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Venezuela: call for a coalition government

As Covid-19 threatens the country with catastrophe, political differences must be set aside and the US administration must suspend sanctions



LAB received this article from Venezuelan National Science Prize winner Victor Álvarez. We publish it here because of its appeal to both sides of the country’s political divide to set aside their differences in the national interest, and to prevent a health catastrophe. The appeal includes a clear demand that the US Government suspend economic sanctions and stop blocking the funds Venezuela so desperately needs to deal with the coronavirus threat.

Translated for LAB by Chris Whitehouse.

To deal with the threat of coronavirus it is essential to lift sanctions and establish a coalition government.

Coronavirus has reached Venezuela at a time when the country is extremely vulnerable. The country’s health system is in a bad way and a high percentage of the population relies on the public health system. Venezuela needs technical and financial support to prop up the precarious hospital network and compensate for the collapse of public services, including water supply, essential if people are going to be able to wash their hands regularly and avoid infection and spreading the virus. 

Without financial and technical assistance to complement local capacities and resources, the emergency could become catastrophic.

Venezuela cannot overcome the economic and social crisis, now amplified by the arrival of COVID-19, without broad agreement between the political elites that are disputing power. Divided international opinion about the government’s legitimacy is hindering attempts to negotiate the financial and technical assistance that the country so urgently needs.

We have already seen how political confrontation has undermined attempts to obtain funds from the International Monetary Fund. Maduro and Guaidó could work together on formulating an urgent request to multilateral agencies to grant and coordinate financial and humanitarian assistance, but they are still immersed in a sterile confrontation in which each seeks the unconditional and humiliating surrender of the other.

Now is not the time for grandstanding or trying to exploit the situation for political advantage. Neither is it the time to blame each other for the consequences of a massive and rapid spread of coronavirus. The disease makes no distinction between government supporters and the opposition.

We need everybody to put a stop to fratricidal political confrontation and work together to deal with this threat. Lives are at stake.

Coronavirus poses a dual challenge to the political elites in dispute, one specific and partial and the other more general and comprehensive. If the objective is to avert the threat posed by the pandemic, the challenge is to get Maduro and Guaidó to agree to the international (by the UN, UNDP, WHO, PAHO, CRI) administration of funding obtained and allocated to deal with the pandemic. This would be a specific political agreement to avoid the massive and rapid spread of the disease. 

The more general and comprehensive challenge requires the political forces in dispute to adopt a longer term vision. This goes further than the urgent need to reinforce the country’s capacities and resources to bring the pandemic under control. This broader challenge demands statesmanship, something in short supply among the political elites, and willingness to prioritise the country over individual political projects and personal ambitions that focus on a winner-takes-all scenario.

Sanctions make it impossible to deal with coronavirus without neglecting the economy.

Coronavirus has reached a country with its economy in ruins and a health system in a state of collapse. Social quarantine to reduce the spread of COVID-19 is affecting production and commerce and could aggravate the chronic shortages already suffered by families, companies and institutions. Venezuela is trapped in a vicious circle: don’t go to work if you want to survive, but if you want to survive you must work and produce.

The country’s private sector is appealing for help. Small and medium-sized companies are at a standstill, with no production, no sales and no way of issuing invoices. They are beginning to suffer cash flow problems that make it difficult to pay their employees. A spokesman for the country’s employer organisations (Fedecámaras, Conindustria, Consecomercio and Fedeindustria) has suggested postponing and reducing payment of income tax (ISLR), VAT and other taxes. These organisations are also requesting financial support, including for the payment of wages, for companies that that have had to suspend their activities.

But the government thinks otherwise. It wants companies to pay ISLR by 31 March so it has the resources it needs to deal with the coronavirus threat. The prolonged economic contraction has broken Venezuela’s public finances and thousands of companies have reached the end of the financial year with losses and are unable to pay their taxes in full. Hyperinflation has led to increased informalisation of purchases/sales and the avoidance of issuing invoices in order to avoid paying VAT. Customs exemptions have also reduced revenues. The National Treasury is empty and has no resources to compensate for deferment of the ISLR or reductions in VAT. It can only ask the country’s central bank to print money but this would merely boost hyperinflation. 

In this context of financial restrictions, in which the state does not have the money it needs to cover its needs, the government faces the dilemma of using its scarce resources to control the pandemic while also taking measures to compensate companies for the financial impact of quarantine . The government needs revenue to pay workers who are staying at home, especially those who work in the informal sector and who are not on anybody’s payroll and use what they earn day-to-day to put food on the table. But defeating COVID19 requires a critical mass of funds that, in the short term, must be used to prioritise preventive measures and avoid the massive and rapid spread of the infection that the country’s precarious hospital system is not in a position to cope with.

