Situation in Venezuela

MUNiSC Security Council

Forum: Security Council Student Officer: Grace Choi, Head Chair

Introduction Venezuela, which was previously known as the “Land of Grace” due to its abundant natural resources and terrestrial diversity, is currently facing multiple problems, ranging from hyperinflation to political conflicts. When the inflation started in November 2016, the inflation rate was 112%. However, by the end of 2019, the International Monetary Fund (IMF) projected that it would reach 10 million percent. This shows that the economic crisis is getting nowhere better 11 years after it began. Not only this, the combination of hyperinflation and food shortages forced many Venezuelans to flee to neighboring countries, including Colombia, Peru, Chile, and Ecuador. The A map of Venezuela Venezuelans that are left behind face severe shortages of not only food but also medical supplies. According to the Human Rights Watch, it is estimated that maternal mortality has increased by 65% and infant mortality 30% in 2016 alone. The continuing power struggle between President Nicolas Maduro and the opposition leader Juan Guaido that started from Maduro’s re-election in May 2018, not to mention the ongoing oppression towards the protesting citizens, has made the situation worse.

Background Major Factors Only about a decade ago, Venezuela, with the world's largest crude oil reserves, was relatively stable and was one of the fastest rising economies in Latin America. However, the situation changed rapidly from the start of the new decade and worsened when the global oil price dropped steeply in 2014. The innumerable problems raised in Venezuela, including food shortages, human rights violations, and the refugee crisis, all connect back to the destabilization of the economy. Countless factors caused the economic crisis, but the two significant factors are high oil dependency and inadequate currency controls.

High Oil Dependency President Hugo Chavez, the predecessor of President Nicolas Maduro, took office from 1998 to 2013 and was beloved by the citizens due to his populist policies and programs that, for a time, led Venezuela to economic prosperity. His plans focused on redistributing wealth and land and building social-welfare programs with billions earned from exporting crude oil. The agenda included improving the healthcare system and education system and bringing subsidized

© MUNiSC 2020 MUNiSC Security Council food to the poor. Such programs helped the poor and also aided President Chavez by allowing him to gain support from Venezuelans and eventually helping him to be reelected. To continue to stay in power by gaining support from the citizens, President Chavez did not scale back Venezuela's dependence on oil but rather spent copious amounts of money earned from oil to keep the programs running. This led the Venezuelan economy to be more oil-dependent, and it came to a point where the social-welfare programs started to fall apart as oil prices dropped. Due to this decrease in the price of oil, and excess spending on welfare programs, by 2014, hyperinflation was inevitable.

Currency Controls Currency controls, which limit the purchase of currencies by the government, were first introduced to Venezuela in 2003 when President Hugo Chavez was in power. Usually, governments seek to stabilize their economies by using currency controls to manage the in-flows and out-flows of currency. However, the currency controls imposed by President Maduro brought the opposite effect. The official exchange rate set by the government was ten bolivars (monetary unit of Venezuela) per USD (United States Dollar); however, in reality, only President Maduro and his allies could use this rate to exchange their currencies. As a result, the black market rate reached 12,163 bolivars per USD in 2017. It was revealed that the military was benefiting from this flawed currency control. The military used the favorable exchange rate to import food. Then, it sold the food to black markets for exorbitant prices, incurring massive profits. Such currency controls not only increased the gap between the poor and the rich but also worsened hyperinflation and citizens’ accessibility to food and aid. In July 2019, the government announced that it would end currency control policies; however, many experts note that such actions should have taken place earlier and that it is too late now.

Problems Raised Hyperinflation Hyperinflation is one of the most significant and critical issues that must be solved. According to the Library of Economics and Liberty, hyperinflation is defined as high, accelerating inflation when the monthly inflation rate is greater than 50 percent. This means that a product that was 1 USD would end up costing more than 130 USD the next year. The combination of the drop in the minimum wage to 31 USD per month from 360 USD per month and rampant hyperinflation is making the citizens’ lives harder and harder. A chart that shows the accelerating In Venezuela, three bananas are worth 10% of the monthly inflation in Venezuela minimum wage, while 1 liter of milk is worth 30% of the minimum wage.

