Venezuela's Electoral Conundrum
by Francisco Rodríguez, Chief Economist at Torino Capital LLC
Most parties in Venezuela’s main opposition coalition, the Democratic Unity Roundtable (MUD), have decided to sit out the country’s May elections, according to public statements issued by some of the parties as well as the announcement made by MUD spokesperson Angel Oropeza on February 21, in which he said that they could not participate in a “fraudulent, illegitimate” presidential election unless electoral conditions change. 
Although Oropeza said that all parties that are part of the MUD signed the statement, more moderate sectors of the opposition appear likely to participate. At the present moment, the most probable scenario appears to be one in which President Nicolás Maduro will face an independent candidate supported by some minority parties, with the MUD calling on its supporters to abstain in the elections.
In this scenario, President Maduro will be facing an opposition field that will be split between abstentionists and those favoring participation. This is certainly one of the most favorable settings that the government could have hoped for and raises the possibility that Maduro could be re-elected for a second six-year term without overtly manipulating the vote count. On the other hand, we argue that given the results of recent opinion polls, there is also a significant probability that Maduro could lose the election on these terms.
In this discussion, we begin by exploring the rationale for the decisions taken by key actors and then go on to map the potential scenarios that could arise from the electoral results.
The government’s strategy: divide and conquer
We consider the government’s incentives by assuming that its primary objective is to remain in power. While to a certain extent this is true of all political movements, in the Venezuelan case these incentives are exacerbated by the very high exit costs that government leaders appear to have. The fact that it is hard to visualize a transfer of power in which many government leaders do not end up facing prosecution suggests that the government will be willing to pay a very high cost to retain control of the presidency.
This line of reasoning immediately leads to the conclusion that the government could be willing to violate key democratic constraints. This could include rigging the election or suspending it altogether. However, these extreme alternatives are costly, especially in terms of the effects on national and international legitimacy. Therefore, the government’s first alternative would be to win an election in which the opposition participates, and whose results the opposition accepts.
The possibility of the government prevailing in an election that is not rigged does not sound so farfetched today as it may have seemed a year ago. The political developments of 2017, and in particular the ability of the government to prevail in the October gubernatorial elections, dramatically altered the view that many analysts and political actors had about its electoral competitiveness. On October 15, pro-government candidates took 17 of the country’s 23 governorships and 52.6% of the popular vote. While the vote tally appears to have been altered in an 18th race—that for the Bolívar governorship—it does not change the fact that government candidates took the bulk of votes cast nationwide.
Much theorizing and empirical investigation have been carried out since to account for what was a surprising result, in light both of opinion surveys and the magnitude of the country’s economic crisis. The strongest competing hypotheses that have emerged are that the results can be explained by (i) high abstention from potential opposition voters (ii) high capacity of mobilization among pro-government supporters.
In this sense, it is clear that the government’s optimal strategy is to try to promote an electoral event in which it continues to mobilize its voters—for example by the deployment of selective incentives such as cash transfers—while fostering opposition abstention. Opposition abstention is, of course, a complex phenomenon, but a key contributing element is distrust of the electoral system. Thus, to the extent that the government can foster the impression that the system is rigged, then opposition turnout will be less and then—somewhat ironically—the government will have less need to rig it.
For these reasons, it made sense from the government’s standpoint to offer an agreement in the Dominican Republic negotiations in which it made some concessions to the opposition, but still kept control over key symbolically important aspects of the electoral process. For example, it is saying that the government’s final offer in these talks would have kept Tibisay Lucena—a staunch government loyalist—as the President of the Electoral Council (CNE). Regardless of the relevance of the CNE Presidency for the determination of the electoral results, the government was aware that many opposition voters would remain skeptical that the election could be clean as long as Lucena heads the CNE.
Faced with the refusal by the MUD delegation to sign the Dominican Republic accords, the government nevertheless decided to call the election, rather than give in to the opposition’s demand for improved conditions, including a delay of the election date. Partly, the government’s calculation must have relied on the hope that some opposition groups would participate. This split would generate the most advantageous political field—an opposition split between abstentionists and advocates of participation—and would give the government the legitimacy of winning a contested election.
On the other hand, it is worth recalling that chavismo has been strengthened by electoral boycotts in the past. A prominent example is the 2005 legislative elections, which was boycotted by the opposition and led the government to capture the entire National Assembly. Certainly, the international context was somewhat different, and the government’s legitimacy was much less in question at the time. However, memory of that experience continues to be an important driver of the government’s approach to electoral competition.