This is a public health crisis, not an economic crisis

It is necessary to understand that this is a public health crisis rather than an economic crisis. The fiscal sacrifice is taking resources away from the struggle against coronavirus but this will be of absolutely no use if we do not manage to control the pandemic. The key is to have clear priorities and concentrate efforts on what is causing the problem rather than take resources away from alleviating some consequences that will continue to manifest themselves if we do not first control the spread of the disease.

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The tightening of financial and trade sanctions by the United States government makes it very difficult to address both the coronavirus crisis and the economic crisis. The small margin of manoeuvre remaining to the government’s economic policies is restricted to monetary and financial measures. It can only reduce the resources that are left to the government to deal with the economy are restricted to monetary and financial measures. It can only reduce reserve requirements on banks in order to increase liquidity and the availability of credit that will provide some financial oxygen to companies.

Lift sanctions to release resources that can be used to deal with coronavirus without neglecting the economy

Donald Trump claims Nicolás Maduro’s government is responsible for the  Venezuelan crisis and has put a $15 million bounty on his head. He is promoting humanitarian aid but, at the same time, tightening sanctions on a country that has an exhausted economy and a people who are fleeing in their millions from hunger, disease and insecurity.

Economic sanctions are based on the false assumption that aggravating the precarious living conditions of people will increase social pressure that will reach a breaking point and bring down the government. With this obstinate conviction, the appearance of COVID-19 is seen as an opportunity for economic sanctions to finally put paid to Maduro’s regime.

A country in the condition that Venezuela is in should be getting international aid rather than trade and financial sanctions.

Rather than punishing the government, sanctions have a negative impact on the economy and harm the public. And in the middle of the COVID-19 pandemic, they are a threat to the survival of everyone who becomes infected.

Sanctions are clearly not the reason for the contraction of the Venezuelan economy, but they have accelerated and aggravated the collapse of oil production and the productive apparatus in general. In 2019 alone, a year in which the United States tightened sanctions by extending them to private national companies and foreign providers and contractors of the government, Venezuela lost 35 per cent of its GDP. 

The United States punished Rosneft Trading for dealing in Venezuelan oil and pressured companies in India, China and Spain to stop buying crude from the Venezuelan state-owned oil company, the PDVSA, threatening to freeze their accounts and assets in the United States. The number of companies willing to take the risk is falling and those that continue to do so demand scandalous discounts that further reduce Venezuela’s income. Economic sanctions considerably reduce capacity to buy food and medicines. Because of the risk to their reputation and fear of sanctions, traditional providers are wary about doing business with Venezuela and this aggravates supply problems.

The United States should suspend economic sanctions and stop blocking Venezuelan attempts to obtain funds that would allow it to address the coronavirus threat.

Ethically and morally, it is detestable to take advantage of the pandemic’s advance to aggravate the suffering of a country hammered by hunger and disease.

It is just as appalling as the human rights violations that Nicolás Maduro’s government is accused of.

From electoral obsession to coalition government

Due to the growing quarrels and divisions within the opposition, the government feels sure it can win the parliamentary elections and recover control of the National Assembly. The same applies to the electoral opposition that currently has no parliamentary representation. It is ready to participate because it feels sure it can attract the votes of the high percentage of the electorate that is increasingly dissatisfied with the government’s abysmal performance. They therefore want the parliamentary elections to take place this year.

But if the virus has not been brought under control and is able to spread on a massive and rapid scale during election campaigning, a humanitarian emergency of catastrophic proportions will only be avoided if the political forces abandon their obsession with elections, where each side is convinced that will be victorious.

The challenge facing the political elites requires them to consider the convenience of postponing the elections and forming a coalition government in the national interest. This would mean going beyond joint action to deal with the coronavirus threat. 

Once the health emergency has been overcome, the coalition government’s mandate must be broadened to include finding a solution to the structural crisis that plagues the country so that it not only defeats the COVID19 threat but also implements an economic reform programme, restores the country’s institutions, dismantle the colectivos and convenes general elections, in such a way that whoever wins takes over an economy that is in shape and a reinstitutionalized and peaceful country that is governable. 

This is a challenge that goes beyond a temporary agreement between Maduro and Guaidó solely aimed at dealing with the coronavirus threat. To form a coalition government requires our politicians to rise to the occasion and meet the challenge to set aside their mutual hostility and one-upmanship in favour of  reaching the vital agreements that the country needs to deal with a structural crisis that is tearing the country apart and leaving it without the capacity to respond to such a dangerous threat as the COVID19 pandemic.

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