WBD071 Audio Transcription
Update on the Venezuelan Political Crisis
Interview date: Wednesday 6th Feb, 2019
Note: the following is a transcription of my interview with three Venezuelan nationals discussing the political crisis in their country. I use Rev.com from translations and they remove ums, errs and half sentences. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
In this episode, I talk with Venezuelan nationals, Alejandro Machado, Giancarlo Fiorella and Mauricio Bartolomeo about the political crisis in their home country. We discuss the recent protests and Juan Guaido declaring himself as the interim president.
“Just the idea of getting paid in something you need to immediately need to get rid off is a huge problem.”
— Mauricio Bartolomeo
Peter McCormack: Hi there all of you? How are you all? And also thank you all for giving up some time to come on my podcast.
Giancarlo Fiorella: Yeah, thank you.
Alejandro Machado: Thanks, Peter.
Mauricio Bartolomeo: Thanks Peter, glad to be here.
Peter McCormack: Great. Before we start I think it will be a good idea for everyone to find out very quickly who you are, what your background is, and what your relevance is to what is happening right now in Venezuela. Alejandro you’ve been on the show before, you can kick off.
Alejandro Machado: Yes, thank you, Peter. It’s great to be here as always. My name is Alejandro Macha, I’m currently researching how people are using cryptocurrency in Venezuela, and also how people, in general, are using money they're hoping to get some good insights so that people can design products, and we can nudge the industry more in that direction to the people that need it the most. We believe that places, where there’s lack of economic freedoms, are the places where we should focus as a community. We’re trying to get real data and real insights from these people, and from these societies. Of course being from Venezuela, it’s a place where I focus and the place where that really drives me up that’s why I’m excited about. I’m doing some field research at the moment, and I’ll the stuff to share in a couple of months.
Peter McCormack: Giancarlo?
Giancarlo Fiorella: So thanks again Peter for having me on. If you told me a week ago that I was going to be on a Bitcoin podcast I would have said you are crazy because I don’t know the first thing about Bitcoin. I’ve never been interested in it, but I’m really happy to be here and talk about something I do a little bit about, which is the Venezuelan situation. As you mentioned, my name is Giancarlo Fiore, I’m a doctoral candidate at the Center for Criminology and Social Legal Studies at the University of Toronto. I’m writing a dissertation broadly on protest policing, and I’m interested in particular in the policing of protests by civilians. If you’re familiar with the situation in Venezuela, there are civilian groups that will occasionally turn up at government protests, and there is a kind of a police or a militia. There’s some discussion about our militaries, and that’s mostly the case of what I’m focusing on for my dissertation. Also, I’ve just recently started working as an investigator and trainer for Latin America at Bellingcat, which is something that I’m really excited about.
I’ve also been running a sort of a Venezuelan news website for the last five years. So every day I read the news from Venezuela, I piece together a summary of what happens in the day, I translate it into English, and I also provide context for an English speaking audience. For people who live in Canada like I do, they might not be too familiar with what’s going on, but my hope is that they go to my website and they understand a little bit more about what’s happening day to day in Venezuela.
Peter McCormack: Mauricio, with yours can you also tell the story of what happened with … was it your brother’s mining farm?
Mauricio Bartolomeo: Sure. I will tell you a little bit about that. My name is Mauricio Bartol, I’m from Venezuela and now based in Canada. I’ve been in Venezuela, my whole family was still very much in Venezuela until a couple of years ago. We started mining in Venezuela in around 2014, and we as mining started picking up popularity in Venezuela, a lot of other Venezuelans wanted to learn about it and do it because it was a great way for them to earn an income. A lot of people were very secretive around how you could set up a mining operation and basically how to purchase the equipment and install it, but we didn’t really take that route. We were pretty much an open book to anyone that came and wanted to learn how to mine. So we helped I think it’s in the neighbourhood of hundreds, or 500 people get set up one way or another.
As we became more known in the Bitcoin community around 2017 Christmas when Maduro announced the petrol, we kind of created this informational campaign to let people know what mining machines look like, what they did and that prompted some of the corrupt police to basically start raiding facilities illegally and try to extort miners. That happened to us in December 2017, we had a brigade knock down the door and start harassing my brother threatening him with jail, took his equipment, accused him of terrorism. It was a really terrible situation, so we all left … I mean my family actually ended up leaving from a point, I was already in Canada.
Along with these other two gentlemen here, we’re all from Venezuela, and we’ve witnessed the entire system fall apart. A lot of us have discovered Bitcoin through it, saw in Bitcoin a way out, or perhaps a way to alleviate some of the pain. Since then I’ve been focusing on Canada and setting up Ledn which is a Bitcoin back lender as a first product, and the idea here is to bring fair price North America standard financial services using Bitcoin as a vehicle to places like Venezuela.
Peter McCormack: Okay, great. Thank you for all coming on, I’ve had a previous show about Venezuela, which I ran with Alejandro. Obviously, there’s been quite a change in the political climate recently. Before we look into that, Alejandro could you just for anyone listening give a very short summary of what has happened over the last 20 years in Venezuela from pre-Chavez to Chavez, to Maduro so people can get an understanding of the general breakdown in society in Venezuela?
Alejandro Machado: I was nine years old when Chavez came to power, so it’s … Chavez is the only government that I’ve ever really known. Before that I wasn’t obviously paying much attention to politics, or … politics wasn’t really a key part of Venezuelan life. This is the main thing that Chavismo has done, it has polarized society in a way that you need to care about politics because everything is in danger. So Chavez came to power in 1999 first, and he came to power with a mandate to step aside from old-style politics, to end corruption, to find a third way between capitalism and socialism. That’s the way he sold himself to the electorate, and many people, especially in the left around the world, championed Chavez for a very long time even after he was displaying some clear authoritarian tendencies because the left I believe tends to be more tolerant of these tendencies. Even though there are warning signs, for example, Human Rights Watch failed to spot these warning signs in I think as late as 2006. 2007. So even human rights organisations weren’t really catching on to what was really going on.