Humanitarian Crisis The living conditions of Venezuelans are startling. Nearly 90% of Venezuelans are living below the poverty line, while more than 80% of Venezuelan households are suffering from

© MUNiSC 2020 MUNiSC Security Council food shortages. Moreover, measles and diphtheria, diseases that were previously eliminated in Venezuela, have re-emerged since 2016. According to the Human Rights Watch, an increasing number of Venezuelans are being infected by diseases such as malaria and tuberculosis. While more and more Venezuelans need medical care, the entire health care system in Venezuela is shattering. Frequent blackouts due to underfunding and mismanagement of the government and astronomical cost of medications due to hyperinflation are forcing more and more hospital facilities to shut down. On one of their reports, the BBC commented that the hospitals in Venezuela are only able to offer their beds now.

Refugee Crisis Due to the harsh living conditions, many Venezuelans have fled to neighboring countries. WorldVision estimates that 5,000 Venezuelans left the country per day in 2018, and in total, 4 million Venezuelans became refugees since the beginning of the crisis. However, many refugees who moved into other countries struggle to be employed and afford a house to settle in. Even though some neighboring countries, including Brazil, have decided to accept more refugees, many other countries, including Peru, Chile, and Ecuador, are slowly closing the doors for refugees due to internal frustration and xenophobia according to the Washington Post. Also, many critics are pointing out that many Latin America countries cannot tolerate the increasing influx of refugees.

Power Struggle- Who is the President? The power struggle between President Maduro and the opponent’s party leader, Juan Guaido, started from the highly controversial election that happened in May 2018. After President Maduro's predecessor and mentor, President Chavez, passed away due to cancer, Maduro won the election by a 1.6% difference and came into power. During Maduro's first Nicolas Maduro (left) and Juan term, due to the drop in oil prices and other factors, the Guaido (right) economy of Venezuela destabilized. Therefore, many citizens criticized President Maduro for leading the country into a crisis and were against his reelection. However, Maduro was reelected in May 2018, and this reelection quickly became highly controversial. After the disputed election, the National Assembly, which is controlled mostly by opposition parties, claimed the election was unfair and supported the head of the National Assembly, Juan Guaido, as the president of the state. Finally, on January 23, referring to Venezuela’s constitution, which states that in such controversial cases the head of the National Assembly would become the president, Juan Guaido declared himself as the president of the state. Since Juan Guaido’s declaration, mass protests started against Maduro. However, the National Assembly lost its power in 2017; therefore, their voices were not heard by Maduro. Long story short, in December 2015, Maduro was at risk of being removed from the spot by the opposition parties. In response, Maduro quickly filled spots in the Supreme Court with his allies. The Supreme Court dismissed the National Assembly in March 2016, which led to massive protests that ended in hundreds of deaths. In 2017, Maduro replaced the National Assembly with the National Constituent Assembly, which has the power to rewrite the constitution and replace the National Assembly. Juan Guaido consistently appealed to the military to switch allegiance, but the military is still

Protests, Political Conflicts, Extrajudicial Killings The protest that started in 2014 is continuing. According to the Penal Forum, it is estimated that more than 12,500 protestors have been arrested since 2014 and that the security forces committed serious abuses against the detained protestors, including sexual abuse, severe beatings, and electric shocks. The detainment of political opponents is a critical issue as well. It is estimated that more than 230 political figures in Protestors who oppose the reelection of Venezuela had been detained. The Maduro government Maduro coming out to the streets has been censoring media as well and restricting freedom of expression. Self-censorship of news media and companies due to fear that the government would cause harm is also a problem. Not only this, the Maduro government is suspected of extrajudicial killings.

UN/International Actions The UN and many other countries have been helping Venezuelans by sending aid ever since the economic crisis started. According to the UN News, in 2019 alone, the UN delivered 55 tons of health supplies to 25 hospitals in Caracas, Miranda, Zulia, Bolivar, and Tachira. Not only this, the UNHCR (United Nations High Commissioner for Refugees) has been partnering with the government of the host countries and the Institute of Medicine (IOM) by providing immediate basic needs such as shelter to the refugees and organizing awareness campaigns to reduce xenophobia and discrimination. When clashes between Maduro and his opposition parties intensified, numerous countries imposed individual sanctions against companies and people related to Maduro's administration. These countries include the United States, Canada, Panama, and Switzerland.

