As protests continue in Venezuela, the government of President Nicolás Maduro has sought to delegitimize protests and isolate them in middle-class areas in the hope that they will burn out.
The president's rhetoric aims at inciting poorer citizens against student and middle-class protesters, who he blames for food shortages, and soaring inflation and by “sabotaging the economy.” He calls protesters "fascists" who are organizing a “soft coup.”
This is a risky strategy. Though reports of relative calm in barrios remain accurate, acts of protests do take place there—such as youth setting up barricades on a hit-and-run basis, and residents banging pots to protest shortages (cacerolazos). Significant numbers of poor youth also unite in Caracas’ barrios every night to join middle-class youth confronting the National Guard.
As a result, the Venezuelan government has realized that it needs to alleviate shortages in barrios, and has urgently sought Russian—and especially, Chinese—loans to float reforms. Now, with the launch of the country’s third and newest foreign exchange system on Monday, Maduro is betting on a new economic strategy to contain protests.
On March 8, Rafael Ramírez, the president of Petróleos de Venezuela S.A. (PDVSA) and vice president of economics for the Consejo de Ministros (Council of Ministers), announced that he had secured extraordinary loans totaling $7 billion from China and Russia. China’s $5 billion loan is to be repaid with oil (Ramírez claimed that this will not increase exports to China), while Russia's $2 billion loan is intended to develop a Russian-PDVSA Faja heavy-oil field.
Shortly thereafter, Ramírez announced that the Sistema Complementario de Administración de Divisas 2 (Ancillary Foreign Currency Administration System—Sicad 2), the new dollar market that had been promised since President Hugo Chávez’ death over a year ago, would open on March 24—with very liberal rules and a “free supply of foreign currency,” that Ramírez said the government will help supply.
In September 2013, Beijing refused to loan money to float Sicad 2—reportedly cutting off Maduro and Ramírez’ Powerpoint pitch midstream. So, why did Beijing later approve $5 billion?
The realities of the global oil market, including increased oil production in the U.S. and Canada, guarantee that China will increasingly be Venezuela’s oil-trading partner, no matter who is in power.
June 1: This AQ-Efecto Naím segment looks at sustainable cities in the hemisphere.