Chavez slowly eroded the institutions of the country, so he gradually took over the National Assembly, which was parliament or congress, but then he started changing names, he started everything about the Bolivarian Revolution. He played a lot with symbols, and a lot with … he tried to decree a reality in a way, and he succeeded somewhat because he had access to the world’s … or at least the region’s most bountiful mineral wealth ever. In the history of Venezuelan, probably in the history of Latin America, there hasn’t ever been a better time for economic extractions of resources, which in the case of Venezuela is oil as when Chavez was ruling Venezuela. Much of that was squandered away, there was a lot of corruption. There was a lot of favouring government contractors, there was a lot of loyalists who were there only because they could get ahead, or they could get rich by just being close to power. So Chavez’ government was always a government that favoured loyalty over competence, and that was deadly for the oil company. That’s state-run and has been state-run since the ’70s in Venezuela.
Basically, you would … I think the best way to describe it is a kleptocracy. It’s just a very very bad way to run a government, it’s just rewarding loyalty and rewarding corruption. There were many bad incentives throughout the presidency, and then when Chavez died he appointed Maduro as his successor so people voted for him because he still had a lot of charisma and a lot of people who followed him just because of the coincidence of the oil [inaudible 00:09:46]. Then Maduro came to power, and he didn’t have the same kind of charisma, so he had to become more authoritarian, more abusive to be able to keep the population in line. There were protests from as early as one year after Maduro got elected to 2014, there were big massive protests. We saw the first real violent industries, and probably Giancarlo can expand more on this. And just started to see the ramp-up of a police state, and of a state that censors the internet, for example, a state that is way more fierce about capital controls and about controlling the money and issuing more and more money, printing more money.
This has devolved in a full pledge economic crisis that has the country in one of its worst shapes ever. Poverty is now more than 90%, which when Chavez came to power it was around 45 so it’s more than doubled. The situation is very dire because it’s now being compounded by the hyperinflation which … and the government now with the latest standoff with the international community who should be the caretaker president of Venezuela Juan Guaido. This figure came to prominence just three weeks ago, Maduro’s term ended and he is … there weren’t clear, fair and free elections last year. He just staged some fake elections like Cubas or North Koreas, the world looked and said, “You know these aren’t real elections. We won’t accept the outcome of these elections.” But Maduro thought he could get away with it so he tried to swear himself in, but then the constitution of Venezuela has some mechanisms to solve that problem.
When there’s a void in the presidency because of any reason and one of these reasons could be that the President just failed, like there failed to be elections, then the President of the National Assembly or Congress is the one who should take power temporarily for some days so that free and fair elections can be organized, and then the country can get back on its feet. This is what happened, and now we have this situation where besides of huge economic crisis, there’s also a big political crisis that sounds like most of the international community and most of the Western countries are recognising Juan Guaido as the President of Venezuela, and he has his ambassadors, he’s been trying to keep that international influence, and trying to, for example, capitalise on that, seize the assets that rightfully belong to the Republic in the United States in other places. And on the other hand, you have Maduro who has still the backing of the high command of the military, it’s not clear whether he has the backing of most of the military. It’s just a matter of coordination, right?
But Maduro is deeply unpopular in all of the Venezuelan population, more than 85% of people don’t approve of Maduro, they don’t want Maduro on power, and they believe he’s illegitimate. But here we are, there’s a standoff between the internal security forces and military who, again have been very loyal had a lot of incentives to support Maduro and his rule of corruption and the citizens who really just want to get out of this.
Peter McCormack: Mauricio, could you just give me an understanding of what it is actually like for people at the moment living in Venezuela? I think it’s almost impossible for somebody living in a country like where I am in the UK to understand what it’s like to live in the hyperinflation. We hear anecdotal stories of people running around shops repricing items, but the actual reality of living in Venezuela at the moment operating a business and trying to feed your family. Can you give me some reality behind that?
Mauricio Bartolomeo: Living in Venezuela is a very challenging feat right now, it is not what you would expect when you think of normal life in North America or European countries. Money is a big problem, I’m sure Alejandro can comment on this based on the research that he’s running. But just the sole idea of getting paid in something that you need to get rid of is a huge problem. So as a Venezuelan right now, if I get a paycheck today, what I have to do it immediately get on my phone and try to find somebody that will sell me some dollars at any price really because the price at this point is changing so quickly that you really just need to get rid of them. There’s no sense in you waiting for a better moment to buy dollars, it’s always the best moment to get dollars is when you have bolivares. So people going to this frenzy trying to get rid of the bolivares so they can acquire dollars, it’s very difficult to store these dollars.
You keep them in cash, or you basically deposit it in someone’s account that is not yours because not everybody has access to U.S dollar accounts. That seems like a normal thing here, but for a Venezuelan citizen with a conflict passport, it is impossible or very difficult to go out in any country nowadays and get a U.S dollar-denominated account. So you’re constantly trying to get rid of your bolivares, and it’s to the point now where at shops and restaurant, they will actually take you like credit cards. That is the most common way to pay right now is sending Zelle transfers and actually making credit card payments. An interesting anecdotal story that I just heard from a friend that I was recently chatting with, one common way right now to make currency arbitrage … so currency arbitrage just by the sheer fact that everyone is always buying and selling dollars, and this is a constant need. There is an opportunity for people to come in and play arbitrage and they become the market makers.
Because there is no central market, everything is a black market so there are these hubs of liquidity and people have stepped in and they are the market makers. So effectively, one way that people are basically getting an arbitrage opportunity today is they will go to a restaurant or a shop that has accumulated a significant amount of bolivares during that day, that company itself doesn’t want to deposit it in the bank because just taking it to the bank, finding another seller and then sending off those bolivares is very difficult.
There’s a lot of restrictions on the amounts of transfers, so what you do is you essentially using the square or some sort of credit card point of sale device, you will run someone’s U.S credit card, you will give them a bulk discount for taking all of your bolivares, and then that person goes and starts piecing out the bolivares in smaller amounts to other people. That’s how they make arbitrage today before it used to be more in a straight buying and selling of dollars in the black market and they would make a spread, but not it’s becoming a lot more complicated to do it. In an interesting note is that … we can get into this maybe later, but a dollar worth of Bitcoin is trading at a premium to a dollar in Venezuela. This premium has been sustained for the better half of this year, which I believe is largely a function of the government of Venezuela printing and dumping the freshly printed cash on the P2P Bitcoin market.
