A Slippery Slope: US’ Failing Economic Sanctions and the Humanitarian Crisis in Venezuela

A few steps inside the Colombian border, business is booming. Venezuelans sell food, clothes, their hair, -anything that can possibly be purchased- using the income to buy basic amenities that are conspicuously unavailable at home. Faced with the potential of inflation touching 1,000,000% this year, citizens are increasingly choosing to walk out on the toxicity of life in Venezuela. About 7% of Venezuela’s population has fled the country, creating an acute refugee crisis whose magnitude has largely gone under the radar in mainstream media. Even more perturbing, however, is that few voices have emerged to criticize the US’ role in exacerbating the crisis. While it is obvious that Venezuela’s incumbent president must go, the Trump administration’s current policy of imposing harsh economic sanctions may be contributing to the humanitarian crisis far more than is currently estimated. If the US truly wishes to help Venezuelans like it claims it does, it must adopt more collaborative and non-punitive policies to successfully depose the current government and help re-establish economic stability in Venezuela.

It is no secret that economic miscalculations and mismanagement by successive governments have generated the current predicament. After coming to power in 1999, President Hugo Chavez brought the “Bolivarian Revolution” to Venezuela. Banking overwhelmingly on export incomes from Venezuela’s extensive oil reserves, Chavez drastically increased spending on public goods and services. Chavez’ myopic economic policies soared on globally high oil prices, leaving the country vulnerable to price shocks. Venezuela’s reliance on oil proved to be fatal when oil prices crashed in 2013. The currency depreciated and import prices climbed immeasurably, adding to the widening budget deficit. Soon, Venezuela would begin to default on debt even as investors deserted the economy, shattering the illusion of Chavez’ glory years and leaving President Maduro to pick up the pieces.

Maduro’s panacea for rising prices can best be summarized in the following manner: if the people need more money, print it. Anyone with a base knowledge of Weimar Germany could have foreseen the ensuing plague. Hyperinflation soon followed, opening the Pandora’s box of shortages, surges in black market goods and, in many areas of Venezuela, a return to the ancient trading system of bartering. The crisis has most visibly affected middle and lower-class Venezuelans, who are fleeing the country in droves. Unlike families that have ancestry in Spain or the money to relocate elsewhere, most of these Venezuelans are spilling over Venezuela’s immediate borders, creating one of Latin America’s most pressing refugee crises. Neighbouring countries like Colombia and Ecuador, who bear the brunt of migration, have already begun tightening their immigration policies - and Venezuelans may soon be left with nowhere to go.

Until recently, when he turned to his own party and acknowledged its role in the catastrophe, Maduro had been vocal in criticising the role of exogenous forces, particularly the US, in exacerbating the crisis. After Maduros’ re-election in 2018, the Trump administration instituted a third round of harsh and illegal economic sanctions against Venezuela. These sanctions do not permit Venezuela to sell or restructure its debt in America. In its defense, Trump’s administration claims that these sanctions are intended to damage the interests of Venezuelan elites, depriving them of methods of siphon more money away from the economy and into their own purses. Unfortunately, these sanctions also create severe shortages of essential goods, like medicine, by inhibiting Venezuela’s imports. For an economy that doesn’t produce much else besides oil, further restrictions on imports can be especially debilitating. Shortages in goods caused by the sanctions also provide additional incentives for existing private entities to hoard goods and sell them for even higher prices on a black market (a term that is increasingly losing significance in Venezuela).

While Venezuela’s economic woes were hardly caused by the US, its sanctions neither achieve the US’ larger political impetus to topple the Maduro government nor help starving Venezuelans on the ground. Ricardo Hausmann, a former Minister of Planning in Venezuela and former Chief Economist of the Inter-American Development Bank, also acknowledges that current US sanctions are neither here nor there. While he clearly advocates for Maduro’s removal, he claims that sanctions are often too slow in having their intended effect of bringing the government to its knees. Given that the fallout of the sanctions are received not by protected elites but by commoners, increasing sanctions even more would be ineffective at best and inhumane at worst. What is more, notwithstanding widespread Venezuelan disillusionment with the government, Maduro managed to win the 2018 elections through implicit electoral coercion, which points explicitly to the scant effect sanctions have had in weakening Maduro’s regime.

Like many of its predecessors, the Trump administration is resorting to the quintessential presidential proclivity to try and topple socialist, Latin-American governments through coups -with the crucial divergence being that this time, they might actually be close to a potential solution. Recently, evidence has emerged of the US in talks with rebel leadership in Venezuela about a potential coup. Although an overt military intervention would be widely condemned by the international community and unsupported by taxpayers at home, Hausman is proposing an alternative solution that may achieve the US’ political aims. The key, he claims, is to carry out an invited intervention of sorts. The main opposition party should use its constitutional powers to impeach Maduro and his vice-President Aissami, after which it would invite joint-forces from allies countries and the international community at large, including the US, to intervene and ensure a smooth democratic transition.

Hausman’s solution is unique, experimental and relies on the success of two key stages. First, Maduro’s opposition must successfully out him despite internal opposition and second, the US and other nations must be willing to commit to Venezuela in order to reinstate democracy and help rebuild its economy. This would involve the US not only removing sanctions to restructure Venezuelan debt but also actively helping Venezuela develop non-oil sectors of its economy, through limited economic concessions and support via international banking organizations like the IMF. All else succeeding, the US must be willing to make an exception to its increasingly isolationist and antagonistic economic policies if it truly intends to help the millions of people stranded in Venezuela today.

Antara Agarwal