Civil unrest is likely to continue for the rest of H2 2024 or until a transitional government is formed, with further US sanctions expected if Maduro does not allow a transfer of power
After the controversial proclamation by the National Electoral Council (CNE) of Nicolas Maduro as the president of Venezuela, in a dubious electoral result, mass protests have erupted across the country. The opposition, rejecting the election outcome, is demanding transparency and the public release of the results. Over a week of protests has passed, and the situation is escalating into recurring social unrest in Venezuela. Meanwhile, electoral authorities have not published the tally sheets that validate Maduro’s victory.
Multinationals operating in Venezuela should expect a period of civil unrest due to political agitation, likely lasting until the end of H2 2024 and partially restricting economic activity. The medium-term economic outlook will depend on how the political unrest is resolved.
Scenarios and their business implications:
- Base-case Scenario (60%): Our base-case scenario assumes that Maduro will remain in power through fraudulent means and repression, resulting in significant social and economic consequences. If no transition agreement is reached, the US is expected to reimpose sanctions, severely limiting Venezuela’s oil production, and causing it to fall below 800,000 barrels per day. This will likely trigger mass migration from the regime, impacting South and Central America as well as the US. These conditions, combined with a lack of legitimacy and social instability, could cause Venezuela to reverse its current growth trend and return to negative territory, similar to the periods observed in 2014 and 2017. However, the decline is not expected to be as pronounced as it was over the past decade. It is also likely that the government will try to impose restrictions on social media usage.
- Upside scenario (30%): Due to popular support and the backing of the military, opposition candidate Edmundo Gonzalez is formally recognized as the elected president, initiating a transition period. In the short term, we expect the full lifting of sanctions on Venezuela, allowing for the recovery of oil infrastructure and the return of several private national investors from exile. This scenario includes the privatization of several public assets, including PDVSA’s oil fields. The newly elected government’s priorities will focus on stabilizing prices through monetary contraction, reducing the size of the state, and closing several entities created under Chavismo’s reign. In the medium term, as institutional reforms take place, we anticipate the return of several million Venezuelan exiles, boosting GDP growth. It is reasonable to expect that, at least in the short term, Venezuela will continue its forecasted growth trend of above 2.5–3.0%. However, comprehensive institutional reforms are needed for a full economic recovery to occur.
- Downside Scenario (10%): The opposition’s inability to remove Maduro, coupled with increasing dissatisfaction with Chavismo among the civilian population and the military, could lead to a civil war or a state of ongoing conflict. This situation would likely result in millions of displaced people and plunge Venezuela into a profound recession. Purchasing power, even among the middle- and high-income populations, could be severely diminished, while business operations could be significantly impacted or limited to the black market. This scenario would severely hinder any potential economic recovery and exacerbate the country’s current crises.
Political outlook in the election’s aftermath
According to Venezuelan law, polling station tally sheets must be published to confirm the presidential winner. However, the CNE has not published these tally sheets, raising concerns about the legality of Maduro’s appointment as president. The opposition claims it has accessed 80% of the tally sheets, which it asserts prove Gonzalez’s victory.
Opposition leader Maria Corina Machado stated that these tally sheets were obtained through opposition electoral witnesses, army personnel, and even Chavista electoral witnesses, and have been made available for public consultation on a website. Chavismo has alleged that the tally sheets published by the opposition are fake. However, experts consider this highly unlikely, as falsifying tally sheets would require cloning their individual serial number, hash code, QR code, and the signatures of electoral witnesses.
Over 75 protests sparked by fraud allegations have been met with violence across the country. In the past week, at least 23 people have been killed by security forces or Chavista paramilitary groups. Approximately 2,000 civilians, among them opposition members and electoral witnesses, have been detained. On national television, Maduro announced that detainees would be sent to labor camps for “re-education.”
To prevent the dissemination of information related to protests, Maduro has urged the nation to abandon Instagram, TikTok, and WhatsApp, where most videos of the ongoing events are being shared.
On the international front, an emergency meeting of the Organization of American States (OAS) was called, but it failed to approve the demand for the CNE to publish the tally sheets due to negative votes or abstentions from several CAMCAR countries, as well as Colombia, Mexico, and Brazil. These three nations have since initiated talks with Maduro to engage in negotiations with the opposition. However, Maduro is advocating for new elections in December and has challenged the CNE’s decision, which declared him president, before Venezuela’s Supreme Court to facilitate these elections. It is unlikely that the opposition will accept this condition.
The US government has recognized Gonzalez as the winner of the presidential race, with Secretary of State Anthony Blinken congratulating Gonzalez and Machado during a call. Blinken affirmed the US’s intention to restore democratic norms in Venezuela, although sanctions have not been reinstated yet.
At FrontierView, our mission is to help our clients grow and win in their most important markets. We are excited to share that FiscalNote, a leading technology provider of global policy and market intelligence has acquired FrontierView. We will continue to cover issues and topics driving growth in your business, while fully leveraging FiscalNote’s portfolio within the global risk, ESG, and geopolitical advisory product suite.
Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.