Peter McCormack: So Giancarlo, January 23rd a new wave of protests started, right? As I understand, there is always protests in Venezuela but this was a specific wave on a specific date for a specific reason. Can you give us a background to why these protests started, what the background was, and an update in the current political situation in Venezuela?
Giancarlo Fiorella: Sure, yeah. As you said, protests are relatively common in Venezuela and they certainly were even last year we saw a huge wave of healthcare worker protests that started spontaneously as a result of the healthcare crisis, and they were pretty sustained. You know, we’re talking about weeks and weeks of protests at hospitals from nurses, and doctors, and et cetera. But as you mentioned, this is a different sort of events because what happened on the 23rd was as you said a planned protest. January 23rd is important in Venezuelan history because it’s the anniversary of when we kicked out one of our previous dictators through protests, so it’s an important day in the imagination of the Venezuelan state, I guess and the Venezuelan people. It’s a day when we some generations ago decoded we’ve had enough of the dictatorship, let’s get them out. As Alejandro mentioned earlier, Juan Guaido is the President of the National Assembly. He became President of the National Assembly in early January, every year there’s a new legislative term, and there’s a whole new legislative assembly that is elected with a new President and executive committee et cetera.
So this year it just happened to have been Juan Guaido, right when he’s sworn in as the President of the National Assembly in early January, there’s a lot of rumours and expectations that they’re going to make a big move because as Alejandro mentioned, the presidential election from last year was not free, fair, and it was essentially rigged. So Maduro basically stole the election, he banned major opposition parties from running, he banned individuals from running against him. So it was a completely a sham of an election. So Maduro wins an election, and then he’s supposedly sworn in January. So early January, lots of expectation because one of the things that the National Assembly can do is, as Alejandro mentioned, declare the presidency vacant. So say, “For a list of reasons, we actually don’t have a President so in that case according to Article 233 of the constitution, the National Assembly President becomes interim President supposedly for a period of 30 days until we have elections to elect a new permanent President.”
So all of these things are happening in early January; Maduro is supposed to be sworn in, Juan Guaido is coming in as President of the National Assembly, and there are lots of expectations, lots of rumours that this is going to happen in early January, and it doesn’t. I remember back then there was some disappointment I heard just from following the news, and from hearing what people are saying in talk shows and whatnot that Guaido` missed his chance, and he should have done it. Why hasn’t he declared the Presidency vacant? Why hasn’t he taken on the responsibilities given to him in Article 233? So on the 23rd is when that happened. I personally wasn’t expecting it, I was watching the protests on a live stream, and I wasn’t expecting Guaido` to do that. I don’t know if many people were, but it was a really shocking moment. He was speaking at a rally in Caracas, there were tons of people out on the street. It was the biggest demonstrations in 2017 … yeah, 2017, and he swore the oath. The invoked that Article 233, he said, “I’m becoming the interim President.”
And just completely flipped over the political dynamic in Venezuela because now we have two Presidents which is something that usually doesn’t end well for a country, it could lead to much worse things, right? Like a complete fracturing of the state. So the situation right now is that I think we’re seeing that fracture develop. One of the things that the opposition has done in conjunction with Guaido` becoming interim President is that it’s passed an amnesty bill, and this bill is supposed to cover any government officials including soldiers who have committed crimes in the past if they help … I believe the word is if they collaborate with restoring democratic order in Venezuela, they could receive amnesty afterwards. This is a big push that the opposition is making here because they’re trying to basically convince the army, and civil servants in general, entire institutions, ministries to just abandon Maduro. So that’s an initiative that’s also taking place right now, and what we’re seeing right now is an attempt, a really open attempt to really fracture the state, to say, “Abandon Maduro, he’s not the legitimate President. He’s a dictator. Come join the democratic forces, the people who really have the legitimacy to run.”
We’re also seeing that play out. We haven’t seen it play out in the army, we can talk about that later if you’d like. The army so far there’s been individual defections. Most recently a member of the Air Force high command defected, I believe he’s the highest ranking of the army to abandon Maduro. But what I was talking about the fracturing of the state, we’re seeing that also in international diplomacy which is really interesting. So Guaido` has been appointing ambassadors to countries that already have ambassadors that were appointed by Maduro. So places like the United States, Colombia, a lot of Latin American countries. So then really quickly this becomes really confusing because now you have two Presidents, now you have two different sets of diplomats. If you can imagine your England, or your Germany, or Spain, or the United States, who do you talk to? That’s affecting financing of course, and so the situation today is complicated, to say the least.
Peter McCormack: One more thing in that Giancarlo, could you help us understand a little bit about the relationship between the army and Maduro? Because I’ve read conflicting reports that he has the support of the army, but I’ve also read that he is essentially a stooge of the army, and the army itself is a criminal organisation involved in drug trafficking, smuggling of gasoline out of the country. Is there a clear direction of what the relationship is? And could you also explain what are the risks of defection? Because I guess you can’t defect from within, you’ve got to almost sneak away, right?
Giancarlo Fiorella: The relationship between the military and Maduro is a really interesting one. A couple of years ago, Maduro created a company called Caminpeg, and it’s a company that is run by the ministry of defence so the head of this organisation is the minister of defence and he appoints the executive board. This company was given complete control over anything to do with resource, exploration, or exploitation in Venezuela. So anything to do with oil, minerals, et cetera. When this company was created, a lot of commentators said, “Okay, this is it. This is Maduro handing over the wealth of the country.” And Venezuela is overwhelmingly almost entirely run on resources. So they said, “Well, this is Maduro handing the military complete control of probably buying them off essentially. That’s where I think a lot of people say, “Is Maduro really in charge, or is the military keeping him in place because they are the ones who are actually calling the shots?” So it is true that all of the money that comes into Venezuela really goes to this company which is run by the military, so they have a really vested interest in maintaining the status quo.
