. However, at the beginning of July 2020, lockdown conditions were re-imposed in 89 of the country’s 335 municipalities and in Caracas, with the government announcing new military deployments in border areas to prevent irregular border crossings. Meanwhile, the economy continues to suffer with a contraction of around 25% expected for 2020 and an inflation rate above 500% for the first half of 2020. OPEC figures show that oil output for June 2020 was down to 390,000 barrels per day. This is the lowest since the 1940s and less than half the first quarter (2020) average of 821,000 barrels per day, this is partly due to US sanctions making sales more difficult and because the country’s storage capacity is full.
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Before the COVID-19 crisis, the Maduro government was cautiously forming ‘strategic alliances’ with the private sector and the sale of previously nationalised assets was hesitantly embraced as a means to kickstart vital investment. The process was beginning to take hold despite strong opposition from grassroots and union organisations and it was evident that the government no longer has the appetite or resources for further expropriation. However, this trend was reversed when the assets of AT&T were taken into state hands in May 2020. The move followed AT&T’s announcement that it would suspend its 300 channel DIRECTV subscription service, citing the company’s inability to be compliant with both US sanctions and Venezuelan regulatory requirements. As this example suggests, Washington’s aggressive enforcement of its sanctions regime will offset efforts by the Maduro government to attract investment, which will force further state intervention.
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The combination of the COVID-19 lockdown and a heightened security sector presence across the country has stifled anti-government protests. However, public support for mass gatherings was waning before the onset of the COVID-19 pandemic and Juan Guaido’s calls for protests were drawing diminishing crowds. Although there are some signs that new, largely regional, organisations are trying to reflect popular frustration with the conflict between Maduro and Guaido, a significant proportion of the population still sees violence as the only way to remove Maduro. Meanwhile, small cells of civilian and military armed anti-government actors pose an ongoing threat of targeted violence against individuals and infrastructure, and they are likely to become more active in an attempt to disrupt preparations for the December 2020 elections.
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In May 2020, a private US security company, financed by people with links to Guaido, led a poorly organised operation into Venezuela with the aim to capture Maduro. Eight of the participants were killed and more than fifty arrested. The US government distanced itself from the debacle, but the bounty of 15 million USD being offered by Washington for information leading to the capture of Maduro will incentivise further unpredictable and dangerous incursions.
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The US has aggressively enforced the sanctions it imposed in 2019 last year on the Venezuelan oil sector. Iran has stepped in to help alleviate the calamitous shortage of domestic gasoline which was a result of Venezuela’s lack of refining capacity -just five tankers arrived in May 2020 with the equivalent of only fifty days of fuel for the country. US forces observed their arrival but did not intervene, but Washington subsequently brought a civil forfeiture case against a businessman with alleged ties to Iran’s Revolutionary Guard.
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A decision by the British High Court in June 2020 declared that Juan Guaido was the recognised head of the Venezuelan state. This has frustrated efforts by Maduro, who was only recognised as head of government, to achieve the return of one billion USD in gold which is held in the Bank of England. The British move follows the US in freezing the Maduro government’s access to Venezuelan assets overseas, most notably CITGO in the US, and giving management of them to the Guaido team. This foreign determination of control of resources raises important questions of oversight and management as CITGO is being pursued by ConocoPhillips, Crystallex, and PDVSA bond holders for defaulted repayments and arbitration awards. Decisions on Venezuela’s response now lie with Guaido, an unelected head of state from a minority political party. In response, Maduro officials have accused the World Bank and Inter-American Development bank of colluding with Guaido.
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