The MUD: between credible and incredible threats
Over the past year, the MUD has put forward an international communications strategy that has been extremely successful in isolating Venezuela’s government and characterizing it as a dictatorial regime. Perhaps the most recent example of the success of that strategy has been in the decision by Peru to revoke the invitation it had previously extended to Maduro to attend the Summit of the Americas on April 13 and 14.
As time went by, it became clear that the opposition needed to develop a strategy to confront the 2018 presidential elections. As we pointed out above, the electoral events of 2017 showed that an opposition victory in a presidential election was not necessarily a given. This forced a change of tactic from the MUD leadership. While it had spent much of 2016 and 2017 calling for early elections, in 2018 it shifted the focus to the conditions under which these elections would be held, and in arguing that it would only participate in free and fair elections.
There are, of course, many ways in which an election could fail to be free or fair. The most blatant one is actual rigging of the vote count. The CNE’s avowal of apparently distorted vote tallies in the October 15 Bolívar gubernatorial elections and in the July 30 Constitutional Convention elections suggests that there are good reasons to fear that the actual election result could be subject to a similar distortion.
But it is not clear why this would be a reason for the MUD not to participate in these elections. The Bolívar results, in fact, showed that, while it is possible for the CNE to distort the vote tally, it is very easy to detect that vote alteration, as it produces inconsistencies between the final vote count and the polling station records kept by opposition witnesses. If the MUD candidate were to in fact obtain more votes than Maduro in the presidential election but the CNE were to alter that vote count, the opposition could use that event to further delegitimize the government and rally national and international support in its favor. There are in fact many examples in which authoritarian governments have been forced to give up power after losing an election which they tried to rig.
The MUD’s fears rather appear to have more to do with the other elements of the electoral system which it considers unfair and which could lead it to obtain fewer votes than the government. Had the MUD signed the Dominican Republic agreement, it could have ended up committing to recognizing the results of an election played on an unlevel playing field. Two examples of these governmental advantages are the imposition of severe restrictions on Venezuelans’ right to vote outside of the country, and the use by the government of selective incentives to reward voters, including the giving of cash and in-kind payments on election day.
It is still the case that the opposition could have opted to not sign the Dominican Republic agreement and nevertheless decided to participate in the elections. This would have required a communications strategy that characterized the elections as unfair but painted electoral participation as another act of resistance against the government.
One way to understand the MUD’s decision is as a result of extreme risk aversion. MUD leaders believe that the Maduro government is already seen internationally as illegitimate and dictatorial. There is thus little to gain even from winning the election—on the assumption that the government would rig the vote count anyway. But there is a lot to lose from participating in the election and losing it, to the extent that some actors perceive participation as an acceptance of the rules of the game.
But how does the election boycott lead to regime change? The assumption must be that advancing on a strategy of regime delegitimization would inevitably lead to external pressure on the government to increase. A ratcheting up of sanctions on the government and its officials would generate a deterioration of economic conditions such that it would ultimately lead the government coalition to crumble. Seeing the situation as unsustainable, and with the economy starved of resources, the military would ultimately turn on Maduro and produce regime change in order to regain governability. Some actors in the opposition may also believe that this dénouement would involve some more explicit international action to drive Maduro from power.
Third party actors: little to lose and a lot to gain
One of the key problems with the MUD’s strategy of boycotting the elections is that it generates a significant incentive for third-party actors to defect from it and choose to participate in the elections. Top MUD leaders may believe that they have too much to lose from failing to win an election, but this may be less of a problem for third-party leaders who do not play a dominant role in the MUD and which would be unlikely to be picked to head a MUD government in case the Maduro government collapsed.
A key figure in this map is Henri Falcón, the former governor of Lara, who has spent the last ten years courting middle-of-the-road voters that feel disenchanted with chavismo but who do not feel represented by the opposition either. Falcón has been openly critical of some of the most extreme tactics of the opposition and the United States: his party has openly condemned U.S. sanctions and voted against the National Assembly’s attempt in January of 2017 to declare that Maduro had left the position of the presidency vacant.