Alejandro also mentioned that when we say in the military, the army is a big institution. I think it’s important to stress that we’re really talking I think about the high command, the upper levels of the military are the ones that are I think squarely on the side of Maduro because they’re benefiting significantly and personally from these corruption schemes that have been in place for a while. That is as opposed to an ordinary normal kind of soldier who’s not getting paid on time, who whatever little he is getting paid is getting melted with the inflation, et cetera. Right? To talk about corruption and the drug cartel, there is this … it’s sort of an open secret I think. I mean I think most people have heard this name, but it’s not something that’s been necessarily widely reported. There have been rumours for a while that there is a drug cartel operating inside the higher levels of the military, it’s called the Cartel de los Soles. As far as I can tell, this organisation actually predates Chavez. It’s been around from the sources that I’ve seen since at least the early ’90s, but it’s kind of an open secret.
Everybody will tell you like, “yeah, of course, the Cartel de los Soles is real.” But nobody can … as far as I can tell, it’s really hard to pin down like, “What does it actually look like? Who runs it? What are the different branches of it?” Right? So in that sense, I’m not sure that it’s … this is my speculation, I don’t know that it is a cartel like we might think of like the Medellin cartel, Pablo Escobar, right? It might just be a loose association of people who have similar interests in becoming rich, and they all happen to be in the army. It’s also the case that there’s tons of smuggling as you said particularly in the border region, so any area bordering Colombia for example. There’s gasoline smuggling out of Venezuela into Colombia and the smuggling of supplies from Colombia to Venezuela. The military in those areas has a direct stake in that. So again just to maybe summarise it, it’s a complicated situation. It’s a complicated relationship that Maduro has with the army, it’s something that I’ve been thinking about recently. I think definitely Maduro is in power really because the army is refusing to switch sides at least at the higher levels.
So in a sense, they’re the ones who are really perpetuating the situation because they’re refusing to switch sides. In terms of the risks for defection, well last year there were dozens and dozens of soldiers, officers who were arrested for supposedly conspiring to overthrow Maduro, right? So the risks are potential … I mean they’re clear, it is a fact that the army is intimidating into following, into keeping in line or else. It’s something that I think of as a role in maintaining Maduro in power.
Peter McCormack: Alejandro?
Alejandro Machado: Yeah, I was going to say the else might mean torture. It’s not just like a … if you get in trouble working for a Western government and you’re military, even if you’re charged for treason, or with the most delicate, or most serious crimes that you can get charged within the Western country, you will not get tortured most likely, right? And in Venezuela this is routine, it happens all the time. People are very afraid of that, and also they intimidate you or they intimidate military officers with their families. They might tell them, “We’re going to do something to your family, you’re going to regret this.” And it’s something that goes way beyond what a normal Western government could do.
Peter McCormack: Mauricio?
Mauricio Bartolomeo: No. I was just going to add that this government no fan or not a friend of anyone that questions them in any way. There was an episode last year where there was an uprising led by this gentleman called Oscar Perez, and they were actively surrendering … Literally, he put this whole thing on Instagram, they were actively surrendering because they were being outnumbered and shot at by the Venezuelan military and they just assassinated them. It’s on record, they just went on and shot them, guys, that were openly trying to surrender. There have been episodes where a political enemy committed alleged suicide by the first day he was taken up for questioning jumping out of a 10 story balcony, which nobody believes. So yeah, it is very real, it is very patrolled as a terrorist state personally because they have this new body that they’ve created called the FAES, which is essentially this new security body that has an open license to go and shoot first and ask questions later. And these are-
Giancarlo Fiorella: They’re a death squad.
Mauricio Bartolomeo: Yeah, they’re a death squad. They’re actually routinely … and Giancarlo and Alejandro probably speak more to this, but they are routinely sent to the places where the protest happens the day after. So they basically tally up with anyone that was out there, so people are constantly under the threat of becoming victims of all these horrible acts just by not supporting the government, or openly opposing it.
Peter McCormack: Alejandro, there’s a lot of reporting about what’s happening in Venezuela at the moment, and depending on where you read you can get a different picture. There’s almost claims that this is an American coup. What are the truths and the myths that you’re seeing in the reporting right now?
Alejandro Machado: I think the biggest blunder that I’ve seen, or the most common blunder is that the media is covering the crisis and is talking about Juan Guaido as self-appointed or self-sworn in, which is not the case. I think a journalist should do a better job at researching how the Venezuelan constitution works, and what the mechanisms are in case of when there weren’t really free elections when the National Assembly which is the last standing democratic institution in Venezuela which was elected. At the end of 2015 the opposition absolutely crashed the government in that election, and the government made really sure that they would never hold free or free-ish elections again. Even with all of the intimidation that the government routinely deploys, even before 2015 and all of the true voters, that they create this fear that, “Oh, we’re going to know who you voted for.” And it’s like in the system technically this is not possible, but people believe because this is an electronic system so people don’t really know how it works. There is not a lot of really good technical literacy in Venezuela.
I mean sure, experts can say, “This system is very good. It is tamper-proof and so on.” This is what we had until 2015, but people don’t know that so they are very intimidated. Even though there was a lot of gerrymandering and electoral abuse, the opposition absolutely crashed the government as early as 2015 because they were sick and tired of Maduro. We were ready, we knew where we were going and there was already a lot of scarcity. So that ended with the opposition taking power over Congress, which should be a political body, it should be able to make laws, it should be able to start changes to the situation. But what the government did was just double down and then start eroding institutions even more. They created a parallel parliament and so on.
So I think most people that cover us in the media today, they don’t have that context because they’re just reacting to the crisis very quickly, and they just think … obviously, they have studied the history of the United States intervention in other countries like Nicaragua, and in other parts of South and Central America, all of that and that creates a trigger, and it maps very quickly to their … and especially if you sympathise with left, it creates an association that is unfair that say anything that the U.S is pushing for in its international agenda, looks like a coup to some people, looks like some sort of unwarranted intervention. I think in this case it’s very different, this is a mechanism that is triggered by the Venezuelan constitution.
