A few thoughts on Venezuela

Fires burn on the Galipán mountain above Caracas (Source: here)

For a number of years, I worked as Venezuela sovereign debt analyst in a bank on Wall Street. I visited Caracas dozens of times over many years. I met with government officials, US embassy staff, other analysts, pollsters, politicians, bankers, business people, academics, and many others. Hugo Chavez was president and over time I became quite familiar with the workings of his government. Nicolás Maduro, Chavez's successor, inherited the regime and left it largely unchanged from the Chavez days. As I type these words, Maduro is in US custody after being kidnapped in a surprise raid by US forces on the morning of 3 January 2026. The purpose of this note is to share three quick thoughts on today's events.  

Crossing Galipán mountain on one of my research trips to Caracas (Source: own photo)

No tears for Maduro

My first thought is that I feel no need to shed tears for Nicolás Maduro. Maduro was a ruthless dictator. I still remember very clearly the day I decided to throw in my towel as a Venezuela analyst. I had just had lunch with two friends at the Marriott Hotel in the upscale Chacao quarter of Caracas. My friends were both Venezuelan financial analysts. After the meeting as I made my way to the airport around the imposing Galipán mountain I received a message on my Blackberry that my two friends had been picked up by the secret service. They were locked up for two years without trial. They never even knew why they were arrested. They suffered immensely during their time in prison as did their families. They had probably pissed off some bigwig in Chavismo, so they had to be put away. That is how Chavez and Maduro handled opponents.

Maduro is now in the slammer (Source: here) 

I remember another episode, which also reveals a great deal about how the Venezuelan government used coercion to get its way. A few months after I had stopped working on Venezuela, my successor wrote his first research report. In the report, he mentioned a bridge on the road to the airport that had collapsed due to lack of government maintenance. It was a bit of an issue at the time, so soon after the report was published his bank received a call from the president's office in Caracas, which demanded the analyst be removed immediately, or the Venezuelan government would cease all business with the bank. The following week the analyst was covering Asia out of Singapore.

Maduro and his predecessor impoverished millions of Venezuelans. The statistics are quite shocking: when Hugo Chavez took office in February 1999 about 50% of Venezuela's population was classified as poor. Today, after 25 years of Chavismo, more than 80% of Venezuelans are classified as poor. The number of people deemed to be extremely poor has increased from 20% to 50% of the population (see here).

El Comandante (Source: here) 

Why did things go so badly wrong under Chavismo? One obvious reason is corruption. When Chavez and Maduro were at the helm, it was impossible to miss the lines of fancy jets in the airport. They were the private aircraft belonging to Maduro and his so-called socialist kingpins. The amount of money they stole is not known exactly, but it is breath-taking regardless. Inter-American Dialogue puts the figure at several hundreds of billions of Dollars (see here). In my personal opinion, Chavismo’s elite ranks among the most corrupt rulers in the history of the world.

The other reason things got so bad is that Chavismo ran the economy into the ground. When Hugo Chavez took office, Venezuela produced about 3 million barrels of oil a day. PDVSA, the national oil company, refined much of the oil into high value-added petroleum products, earning significant mark-ups. Today, Venezuela produces less than 1 million barrels of oil per day and the only product is low-margin heavy crude.

The Venezuelan economy has collapsed. Rather than accumulate savings and investing in the economy, Chavez and Maduro somehow managed to run out of money (with nothing to show for it) and then proceeded to default on both government and PDVSA debt, cutting off the country from external finance.

Venezuelans ought to be richer than Norwegians, but instead they compete with Haitians for the prize for the poorest population in Latin America. That economic mismanagement on this scale is even possible in a country like Venezuela it remarkable in itself. Venezuela literally has the largest oil reserves in the world, larger than both Russian and Saudi Arabian reserves. Moreover, Venezuela’s oil is super-easy to reach, because it sits just a few hundred feet below the ground in the Orinoco Belt.

A devalued economy (Source: here)

Does the US know what it is getting into?

The second thought that occurred to me when the news of Maduro's kidnapping hit the wires was that maybe the US is not best-placed to decide Venezuela's fate.

I worry that the Trump Administration has little or no idea what it getting itself into in Venezuela, beyond the kidnapping, that is.

Let me illustrate my concern with a little anecdote about US intelligence on Venezuela from my time as an analyst.

Research is obviously an information business, so as analyst you generally want to speak to as many people as possible as often as possible to get a sense of what is going on. You also want to make sure you don't alienate anyone. I therefore used to travel to Caracas at least once a quarter and I always protected my sources. I had good contacts at all levels in the government and in the opposition.

During my visits to Caracas, I would usually pay a visit the US embassy. What I found shocking on these visits was how little State Department officials knew about the country. They were posted there full-time, but I was usually the one telling them what was going on rather than the other way around.

One day I received a call from a high-ranking officer at the US Southern Command in Doral, Florida. He wanted to meet and I said yes, of course. In the course of our conversation, he told me he had been reading my research on Venezuela for some time and he deemed it far superior to anything coming out of the State Department, particularly as far as Venezuelan politics was concerned. He even confided in me that my reports went straight to Condoleezza Rice at the National Security Council. I was flattered, but not overly surprised having seen how clueless the guys at the US embassy in Caracas were. They knew nothing.  

Are Trump Administration officials better informed about Venezuela than the Bush guys? I doubt it. If so, is the United States really in position to direct events in Caracas following Trump's illegal regime change? Actually, Trump probably does not care. In an age of cruelty towards the weak and the vulnerable, where the rich and powerful will do anything to get even richer and even more powerful, the lives of ordinary Venezuelans do not matter. Trump will want you to believe his attack on Venezuela is all about Maduro, but his real aim is, of course, Venezuelan oil. Trump needs to deliver to his oil industry backers and what better way to reward them than to give them the biggest oil reserves in the world?

Maria was also good friends with Dubya (Source: here) 

If he gets his way, Trump will need a friendly government in Caracas, ideally a puppet. Maria Corina Machado, long-standing opponent of Maduro, has wasted no time sucking up to Trump, even dedicating her Nobel Peace Prize to him. She proclaims her love for democracy, but does not seem especially averse to a bit of foreign intervention if it gets her into power a bit quicker...

Once the next government is in place, historical grievances will resurface. Venezuela was deeply divided along race and class lines prior to Chavez. There were just two parties, AD and Copei, both of which drew support from the economic elite and took turns in power, but kept the oil wealth firmly under the control of the elite, with very little trickling down to ordinary Venezuelans.

During this times in office, Chavez and Maduro made no attempts to bridge the old divisions. If anything, Chavismo exploited and amplified them. Maria Corina Machado represents the old power structure of pre-Chavez Venezuela, not a more sustainable and inclusive future for all Venezuelans. I would therefore not be surprised if Venezuela under Machado reverts to being an oil company with a country attached, where the money goes to the few rather than the many.

Maduro is NOT the big issue here

My final thought is that Maduro is actually not really the big issue here. Maduro was just a tinpot dictator, after all.

The far bigger issue here is that the likes of Trump, Netanyahu, and Putin can act like bullies without the slightest regard for international law. Over the last few years, the last vestiges of multilateralism and rule of law have been swept off the international stage and been replaced by bully rule (See here). Coming from the erstwhile arsenal of democracy, Trump's illegal attack on Venezuela is the loudest and clearest signal so far that we have moved to a new world in which the strong do whatever they want. By dint of their powerful militaries, strongmen now blatantly flout rule of law, democratic principles, and human rights. They kill enormously numbers of people with complete impunity and they will continue to do so until they are stopped.

Which brings me to my biggest concern: who will stop them? Most of the rest of the world, including the United Kingdom and the European Union, appear to be run either by cowards without the courage to stand up to bullies, or by leaders without the ability to form effective coalitions. Smaller nations, regardless of their democratic credentials, should worry. My own country, Denmark, is one of them; Trump has set his sights on Greenland and Denmark cannot stop him, so who will? Yes, NATO clause 5 requires the UK and France to defend Greenland, but would they do so if the enemy is the United States?

In my view, one of last and perhaps only chances we have to stop Trump is to inflict a heavy defeat on Republicans in the mid-term election later this year. A major swing to the Democrats in November would eliminate Trump's majority in Congress and pave the way for impeachment. The only other option, given the military situation, is that the rest of the world just gradually distances itself from the US. By sticking together and excluding the US, the cost of going rogue for the US (and Israel and Russia) will slowly increase.

The End