Is the Pax Bodegónica Coming to an End?

An organized and effective protest campaign in the public sector and the sudden rise of the street dollar are bursting the bubble of a very relative economic recovery and political peace in Venezuela

What’s in a name? The Maduro administration has been working hard for the past three years to detach itself from Chavismo. Madurismo, if we may, has been focused on shifting the narrative, selling the idea that the government, regime, or whatever, understood the path that the revolution needed to take in order to survive in the 21st century. It shed the old interventionist State approach of ruling for a more every-person-for-themselves capitalism that sparked a bleep of recovery in a dead economy and it started sporting a smile for any “big boy” looking to play, friend or foe, as long as they don’t bring politics to the table. Also, Madurismo has done efforts to show this in the streets, by stripping the old Chavista propaganda reminiscent of years of hunger to present the (still hungry) population with a new face covered with ads featuring blue jeans brands, concerts, all types of business, services, hopes, and dreams. 

But at its core, Madurismo is imbued with Chavismo, the problems at the root remain, and anything that departs from the old system, as this small period of apparent stability, relies on a very delicate balance. A balance that is in the process of enduring its first real test since it came into place. Will it hold?

The teachers’ rebellion

Despite the packed cafés in Las Mercedes and the parade of concerts, Venezuela is also experiencing a summer of discontent. While going mostly unnoticed by the English-speaking press, a set of organized labor protests have rocked Venezuela since June. Public sector employees are demanding the revocation of new labor rules—the “instructivo Onapre”—that cut benefits and bonuses, leading to an abrupt wage reduction of up to 40%: seemingly part of the government’s jumbled and informal reduction of the State. The protests are multisectoral: on Tuesday, dozens of red-clad PDVSA workers in Anzoátegui marched to the local headquarters asking for the restitution of their medical insurance and better labor conditions. “If there’s money for parties in the apartment of the Minister’s wife, there’s money for the workers,” one of the protesters said.

In fact, 43 protests were registered in Venezuela during the first three days of August alone, according to the Venezuelan Observatory of Social Conflict. 

During the first semester of the year, 3,892 protests were registered: an average of 22 daily protests and a 15% increase from last year. While political protests are decreasing, labor rights protests are on the rise.

The protests, mostly led by public sector educators and healthcare personnel, have deepened the rift between Madurismo and the dissident hard left. The Communist Party of Venezuela (PCV) -a former close ally of PSUV- accused Maduro of leading an “anti-workers’ policy and neoliberal plan”, a position that was soon repeated by some foreign communist parties. In July, the government detained several union leaders and members of Bandera Roja, an opposition Marxist-Leninist party.

In the past weeks, the Maduro government seemed to be worried about the protests organized by teachers as a potential source of generalized unrest: the Education Ministry, in a rare decision, announced that it would pay the entire vacation bonus the teachers were demanding at once—while not repealing the Onapre rules. This week, after several analysts mentioned the increase in money supply (estimated at 36%) involved in the payment of the teachers’ bonus as one of the factors behind the sudden increase of the dollar, the government found itself in an uncomfortable loop: trying to cut one reason to protest, it ended up opening another one. 

The rise of the street dollar

In 24 hours, the parallel dollar rose by 22% (44% in four weeks): drifting away from the Central Bank’s official rate, maintained through the Bank’s increasingly interrupted weekly injection of about $100M-$200M to banks (and now directly to the market). Inflation also rose to its highest point this year, reaching two digits, according to consulting firm Ecoanalítica. 

A single bonus for public sector workers and a decrease of dollars released to maintain the official rate was all that was needed to plummet the bolívar again. 

The effects were felt everywhere: a supermarket in Mérida limited the sale of products in bolívares; superstores in Caracas registered massive attendance to buy products at the official rate; and workers in a supermarket in Cúa tried to remove products while clients were shopping. Déjà vu? 

Responsible voices in the public arena have said that the inflation this devaluation is causing could bring the end of the Pax Bodegónica, as political scientist Guillermo T. Aveledo dubbed the relative political and economic peace that imports and dollarization have built in Venezuela, to Maduro’s favor, since 2018.

Venezuela needs more dollars, but the government’s economic reform has been warm at best. Without an increase in oil and gas revenue and a still irrelevant productive capacity, the bodegón economy is just not viable, even if it manages to keep the privileged few content. The promises of a post-Ukraine war oil bonanza for Venezuela have not yet materialized. What is worse, Venezuela has been struggling to keep up with its projected oil production as its output dropped by 28% since December.

While the government continues to communicate its willingness to open itself to the world—while we write this, the Bloomberg Terminal quotes Tareck El Aissami saying that the “ball is in the U.S. government’s court” and that Venezuela is ready to have Chevron restart regular operations—it doesn’t necessarily mean that Madurismo is willing to give political concessions to negotiate sanctions relief with Washington and move towards more privatizations, more space to the private sector, a new legal framework and many more measures to step aside and let society be more productive. As the Caracas Chronicles Political Risk Report put it this week: “old habits, the intestine tensions with hardliners, and the lack of capabilities to design and implement tangible reforms hinder any chance of real economic reform. Hours before the bolívar crashed, Maduro himself was talking about collecting more taxes, quoting the example of European countries and the United States: countries that have nothing to do with dramatically impoverished Venezuela in terms of productive capacities.”