It was started by the people of Venezuela, and all we ask is for the international community, governments, international media and so on to report what’s going on and to recognise that Maduro’s term is over and we need some help in terms of international recognition to be able to really create the conditions of pressure so that the military, in fact, stops backing Maduro because if not, we can have a very difficult situation where there is a standoff between different military groups and where the military just favours their status quo because they are incentivised economically to do so, but they’re not really … while the rest of the country withers and dies. That is I think the biggest misconception, they’re describing this, “Oh, it’s the U.S led.” It’s not. There’s actually a list of misconceptions that I can translate some of the tweets ’cause it’s in Spanish, I can send it to you later. There’s some like common lenders there, I think that’s the one that bothers me the most, and then just automatically thinking, “This is just another act of the U.S imperialism. This is exactly the same as Libya, exactly the same as the Middle East, they’re in it for the oil.”
It’s not true, the U.S doesn’t need Venezuelan oil. Venezuela needs the U.S way more than the U.S needs Venezuela and that is clear from what the government has been … the government has actually suffered a lot in the past few days because they have lost control over key assets, especially U.S assets, they have lost control over their Golden Bank of England which we can also get into later. I think it’s very humbling and very satisfied with the response. I don’t think we’ve ever seen a situation in the past where the international community, especially countries that do care about human rights and democracy, they’re standing up to this authoritarian government and saying, “You know what? We no longer recognise you. Your term is up, and we are supporting the people of Venezuela.” Which is I think a very clear stand, and it’s … if you do support human rights, you have to be in this camp.
If you, on the other hand, are more like China, which are you are very pragmatic, and you just care about doing business and you don’t care how difficult the situation is, or how human rights are respected in a country, they, of course, you won’t have a problem supporting a criminal regime.
Peter McCormack: Mauricio, would you say that a more accurate picture of the U.S situation is that they have a very good understanding of the situation in Venezuela, and they have leveraged to put the right kind of pressure on the Maduro regime with sanctions and that will obviously have a trickle effect across the world. I mean historically the strongest relationships with Venezuela or with the Maduro regime is China, Russia, and Turkey as I understand it. Obviously, a lot of Russian money has gone into China, but I was reading today that … sorry, a lot of Russian money has gone into Venezuela but I was reading today that the Kremlin has gone pretty quiet on their relationship with Maduro. So would you say that it’s more than the U.S has a better understanding of what’s happening?
Mauricio Bartolomeo: Yeah. I do think the U.S, particularly led by the council of Marco Rubio and a lot of the other Republicans I guess that have stood up for the Venezuelan course. The Venezuelan diaspora in Miami probably the strongest one globally and they have been making a very very big push to raise awareness in the U.S Congress of what is actually happening, so it’s been really surprising really to me to see how well they understand the situation. They really have taken the stands that this isn’t the kind of party that you can negotiate with. There’s been many attempts of having actual discussions and reach agreements to set new elections to government time and again hits the can and hurts the people. They really now call the regime what it is, which is it’s a criminal state. They are involved in all sorts of dark or shady businesses, and I think what they’re doing is in my view the right approach because they are really just trying to choke Maduro out of financing and putting all the pieces in place so that the military can switch, and trying at least to put through a change without any violence.
I think that the approach they’re trying to do is they’re trying to make the threat of actual either by bringing in foreign aid or by bringing a group convoy to protect their embassies that are still there, they’re just trying to elevate the levels of potential threat so that the ranking officers can now say, It’s not worth it for me to keep supporting these guys.” One thing that I really applaud Guaido in doing, which is something I think the Venezuela opposition should have been doing a long time ago is requesting calls and direct conversations with China and Russia. Which have actually thrown lifelines to the Maduro regime time and again when they got put in corners, and I think it’s time someone steps up in the play and says to these guys, “Listen, we understand your situation. You’re better off working with us and continue to support this criminal,” I think those are the right steps, and I will continue watching with a lot of interest to see how these things continue to escalate.
Peter McCormack: Giancarlo, what is the current state of the political climate today? What leverage and tools does one Juan Guaido` have at his disposal? And what are the expected next steps within Venezuela?
Giancarlo Fiorella: The next step question is that a lot of people have been asking me about like, “What do you think is going to …” really hard to tell. I’m going to give it my best shot because it is obviously a question on everybody’s mind including my own, but it such an unprecedented unpredictable situation that is hard to say. I do just want to jump in really quickly before I answer that question, Peter, my own take on, in particular, the U.S involvement is more cautious I think. Because I do think that we have to be very sceptical about any kind of foreign intervention in Venezuela just precisely because it’s such an important time in the history of the country. When you’re in a crisis point I think people have a tendency to jump to leaders and say, “Let’s do whatever these guys are doing.” Or, “Let’s follow this guy to the end.”
And I think we have to be cognizant of the fact that that’s really partially why we’re in this situation almost entirely you could argue because Venezuelan in the last 1990s was us having a lot of problems, and then suddenly this guy shows up and he’s got all of the answers, and it’s Hugo Chavez, right? So I think we have to be sceptical always and in particular when we’re in crisis point like the one today. I don’t think we should throw out the baby with the bathwater, I think that the international reaction has been excellent for the most part. I think the diplomatic efforts that Guaido` has been leading with the U.S for example, like appointing I guess a shadow diplomat, I think that’s really good. Things like the oil, sanctions against PDVSA that the U.S has put in place. The consensus that I’ve seen is that those are going to hurt potentially even in the short-term they’re going to hurt Venezuelan people, so those sorts of things I think we have to be very careful with. We just have to recognise that this is a really complicated situation, that’s there are lots of moving parts and that it is precisely because of that we have to really ask lots of questions whenever somebody wants to get involved even if they say that they want to help.
To your questions about what are the next steps? What’s Guaido` doing politically? I think that the big developments over the last couple of days have been the blocking as Alejandro was mentioning, the blocking of financial … I don’t want to know what we’re going to call it, access I guess of the Maduro government. That has the potential to I think completely undo him, and I think once the book on this is written that might be a big chapter in it. Once the government started to really get serious about, “Okay, we’re not going to let this government access money anymore. I think that’s going to be a big part of bringing the government down. The opposite of that coin is like, “So now if we’re not going to let Maduro take that money, we should let … are we going to let Guaido` take it?” Like, “Are we going to let the Guaido` interim government take it?” I’ve heard some movements in that front, I’m not entirely sure how it’s going to play out because again we’re in an unprecedented moment where we really have two governments emerging, right?
