If He Holds on to Victory, Maduro Will Have an Extremely Hard Job

Venezuela's president faces not only a credibility challenge but massive economic problems that got their start in 1918.
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Venezuela's acting President and presidential candidate Nicolas Maduro sings during a campaign rally in Caracas on April 5, 2013. (Carlos Garcia Rawlins/Reuters)

CARACAS, Venezuela -- During the 10-day presidential campaign to determine who will fill out the rest of late president Hugo Chávez's six-year term, his anointed successor Nicolás Maduro threatened that the "curse of Maracapana" would fall on those Venezuelan voters who failed to support Maduro. (The name of the curse comes from a battle in which Spanish conquistadors defeated indigenous Caribbean tribes in the late 1560s.)

But the curse is now on Maduro. Despite a flowery and defiant victory speech late Sunday night after Venezuela's National Election Commission declared him the winner with just 50.66 percent of the vote to 49.17 percent for his aggressive challenger Henrique Capriles, Maduro's tenure in office, whether it lasts six days or six years, will be haunted with the doubt of half the nation's voters.

Maduro is a bland apparatchik whose legitimacy, so long as he remains president, will forever be challenged by his narrow victory.

In the short term, he faces an immediate crisis over the audit of election results that could further delegitimize his victory. Capriles defiantly refused to accept Sunday's election results in an early morning address to the nation. Wielding a thick 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 his campaign had a different count of the results. Venezuela's army made clear last night that it was siding with Maduro for now, but that could change if the audit doesn't line up with the election commission's declarations.

Maduro was always going to face an economic crisis in the long run. But now, just five weeks after Chávez's death, Maduro faces a governability crisis as well. If his election is upheld and he serves until the end of his term in 2019, Venezuela will have marched through 20 years of chavismo.

Maduro takes office with an economy under siege -- the country has become increasingly reliant on imports; PDVSA, its state-run oil company actually produces less oil today than it did when Chávez took office; both international finance markets and Chinese lenders seem unwilling to fund a growing public debt; and the country is plagued with growing inflation that was already in double digits before the government officially devalued its currency in February and a informally devalued it even more in March.

It's far from certain that Maduro is up to the task of salvaging it all from a major economic crisis or recession. That half the nation believes Capriles won certainly won't help matters. It will make Maduro's position even weaker within the inner guard of the chavistas who run Venezuela's government, and Maduro's weak victory essentially makes chavismo a lame-duck movement more than ever.

But though Venezuela seems in dire need of at least some basic changes in economic policy, Venezuela's problems run far deeper in its society than even the most surgical reforms could fix. When the smoke clears, the deeper curse Maduro faces will come from neither Maracapana nor Capriles, but the curse that began in 1918 with Venezuela's oil exporting prowess -- the resources 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 early 20th 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 additional macroeconomic burden as a petro-state with complications that plague Venezuelan governance to the present day.

Although Chávez came to power proclaiming a new, 'Bolivarian,' socialist fifth republic, he in many ways simply replicated what came before -- a relationship between the government 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 the fiercest battles over chavismo came not in 1998 when Chávez was first elected, but in 2002, when Chávez took direct control over PDVSA. That year saw Chávez briefly fall from power for 47 hours during an aborted coup and, later, a quixotic general strike among PDVSA employees that caused a minor recession. Chávez responded by replacing most of PDVSA's employees with loyalists and, increasingly, has used the oil company as a direct source to disburse funds for social programs, bypassing the formal government budgeting process.

Before 1958, the system was based on the caudillismo of military leaders like Marcos Pérez Jiménez. For the next 40 years, the system was based on a two-party oligarchy, split between the nominally center-left Democratic Action and the nominally center-right Copei.

Chavismo marked a rupture from this system in two ways. First, he diverted a larger share of Venezuela's oil wealth to the poor than ever 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 United Socialist Party. It was Chávez personally who doled out the gifts.

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It's the second part that will make Maduro's task especially difficult. Chávez would have been a hard act for anyone to follow, but Maduro is a bland apparatchik in contrast whose legitimacy, so long as he remains president, will forever be challenged by his narrow victory . He ran a largely defensive campaign, wrapping himself in Chávez's legacy. Provided that his victory is upheld, it's hardly a mandate forchavismo, let alone madurismo, but it's not at all clear whether chavismo would ever actually work without Chávez, the personal embodiment of the latest iteration of Venezuela's petro-state clientelism.

It's not at all clear whether chavismo would ever actually work without Chávez.

Maduro's weakness means it's more likely than not that Venezuela is headed for tough times ahead, even beyond the economic turmoil. Maduro spent negligible amounts of time advocating anything more than the broadest slogans, but the opposition refrained from calling from any radical departure from Venezuela's fundamental system, offering essentially a more workable chavismo that retains social welfare programs, but with less crime and a better business climate.

Capriles pledged in particular to end subsidies to provide discounted oil to Cuba in exchange for somewhat dubious services from Cuban medical and technical experts. But he raced to pledge, like Maduro, to raise the minimum wage by 40 percent, which is likely to accelerate crippling inflation in a country where even broken-down, used cars appreciate in value.

Leopoldo López ranks among the brightest young stars of the broad opposition coalition that Capriles led in Sunday's election. López served as the mayor of Chacao, one of Caracas's five municipalities, from 2000 to 2008 at the same time Capriles was the mayor of Baruta municipality.

Like Capriles, he's tanned and trim and just barely in his forties, and he's been a visible Capriles adviser throughout the short, frenzied campaign. Unlike Capriles, however, he is the great-great-grand nephew of the libertador of Venezuela and much of South America, Simón Bolívar. If not for a murky administrative ruling from Chávez's government banning him from running for public office until 2014, it may well have been López running against Maduro on Sunday, and he argued on Friday at the opposition campaign headquarters in Caracas that Capriles's victory alone could fix much of what ails the Venezuelan economy.

"One of the key issues of our economy is expectations. If Capriles wins, the expectations of all the actors within the economy will be favorable. There will be investment, good conditions, there will be a very different climate for the economy," López said. "Our main income, which is oil, is at $103 per barrel but we are living an economic crisis. Why? Because the government has decided to destroy the national production."

There's obviously a lot of truth to what López says: The caprilistas would respect the private sector more than the chavistas and are much more committed to restoring business confidence in Venezuela. A Capriles win would have restored some balance to the long-ago distorted Venezuelan democracy in a country where state institutions, from the armed forces to what will soon be the entirety of Venezuelan television media to PDVSA, where employees wear chavista red shirts, are lined up behind chavismo.

But if Maduro's victory is somehow overturned and Capriles becomes Venezuela's next president, he'll need a lot more than a change in expectations to put Venezuela on a firmer footing. The opposition's hopes are based on what Paul Krugman might call the "hada de confiaza" -- a Venezuelan confidence fairy.

The underlying problem of Venezuela's past, current and likely future woes is a kind of supercharged version of the "Dutch disease" - a term coined in the 1970s to describe how the introduction of a commodity like petroleum ripples through the economy in two destructive ways.

First, the commodity can artificially boost the value of the currency, making the exports of other industries less competitive, especially when the value of the commodity increases sharply, just as oil prices rose sharply from historic lows in 1998 to historical highs throughout the Chávez era. Although the government has devalued the bolívar twice in 2013 already, petroleum remains the vast majority of the country's exports. Venezuela's El Nacional reported yesterday that the manufacturing sector shrunk from 17.3 percent to 13.9 percent during the Chávez era.

Secondly, and more directly, the commodity boom pulls workers from industries, which also leaves the country's other industries relatively weaker. Perhaps more perniciously, it changes market incentives because there's relatively less payoff from hard work, ingenuity, and building long-term industries. When wealth is bubbling out of the ground, it's simpler just to plot a way to divert your own share of that oil wealth.

The opposition's hopes are based on what Paul Krugman might call the "hada de confiaza" -- a Venezuelan confidence fairy.

That short-termism, more than socialism, rests at the heart of chavismo, and it's another reason why the legacy of chavismo is so precarious in Maduro's hands. So many of the social welfare programs that Chávez created are based on frenetic transfers of wealth made on Chávez's diktat, rather than through the creation of an enduring, long-term safety net. That means the greatest gains that chavismo has been able to claim could be endangered with one economic crisis or a change in political regime.

Beyond economics, the petro-state mentality infects the state's fundamental social compact. As in oil-rich Middle Eastern countries, resource wealth skews the link between the state and its citizens. Although Venezuelan's treasury brings in significant tax revenue, more than half of the government's budget comes from oil revenues, and the traditional link between government and voters is turned upside down: instead of an electorate of taxpayers holding its leaders accountable for good government, voters look support politicians who can offer the largest slice of Venezuela's oil wealth. That's why domestic subsidies make Venezuelan gasoline prices the world's cheapest, at just six cents a gallon.

That was true before and during the Chávez era, and it will certainly be true after Chávez. What seemed like a relatively mature democratic system before Chávez was always institutionally weaker than it looked from the outside. When former president Carlos Andrés Pérez botched an attempt to implement genuine economic reform in 1989 after a presidential campaign of lofty promises, Venezuelans reacted with deadly rioting in Caracas.

Maduro, like Pérez before him, will take office after a presidential campaign largely disconnected from the sober economic realities facing the country. But he seems unlikely to make even the simplest reforms that could bring Venezuela's economy back from the brink of collapse, to say nothing of its hollowed-out civil society.

Capriles and his supporters now have the scent of victory -- they know that chavismo is falling apart without the Big Man himself to make the system work, and they will likely move to recall Maduro before his term formally ends. But merely bringing down the curtain on chavismo won't be enough to transform the fundamental misalignment that characterizes Venezuelan governance.

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Kevin Lees is an attorney in Washington, D.C., and editor of the comparative-politics blog Suffragio.org.

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