A bad symptom

This new devaluation streak put a spotlight on the weakness of the model behind the economic recovery the regime has put as the forefront of its new narrative and brought back the possibility of a resurgence of social unrest. Furthermore, there’s a risk that Chavista hardliners will push for the same economic policies that brought the economy to its knees in the recent past, with price and exchange controls implemented. 

The government’s erratic behavior has already created a cumbersome tax for every transaction made in U.S. dollars, while the new currency crash brought back old regulatory practices and language: Maduro accused retailers of “robbing the people” by raising “the parallel dollar in a fictitious and false way” while the General Attorney, Tarek William Saab, threatened to sanction “especuladores” and “criminal retailers” that didn’t use the official rate. According to Consecomercio (the retailer’s guild), SUNDDE -the government organization tasked with managing price controls- visited 3,000 businesses. It even closed some for selling its products at the new parallel rate. Diosdado Cabello, the poster child of hardline Chavismo, called on PSUV militants to “denounce and take on” retailers that use parallel dollar rates. 

The economic and political management of that power resource which is the public payroll—a traditional key aspect in a petrostate like Venezuela used to be, especially in the wealthy Chavez years—is at the core of the problem. In the permanent trade-off involved in economic policy, the Maduro government has reached the point where the hawkish anti-inflationary policies that ended hyperinflation don’t leave room for a much-needed increase in public salaries and social transfers, which are lagging behind as wages in the private sector increase—moderately, of course, but the increase is large enough to open an already existing gap between public and private salaries. 

According to different private surveys, salaries for low-level workers in the manufacturing sector, which are set in dollars, amount to an average of $80 per month (and rising), while public salaries are at around $30 and dropping (since they are denominated in bolivars, against a rising dollar). Meanwhile, the average cash transfer from the social protection system is around $3 every couple of weeks. A soaring inflation since June, now aggravated, isn’t helping: while 75% of Venezuelans earn less than $300 a month according to Ecoanalítica, the basic food basket costs over $400. This makes Venezuela the country with the lowest coverage (17%) of the basic food basket in Latin America (which has an average of 60%).

The rise of the dollar and the correspondent inflation spike lead to think that social unrest is, once again, a concern for the government. Naturally, despite the fact that the political opposition is powerless to turn the economic concerns to its advantage, repression is still there to respond if massive demonstrations spark again. Yet, this time officials will be warier about the risk of being accused of human rights violations, which might deepen sanctions and stop any relief.

While the government hasn’t appealed to tear gas and bullets yet–even allowing some of the protests to reach ministerial headquarters or the Supreme Tribunal of Justice (TSJ)–, it has sought to discourage the protests through intimidation. Protesters in Portuguesa were reportedly monitored with a drone, Elsa Castillo –a high-profile public teacher– and other union leaders in Caracas were harassed by SEBIN officers, and Douglas González, a union leader from state-owned company Venalum, was detained. In fact, the TSJ accepted an appeal for annulment only to later declare it inadmissible and fine the plaintiffs. The Tribunal called the rules “non-existent”, despite it being a topic of discussion in the Chavista Assembly, and the protests a result of media manipulation.   

Emigration could serve as a valve to relieve collective pressure, but with the social knowledge accumulated and the tighter international restrictions, it won’t be as effective as it was in 2017 and 2018. Remittances are still too low to carry the weight of a national economy; Venezuela is not Lebanon.

Risky nostalgia

While Madurismo has been taking apart the old chavista propaganda, including the dreadful gaze of Chávez from apartment buildings and government offices, Hugo Chávez himself remains surprisingly popular among the citizenship. According to a recent survey by pollster More Consulting, 48,4% of Venezuelans would vote for Chávez if he was still alive (against a 48,2% that wouldn’t (Talk about post-mortem polarization!). It is as if people separated Chávez from Chavismo. 

We always wondered what Chavismo without Chávez would be like, but we never thought that Chávez without Chavismo could be a thing. It remains to be seen how far can Maduro navigate with this rebranding of the revolution, and how they can keep its “endogenous Chavismo” from sabotaging the novel relative stability: not so much regarding their relationship with the international community, which they have handled cunningly in the past year by clearly separating business from politics, but regarding the internal pressure that may push the government to take on a possible crisis by responding with open repression scenarios like those of 2014 and 2017.

The government’s problems, once again, have an economic origin. This may be the biggest test for Madurismo to date. The Pax Bodegónica, and the seemingly omnipotent hegemony that its stability has assured the government, hang by a thread. If it ends, Maduro loses the narrative game that has played so well in his favor, and whatever progress his government has made (for their own purposes) will crumble and land it back in 2018. The question is whether Madurismo will do what it takes to keep the fantasy alive, or will it regress and give in to its primal instincts.