And in terms of next steps concretely, the big thing that’s happening right now is that there’s a humanitarian relief … I don’t know if you want to call it a convoy, or an effort? That’s being organised out of three countries in the region. We know Colombia is one of them, the other one is Brazil, and the other one from the latest reports that I saw was an island in the Caribbean. They’re being kind of coy about exactly where this country is, but this campaign is … what it’s doing is it’s collecting humanitarian aid from different sources, NGOs, governments, even private citizens. Like Venezuelans abroad have been organising in their own communities to send relief to Venezuela. Right now there’s a bunch of aid, I think it’s about 60 tons that’s being marshalled in Cucuta which is a city in Colombia that’s right on the border with Venezuela. As far as I can tell, the move they’re going to try to move back into the country this weekend so that’s setting up a flashpoint because Maduro said as recently as, I think it was yesterday that Russia today published an interview with him.
Maduro said … I’m quoting directly. He said, “We’re not beggars. We don’t need this humanitarian aid. We’re not beggars, we’re not taking this. No, thanks.” So if Maduro orders the military stop this humanitarian aid convoy from coming in, that’s going to be a flashpoint. Is the army going to follow that order? Is he even going to issue it thinking that they might not follow it? So that’s what’s happening next, and I think everybody is just looking to that right now and seeing how that develops because as I said earlier, it’s a really fluid situation. It’s hard to tell what’s going on day to day.
Peter McCormack: If Maduro was to negotiate an exit, maybe got to the point where it’s obvious the regime is going to completely collapse, what would the next step be? Would Guaido be a temporary President till there are new elections?
Giancarlo Fiorella: The National Assembly has begun to move towards organising a new national electoral council. One of the reasons why we can’t have presidential elections within 30 days as stated in the constitution is number one because Maduro doesn’t want to do it, it’s not going to happen. But also even if Maduro said today, “Okay yeah, let’s have elections tomorrow or next week.” We can’t have them with the CNE that’s the name of this institution of Venezuela. The CNE has been for years completely pro Maduro. Alejandro mentioned that the opposition won the elections in 2015, he also mentioned that … I think that was the point, and I agree with him, that the parliamentary elections of 2015 were like a switch went off in the CNE’s head, in the government’s head and they said, “Whatever we’ve been doing before to influence elections isn’t working anymore. We really got to go hard because or tricks aren’t enough to stand this tide of discontent that’s growing in the electorate.”
And so we saw the combination of that in 2017 with the Constituent Assembly election where we had this, it was an election for a Constituent Assembly which the shadow of parliament that the government was set up. After the election, the government, the CNE announces the results and they say … I can’t remember the figures they said, “Eight million people voted, and these were the results.” And just a couple of days after, the company that provided the voting machines for the vote, it’s called Smartmatic, and that had been providing voting machines for elections in Venezuela for years, they had a press conference with the head of the company saying, “The election numbers reported by the CNE are not the ones that our machines counted.” In other words, they just made up the results and Smartmatic didn’t say specifically what the difference was, but it was by over a million votes. So the government just pulled a number out of a hat and said, “This number of you voted.” To my knowledge, that hadn’t happened before. So now we’re in a situation where that does happen, there is precedence for that happening. So if there were to be an election with this current CNE, I have no doubt that they would do that. They would just straight up make up a number.
So what’s going to happen in terms of that? Well, first of all, Maduro has to leave ideally peacefully. I think ideally through a negotiated management, he can go to Cuba and live the rest of his life in peace. I think that would be the best solution. His elite also has to leave, so it’s not just him it’s a group of people. They all have to leave, they all have to go to Cuba, they all have to live happily ever after. I think that’s fine. For the sake of letting the country finally begin to heal and recover, right? And that would include the CNE. So before we have elections, we have to have a new set of institutions that will allow for them to be free, transparent, and just and that’s going to take time.
Peter McCormack: Alejandro, obviously as the regime gets more desperate, the rate of money printing is likely to increase. We’ve seen tactics where they’ve changed the exchange rate, and the exchange rate I believe now is being tracked against the black market exchange rate. Mauricio also commented on the fact he thinks that there’s a potential … that there’s been a spike in Bitcoin buying on Local Bitcoins ’cause perhaps the regime is also printing money to buy Bitcoin. What are you aware of the ground with what’s happening with the use of Bitcoin? Because I checked today. And I think this week was the highest volume week in terms of Bitcoin on Local Bitcoins.
Alejandro Machado: Yes, it’s a very good question and I wish I knew more. But I will start with the little I know. The government strategy for the past … we have had exchange controls for over 15 years, that means that you can’t just go to an exchange house outside or inside Venezuela and just try to buy dollars. It wasn’t possible for the past 15 years, no one would take you bolivares outside Venezuela, and the government would not allow exchange as a swap right inside the country. This, of course, benefits the government or used to benefit the government when they had a lot of oil income, and when they could decide who to give access to cheap dollars. ’Cause this is just a mark of loyal … or is the reward for loyalty. So if you were very loyal to the government, you never questioned Chavez, you can get access to multimillion-dollar contracts and you won’t have to pay pennies on the dollar for them.
This was the strategy for a very long time when there was a surplus and when there was oil money flowing in, but as it happens last week we saw the enactment of sanctions against PDVSA, and also PDVSA which is the oil company of Venezuela. The U.S no longer recognises the board of PDVSA that Maduro set in place in the U.S. the U.S branch of PDVSA, CITGO, these companies that belong to the Venezuelan state, since the government if the U.S no longer recognises Maduro, all of the Republic’s assets they should be transitioned into new management. This is what they’re … a very key point of pressure, and it has made it so that the money that’s … effectively Venezuela’s has halted its shipment of oil to the U.S because obviously, they know they’re not going to getting paid anymore. If they do shop any oil, it will Juan Guaido who will administer the sales, the revenue. So of course what they’re doing is they’re not loading the tankers anymore because they still have physical control and military control over the PDVSA as it’s inside the country.