Since Falcón’s primary support lies among non-MUD voters, he has a lot less to lose from alienating opposition hardliners—many of whom would not vote for him if they were able to choose another opposition figure. On the other hand, current opinion polls show him beating Maduro in a two-way contest, even allowing for high opposition abstention (Chart 2).
For example, a Datanálisis tracking poll carried out between February 8 and 16 put Falcón ahead with 32.6% of the vote compared to Maduro’s 28.4%. The remainder of voters claimed they would vote for neither of these candidates (26.3%) or did not answer the question (12.8%). If we take the total of valid responses as the denominator, these totals indicate that Falcón would win the election with 53.4% of the vote compared to Maduro’s 46.6%—a 6.9-point lead. The poll was based on 800 interviews and has a margin of error of ±3.4%.
Interestingly, the poll shows that uncommitted voters are mainly neutral or opposition voters. Only 10.1% of chavistas remain uncommitted, while 37.0% of opposition voters and 55.8% of neutral voters remain uncommitted. Among those who are committed, Falcón captures 68.3% of neutral voters and 93.0% of opposition voters. This implies that Falcón would have significant potential to increase his advantage if he were able to cut into opposition and neutral voter abstention. Thus, while it appears that a 6.9-point lead may be too small to claim victory in an unlevel playing field, there is definitely potential for that advantage to grow over time if there is an effective strategy to convince opposition and neutral voters.
Falcón is not the only independent opposition candidate. Claudio Fermín, a former mayor of Caracas and Acción Democrática presidential candidate in 1992, has also announced his intention to run for the presidency, while Javier Bertucci, an evangelical pastor, launched his bid on February 18. However, polls point to Falcón as the front-runner in this field. In the Datanálisis poll, Falcón was the top choice of voters with 16.8% of respondents, compared to Fermín’s 4.6%.
Scenario I: Deepening authoritarianism
Against this backdrop, it is possible to imagine two broad scenarios developing. In the first, Maduro is re-elected for another six-year period. This is because either Falcón and other third-party candidates decline to run or they prove unable to prevail against the government’s superior electoral machinery. For the purposes of this scenario, whether Maduro actually “wins” in terms of getting the majority of votes cast in his favor—or instead loses but is able to rig the vote count in his favor—may be of little relevance. The election is unlikely to be recognized by most of the international community as valid, and thus the consequences are likely to be the same as if no election had been held.
We expect the United States to react to this development by tightening economic sanctions, including the adoption of a prohibition on exporting oil products to Venezuela as well as ultimately a ban on oil imports into the United States. It is hard not to visualize an acute further deterioration of economic conditions in Venezuela as a result of these actions, given the high integration of Venezuela’s oil industry into U.S. markets. There is also a clear risk of other countries in the region and Europe adopting financial and broader economic sanctions. We expect prospects of an orderly restructuring of the country’s external debt to dim as it becomes increasingly isolated economically.
We also expect the Venezuelan government to further consolidate its political control in society in this scenario. In all likelihood, the MUD will disavow the election results and therefore claim that Maduro is not the Constitutional President of Venezuela for the 2019-2025 period. It is likely that the National Assembly will move ahead to appoint a new government in the absence of a legitimate government, in which case the government could move ahead and accuse the legislative branch of sedition. 
Would the deterioration of economic conditions provoke the regime change scenario sought by opposition leaders? It is possible, but we remain skeptical that this is the most likely direction that events will take. There are numerous examples of authoritarian governments—Cuba, Syria, Zimbabwe to name just three—in which deteriorating economies and external sanctions have reinforced the hold of leaders in power. In non-competitive political regimes, the ability of governments to remain in power depends mainly on the relative power of the state vis-à-vis the rest of society, making it possible for the government to consolidate its power even as society becomes more impoverished.
Scenario II: Electoral upset ushers in regime change
In a second scenario, the third-party candidate consolidates his lead in the polls and manages to beat Nicolás Maduro in the elections. Taking this scenario seriously implies believing that the government will not choose to rig the vote count or to suspend the elections when its electoral defeat becomes clear. A given assumption in this scenario is that key power groups such as the military move to force Maduro to recognize his loss rather than run the greater risk of annulling the results altogether.
We envision this process as necessarily one of a negotiated transition, along with the lines of that which occurred in Chile after Augusto Pinochet lost the 1988 plebiscite or in Nicaragua when Daniel Ortega lost his 1990 re-election bid. In fact, we would distinguish between the act of winning the election—defined as receiving more votes than the incumbent—and successfully negotiating the transition.