The Stances of the P5 Nations China China is one of the few countries that recognizes Maduro as the president. China has continuously invested and traded with Venezuela even after its economic collapse. Along with the Russian Federation, China accuses the US of interfering with the internal affairs of Venezuela.

France France supports Juan Guaido as the president. They are one of several European countries that strongly showed support for Juan Guaido. France, along with Spain and Germany, gave Maduro an "ultimatum" for reelection after the controversies from the election in 2018.

Russian Federation

The Russian Federation recognizes Maduro as the president. Along with China, they have vetoed a UN resolution about holding a new presidential election in Venezuela. The Russian Federation is a key military ally to Venezuela as well. They had joint military exercises in 2018.

United Kingdom The United Kingdom previously sent emergency aid packages of medicine and clean water to Venezuela. The United Kingdom recognizes Juan Guaido as the president. Penny Mordaunt, the United Kingdom’s International Development Secretary, once commented on Maduro's policies as “reckless mismanagement” and showed strong disapproval of him.

United States of America The relationship between the US and Venezuela was close and cooperative before President Chavez was elected and the government turned to socialism from democracy. Since then, the relationship between the two countries deteriorated. The US has continuously helped Venezuelans by sending aid, but Maduro rejected aid several times from the US. The US also imposed sanctions against people related to Maduro in the wake of the 2017 Venezuelan protest and May 2018 election. In August 2019, the Trump administration expanded sanctions against Venezuela. The US currently recognizes Juan Guaido as the president of Venezuela.

Possible Solutions Firstly, in order to solve the situation, Venezuelan politics should be stabilized. The continuous fight over who is the president does not help Venezuela to move on. Economic stability could be achieved only after the government is stabilized. Secondly, the Venezuelan government should prioritize reducing hyperinflation. Some options they can choose are full dollarization or following how other countries, like Brazil, dealt with the hyperinflation in the past. Each method has its advantages and drawbacks; therefore, the government should carefully examine and apply it to Venezuela as soon as possible before hyperinflation worsens the situation. Another critical issue they must solve is their dependency on crude oils. After Venezuela achieves some degree of stability, the government should invest in different industries to jump-start growth. This may include agriculture and tourism. However, the most urgent issue would be to solve is the humanitarian and refugee crises. Even though numerous governments, non-governmental organizations (NGOs), and United Nations organizations (UNOs) are helping, there is no doubt that they need more aid and support. Raising awareness is crucial; however, at this point, actually motivating people to help is more important. Furthermore, government corruption should be prevented. However, imposing international sanctions on Venezuela should be carefully done since that may cause more harm to millions of Venezuelans who are already suffering.

Timeline The 1910s - Oil reserves were discovered in Venezuela during the early 20th century

1958-1992 - Venezuela had a democratic government during this period 1992 - Hugo Chavez tried a coup but failed 1995 - President Perez impeached on corruption charges 1998 - Hugo Chavez was elected as president and launched the “Bolivarian Revolution”. A new constitution was written, and Venezuela became socialist. 2004 - Oil prices surged 2010 - Chavez devalued bolivar currency in an attempt to boost revenue from oil exports. Later, Chavez declared an “economic crisis”. 2013 - Chavez died due to cancer. Nicholas Maduro was elected as the president. 2014 - Oil price dropped steeply and worsened the financial situation in Venezuela. Protests against Maduro started. 2015 December - Opposition party of Maduro won 2/3 majority in parliamentary elections 2016 March - The National Assembly removed by the Supreme Court 2016 November - Hyperinflation started 2017 - The National Constituent Assembly replaced the National Assembly 2019 January - Juan Guaido declared himself a president 2019~present - Power struggles continue while protests against Maduro are intensifying

Glossary Currency Control: a policy imposed by the government that limits the purchase of currencies to control the in-flow and out-flow of currencies in the country Extrajudicial Killings: the killing of a person (typically individuals who opposes the government) by government authorities without a legal process Inflation: the steady increase in the price of goods over time Hyperinflation: high, accelerating inflation where the monthly inflation rate is greater than 50% Oil Dependence: overreliance in crude oil as the primary source of income Xenophobia: fear or hatred of strangers or foreigners

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