They’re not shipping new oil, so the money is not coming in. The Venezuela government needs dollars to operate, of course, they need to trade with other nations, they need to import gasoline or light crude to actually make gasoline in the country because our oil mostly is very heavy and we can’t process it on our own. So there’s a lot of goods that we import that we need to function as a country, most notably gasoline, but all kinds of foods, plastics, a lot of things. The government, of course, is now desperate for an influx of dollars because they no longer have the revenue that they used to have, they no longer have the option to go to Wall Street which they did many many times for years at very bad rates. So Wall Street made a ton of money for trading Venezuelan debt. They no longer have these options, so all they have left is their ability to print inorganic money and to try to buy assets with it, one asset that they can buy is Bitcoin.
They can get the freshly printed money before the economy realises that there’s more money and the market rate adjust accordingly since they have the privilege of issuing the money and keeping it. I have this theory that some people government insiders are getting that freshly printed money and they’re dumping it into Bitcoin exchanges, and mostly they look on Bitcoins because it’s the one that has the biggest volume. It’s approaching, or it has been close to a million dollars a day in Venezuela for a while now. Then the other thing they can do is they can try to buy dollars from people who are willing to sell dollars to the government, and before last week this was virtually nobody because the government had … the exchange rate it was not favourable to someone that wanted to sell dollars and get bolivares. You could get a lot more in the black market because the incentive for the government before was, “We’re going to have this duo rate, or this preferential rate for people that we like, and the people that we want to favour business with so that they stay loyal.”
They have lost this policing tool because just ran out of money, so they need to tighten their circle and to only allow dollar … or to centralise the dollars that are coming into the country because they’re in crisis, it’s an emergency mode. What they’re doing is, “Okay, we’re going to set … the new strategy is we’re going to set the rate of the dollar higher than the market rate so people flock to us as the sellers of bolivares.” But it turns out that they do have the money printing machine that issues bolivares, so this looks similar to the start of the worst part of the hyperinflation in Germany in the Weimer Republic in the 1920s. Germany at that point ran out of things to do, like economic exports, it ran out of policy tools. The hyperinflation was just bad, but it wasn’t as bad. But then the government decided, “Oh, you know what? We can just print more money and buy more assets and that will save us.” Then that’s actually what made hyperinflation accelerate a lot more.
This I believe what is bound to happen if the government … and it looks like it is if we are still on this track of, “Let’s do this.” People are going to very rapidly figure out that this is something that the government is doing. But right now it’s not clear ’cause the economy takes some time to realise, “Oh, this is what’s actually happening.” But there’s a strong theory that this is what they’re doing, they’re trying to capture at least a significant slice of remittances because now people who … more than 3 million people have left Venezuela in the past few years, and for the first time in Venezuela in modern history, we are receiving more money, we are receivers.
Venezuelan families need to rely on their relatives abroad to be able to make a living. So since the people were using the black market before, the government couldn’t capture any slice of that, but now the government has … the oil is effectively not bringing in dollars into the country, the government has this new strategy of, “Okay, let’s bring dollars by just printing money and being a seller of bolivares.” But of course this only works in the very very short-term, and it will only accelerate the hyperinflation and the crisis.
Peter McCormack: Mauricio, you’ve noticed a premium on the actual dollar in the open markets, right? Can you tell us what you’ve discovered there?
Mauricio Bartolomeo: I’ve been … similar to Alejandro, my head has been in the space where I think a lot of these government officials close circle around Maduro have been taking advantage of the Cantillon effect by basically getting the firstly printed batches of cash and going to dump it on the Bitcoin market. My theory was that they would prefer Bitcoin as the sanctions escalate because it was just censorship resistance, and so I tried to see if I could find a premium between the black market dollar and the dollar worth of Bitcoin in Venezuela. The first time I noticed the premium was in July of last year, and I’ve been tracking it since. Mind you, the data is from black market sources so it’s not the best data but it’s the best we get and stained for up until today.
Actually yesterday, the premium was 17½% but I’ve seen it as high as 70%. Meaning that it’s almost two to one the demand for Bitcoin over a dollar, and I think this is one of those first calls it signals that gets triggered because really if you dig down why would people be wanting to pay that premium for Bitcoin is because it’s on demand. So my guess is that the science and the evidence is starting to be there to say that these guys effectively are doing this.
Peter McCormack: I think it’s been a very very useful update for everyone, I think we’ve done a very good hour and it will make for a really solid understanding of the current climate in Venezuela. I thank you all for coming on. Just to finish off, it would be great to hear from each of you about what you think is going to happen and what would you like to see happen over in the next days, weeks, and months? And specifically Giancarlo, could you just touch on what’s happening with the current state of protest because obviously you and Guaido` can organise protests but at the same time people are being shot on the streets. I mean I’ve read reports of like 30 or 40 people have been killed. So if you could specifically also talk about that. If you start first Giancarlo, then we’ll go Alejandro, and then Mauricio and then we’ll finish.
Giancarlo Fiorella: Sure. The state of the protest today as you said, the figures that I’ve seen also hover around the 30, 35 mark. I think those are accurate numbers, that range. Unlike previous protest waves, and in particular the ones from 2014 and then 2017, we’re not seeing daily protests in the country. Back in 2014, and back in 2017 we had months where people were on the street protesting daily. They were blocking intersections, or organising marches, they were holdings all kinds of events on a daily basis. What makes this round of protests different is that we’re not seeing that many protests, and that I think if we take Guaido` at his word is a deliberate move. He said during a speech recently that … he said, “Look, we know that you have to go to work. We’re living in a crisis, people need to line up for food, you have to go find the food. You go to a supermarket and it’s … whatever, there’s no food.
Then you have to go to another one, it’s a big deal to try to survive in Venezuela so we understand that people have to take care of their everyday necessities and the struggle of everyday life so we’re not going to call for protests every day.” So instead what they’re doing is they’re calling for protests I think once a week so far we’ve had. We’ve had two protest events on the weekends, we had a really short one on Saturday, and we had a longer one on Sunday. They’re being coy with announcing them. Last I heard there was one planned for February 12th, which is if I’m not mistaken Youth Day in Venezuela and it’s a big holiday. I think that’s probably going to be the biggest one that’s coming up. In terms of an interesting change in dynamic in the protests is that in previous waves, the repression … at least the book of repression was done by the National Bolivarian Police and the National Guard. And this year we’re seeing a lot of the repression being conducted by an organisation that Mauricio mentioned earlier, the F-A-E-S FAES in Spanish. These guys were the death squads that you mentioned earlier.
They were created in I believe it was July 2017, and they were involved in a security operation … it wasn’t really a security operation, it was basically like roaming death squads that would just conduct … they would just extrajudicially execute people for a host of reasons. Some of the numbers that I’ve seen put the number of fatalities in those operations up to 500 killed. So those guys are much more … now that’s an interesting new dynamic, I don’t know if that means the government is less sure that the National Guard and the National Bolivarian Police rank and file will repress when called to do so, and they’re calling on these guys who are like death squads to that sort of work. Then what do I hope will happen? How do I think this is going to evolve or resolve itself? On the 23rd when this sort of thing started to unfold, and the initial shock of, “Oh my gosh, this guy just declared themselves interim President and we didn’t expect him to do that.”
Back then I thought that the government was going to do something that they’ve been doing for a number of years, which just ignores the opposition. So when the opposition won that National Assembly and they started passing laws, the government just said like, “Whoa, we’re not going to listen to you.” Like, “We’re not going to follow whatever you’re passing.” So they got the Supreme Court to start declaring every law passed by the National Assembly to be null and void. So I thought maybe that’s what they’re going to try to do this time, they’re just going to be like, “All right, you want to be President? Good luck. All of the institutions are on our side, the military is on our side. We’re not going to do that.” But I think Guaido` and the opposition have been really smart this time because they didn’t just leave it at that, they initiated diplomatic contact with other countries, they’re organising delivery of aid, et cetera. I think now it’s beyond the point to the government being able to ignore it, they can’t ignore it. This is a reality that they have to face.
I think that … it’s really hard for me to say. I’ll tell you what I would like to see, I think the best solution, obviously a peaceful one is one that is managed and negotiated entirely be Venezuelans. It’s something like a negotiated exit for Maduro where the opposition sits down with him, and the military sits down with him, and they say, “Look, our time is up. We’ve had our fun, we need to leave. It’s over.” So in that sort of scenario, Maduro and the elites would go possibly with some kind of amnesty, and then we would have the creation of new institutions that are democratic, and that would allow for transition, again peaceful, managed, and overseen by Venezuelans to a democratic system of government. That’s what I would like to see, I don’t know if that’s what’s going to happen. I think that’s the ideal scenario for me.
Peter McCormack: Alejandro?
Alejandro Machado: Yes, I agree with pretty much everything Giancarlo just said, I’ve always been an optimist, I want to be cautiously optimistic here. I think that we, all of the opposition leaders have been doing a great job. They have been a lot smarter this time, and I think it’s very key to have the backing of the international community, and people, and organisations, countries, governments that do care about human rights and that are putting the pressure. I agree with Giancarlo in that the solution whatever shape it takes, it much be led by the Venezuelans and I believe it has been so far. I think it’s easy to see that there’s a lot of pressure from the international community, but to be realistic, this is not going to be solved without that kind of pressure. I hope that the pressure stays in that form, just pressure and just manifest as the inability of the government to ignore the crisis or this standoff as Giancarlo just said. I think that it can still happen, we still have time, there are still things that the opposition has in its realm of possibilities.
I don’t think … there are some people that argue that there may be violent groups that really do support Maduro and might want to start a civil war, I don’t believe at this point that that’s very likely because Maduro does not have broad support and they have very narrow economic incentives to align themselves with Maduro. There’s not an ideological battle here, there aren’t people that are diehard Maduro fans. There may be some, I think we can’t fully discount the possibility. But I think that if it is clear that it makes more sense economically, and it makes more sense considering how you deal with your neighbours, and your community, and how this has been going on for so long. I mean, the people who support Maduro and be his enforcers, the civil … there are the organisations that are just the civilians that have access to weapons and they act as enforcers. They don’t have any formal permits to carry these guns, they don’t have any … they’re just thugs, they’re just criminals but they enforce government’s orders.
These people I think are what a lot of people are worried about, they’re not that many and I don’t believe that they’re very ideologically aligned. I think if we can make sure that they get in line with the new program, with the, “Let’s have national reconciliation, let’s have a conversation. You can live in peace with other people, you will realise that it’s better and in the longterm, you’ll also be economically better off because of the crisis … it’s just way better to live in a country that has institutions, and that has some rule of law and democracy. We have to rebuild that trust little by little, and it’s going to be really hard work but we must try.”
Peter McCormack: Mauricio?
Mauricio Bartolomeo: I think as far as I would like to see, I’m pretty much in line with what both Giancarlo and Alejandro said. I’m slightly less optimistic on what I think is going to happen, I’ve had a way too many run-ins and conversations with these guys to think that they are the type that will negotiate and recognise the opposition as a democratic sovereign body. I think going back to what Alejandro said at the beginning, one this Chavez has done really well is polarising Venezuelan society into two classes of citizens, and I do feel they treat and have always treated the opposition as second class citizens. So even though I would like to see a conversation happening, and Maduro and his regime admitting that they will just peacefully walk away, I see that as a highly unlikely possibility. I think what’s more likely to happen is, yes he has high ranking officers that are standing by him for circumstantial reasons, for economic benefit, but no one’s willing to fight for him.
So I think what really needs to happen is they’ll basically create a more real threat of actual conflict because at that point all of the low ranking officers will certainly not follow orders, and once the top guys realise they’ve lost the ability to command the low ranking officers, this is going to snowball into a transition. But I don’t think it’s going to be … I think if Maduro leaves, it’s going to be an overnight move. I highly … I just don’t think it’s really likely that he’s going to have a calm negotiated exit. That’s my two cents.
Peter McCormack: Right. Well listen, I want to say big thank you to all three of you for coming on. I really appreciate your time. Alejandro, that’s the second time we’ve done this, thank you. Giancarlo, this is the first time we’ve spoken. Mauricio, this is the second time we’ve spoken, but I didn’t link you to the first one. I wish all the best for you guys in your country, your family. Thank you all for coming on.
Alejandro Machado: Thank you Peter, I appreciate it.
Mauricio Bartolomeo: Thank you.
Giancarlo Fiorella: Thanks for having us, it’s a pleasure.