It is worth noting that the scheduling of elections in April implies that there will be a lame-duck period of more than eight months between the election date and the date on which the new president takes office. It is possible that there could be an agreement to shorten this period, but we see this as more likely to happen in the context of broader negotiations designed to create institutions that set the ground rules for cohabitation between the incoming administration and chavismo.
This complex negotiation would have to balance the demands of key power groups in the outgoing government with the demands of the opposition as well as key international actors. Its success will hinge on the capacity of the new authorities to convince key actors that a negotiated transition is the safer path towards the consolidation of democracy, even if it requires concessions such as the design of transitional justice mechanisms.
About the Author
Francisco Rodríguez is the Chief Economist of Torino Capital LLC. Previously, he was Director and Senior Andean Economist at Bank of America Merrill Lynch New York. Rodríguez has held numerous positions in academia and public policy. He has taught economics at the University of Maryland at College Park, Wesleyan University, and the Institute for Advanced Management Studies (IESA) in Caracas. Before joining BAML, Rodríguez was the head of research at the Human Development Report Office at the UN Development Program. His research has been published in journals such as Foreign Affairs, American Economic Journal, and Journal of Economic Growth. He is the co-author of Venezuela before Chávez (Penn State University Press, 2012). He holds a PhD in economics from Harvard University.
Date: February 21, 2018
TagsBase Metals Commodities Iran precious metals Trade Euro Area Brexit Emerging Markets IMF India Consensus Forecast United States G7 Tunisia China Russia Greece Healthcare Vietnam TPP MENA France Energy Commodities OPEC Infographic Ukraine United Kingdom Cryptocurrency Italy Latin America Asia Sub-Saharan Africa Venezuela Precious Metals Commodities Investment Mexico Africa Housing Market Turkey Bitcoin Gold Forex South Africa UK Inflation Australia Company News Oil Canada oil prices Major Economies European Union Nordic Economies Banking Sector USA Argentina Colombia Eastern Europe Brazil Spain Unemployment rate Commodities Exchange Rate Economic Growth (GDP) Agricultural Commodities Germany Japan Portugal
Despite a recent rally, Brent oil prices are projected to decline further down the road due to the planned increase… https://t.co/u22cTfCUwh
10 hours ago
Elevated geopolitical risks, healthy purchases of jewelry and robust industrial demand are expected to lead preciou… https://t.co/aSHycC1OSf
16 hours ago
Global commodity prices declined for the first time in three months in June. Get the latest price forecasts for key… https://t.co/WbYnOXSmWQ
22 hours ago
Several of the Central America's big hitters lost steam in Q1. Get the latest 2018 and 2019 growth forecasts for th… https://t.co/i5ux5mGSwf
1 day ago
Economic data in Brazil has taken a turn for the worse following a nationwide truckers' strike in May and early Jun… https://t.co/aUfWbIxWob
1 day ago
- How can Latin America’s business environment benefit from technological change?
- Mexico: A look at the past, present and future as elections loom
- Italy’s New Populist Government and the Eurozone: Prelude to a Crisis?
- Latin America moves toward increased integration as U.S. protectionism grows
- How can Latin America increase productivity without affecting the quality of employment?
- How will Saudi Arabia's economy benefit from lifting the women's driving ban?
- Which countries are the most prepared for the upcoming digital revolution?
- India Under Pressure from the U.S. on Trade Policy
- The Story of Steel
- Latin America is the World Leader in eCommerce Growth Despite Serious Challenges
- What the TPP means for trade in Latin America
- Elections in Russia: Analysis and Implications
- 2018 & 2019 Economic Outlook for the Top Oil Producing Countries
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- The Poorest Countries in the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Gold: The Most Precious of Metals (Part 3)
- Venezuela's Electoral Conundrum
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- China’s growing influence on the Latin American economy
- Top Economics & Finance Blogs of 2018
- How Latin America emerged from recession in 2017
- Is this the beginning of the end for Bitcoin?
- Risks and Opportunities for 2018 - Daniel Lacalle
- Emerging Markets 2018 Economic Outlook
- The role of FDI in Vietnam’s socio-economic development
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- What will be the most miserable economies in 2018?
- The World's Top 10 Largest Economies
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- 4 Key European Elections That Will Impact the Economy in 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit