Protests and demonstrations in Nicaragua over the government’s intention to reform the nation’s pension plan became increasingly violent over the weekend. According to sources, the number of dead stands at twenty-six. The student-led protests in Managua last Wednesday expanded beyond the capital city to other parts of the nation. The protests themselves have evolved into a popular uprising and challenge to the authority of the government. Nicaraguan President Daniel Ortega announced on Sunday he will not go forward with the pension reform, obviously hoping to stabilize the situation. His action could have the opposite effect, however, with many protesters appearing determined to redouble their efforts, vowing to continue the demonstrations until Ortega leaves office.
The unrest in Nicaragua is drawing an increasing amount of international attention. The US State Department is removing a number of its embassy staff and families from Nicaragua in light of the violent protests. Pope Francis has also chimed in, calling for an end to the violence. The death of a Nicaraguan journalist while he was broadcasting on Facebook live has helped make more people aware of what’s taking place.
The longer the protests continue, more pressure will be applied to Ortega. The Nicaraguan leader is an avowed leftist cut from the same cloth as Fidel Castro and to a lesser degree Hugo Chavez. He was the head of government in the 1980s, transforming Nicaragua into a socialist state closely allied to Cuba and the Soviet Union. Ortega lost a re-election bid shortly after the end of the Cold War, only to be elected president again in 2007. Since then, he has moved the country back to the left, and in the process undertook a number of moves that strengthened his hold on power. Ortega’s influence is evident in every branch and department of the government. His influence helped the National Assembly do away with presidential term limits in 2014, and bring about constitutional reforms allowing Ortega to personally appoint military and police commanders.
Latin America deserves more scrutiny with Ortega being challenged, a new president taking power in Cuba, and the ongoing crisis in Venezuela. Nicaragua and Venezuela especially have many similarities at the moment. If Ortega continues to use force to quell the demonstrators and remains in power, Washington will begin paying more attention to events south of the border.
While in Argentina over the weekend, Secretary of State Rex Tillerson remarked to reporters that the imposing of oil sanctions and restrictions against Venezuela’s oil sector is now on the table. US oil sanctions are considered the nuclear option and would close off Venezuela’s economy to the single source of dependable income it has left. US and international sanctions already in place against Venezuela have not had the intended effect. If anything, the moves have emboldened Venezuelan strongman Nicolas Maduro to dig in his heels and go for broke. In January, 2018 Maduro announced he will be seeking a new term in office. The presidential election has been scheduled for 30 April of this year and with the majority of opposition candidates and leaders banned from running, Maduro is expected to skate to an easy victory.
If the presidential election proceeds, and the Trump administration imposes an oil embargo in response, the impact on markets, supply, and output will be significant. 2018 has seen an overall tightening in the oil market and a supply disruption now is sure to cause reverberations that weren’t felt when there was a crude superabundance. If Venezuela faces an oil embargo its economy will collapse entirely and that could cause an undesirable chain of destabilization among its neighbors, and other Latin American nations. The prospects of sanctions bringing a scenario like this to life are real. Caribbean nations rely heavily on cheap Venezuelan oil and have resisted Tillerson’s calls for a hemisphere-wide effort to challenge Maduro. US, Mexican, and Canadian oil officials, and diplomats are forming a working group to try and find an alternative to Venezuelan oil for nations in the Western Hemisphere that are reliant on it at the present time.
President Trump favors harsher sanctions against Venezuela, though its uncertain if he’s willing to turn to his nuclear option just yet. As mentioned above, the current sanctions in place have not motivated Nicolas Maduro to begin the reform process. If US efforts to create an anti-Maduro coalition show signs of success between now and the end of April, expect the Trump administration to begin thinking seriously about oil sanctions, or an outright embargo against Venezuela by 1 May.
Tomorrow, Venezuela’s newly created debt restructuring committee is scheduled to meet with creditors in hopes of renegotiating, or restructuring $69 Billion of Venezuela’s outstanding debt. It is not presently clear just how many creditors will actually be attending the meeting. It is also unknown if the meeting will include frank discussions about restructuring Venezuela’s current debt, or if Venezuelan officials will use the opportunity to simply blame the current economic situation on US sanctions. Quite honestly, it is unclear at this time whether or not a meeting will even take place tomorrow.
As meeting preparations continue this evening rumors of default continue to swirl from Caracas to Wall Street. Venezuelan President Nicolas Maduro has adamantly insisted that his country will never default on its debt. Despite his assurances, speculation is growing that the true purpose of tomorrow’s meeting is to lay the foundation for default. Venezuela’s economic situation is beyond dire. It’s cash reserves are nearly dried up, and US sanctions are making it impossible for Venezuela to refinance its debt. Securing a debt restructure in the current climate is virtually impossible. Therefore, Maduro’s only other option would be to declare insolvency and default on the country’s $150 Billion in debt.
The uncertainty surrounding Venezuela’s economic future is causing anxiety internationally. A default could possibly spark a global financial crisis, although the prospects of this happening are low. There is still a possibility of Russia extending a lifeline and saving the day. Or, at least postponing the inevitable for some time. The two nations are expected to sign a debt restructuring deal later this week that will provide some relief for Maduro’s socialist paradise.
Realistically, however, even Russian assistance might not be enough. After years of political catastrophe, social unrest, and economic disasters, time is truly running out for Venezuela. What happens this week will likely determine its fate whether Maduro is prepared to face the truth or not.
President Trump’s first address to the UN General Assembly came at a point in time when a sizable portion of world leaders have been wondering what shape America First foreign policy will take. They received an answer this morning, and as an added bonus the world was also given an brief glimpse at the pillars of a potential Trump Doctrine. The US President’s speech contained blunt language and was missing the diplospeak and doubletalk that is common in world leaders’ addresses to the General Assembly.
North Korea was the main talking point. First off, to be clear, his referring to Kim Jong Un as ‘Rocket Man’ once again did not belittle, or minimize the urgency surrounding the North Korean nuclear crisis. Trump made it clear that the US will welcome UN efforts to bring an end to North Korea’s nuclear and ballistic missile programs. He followed up by letting it be known that if the crisis continues on its current trajectory, the US may be forced to “totally destroy” North Korea. Trump’s words were not an idle threat, or a rambunctious boasting of US military capabilities. Should North Korea launch an ICBM at US territory successfully, Trump will have no choice but to turn North Korea into the world’s largest sheet of glass. The North’s UN ambassador did not watch the speech in person, unfortunately. He opted to leave the chamber before the US President began speaking.
Iran was also in the crosshairs today. Trump dismissed the nuclear deal between Iran, the US and other world powers. Just as he did on the campaign trail last year, Trump blasted the deal as an embarrassment to the US and hinted that it will be revisited in the future. In fact, the Trump administration is currently reviewing the deal and next month the president plans to announce his intentions with regards to its future.
Venezuela was another target of Trump’s criticism. He hinted of a coming expansion of the already wide economic sanctions now in place on Venezuela if Nicolas Maduro continues to impose authoritarian rule. He did not repeat an earlier threat to consider military action as such a move would not receive support from most Latin American allies of the US. Nevertheless, by affording Venezuela as much attention as North Korea and Iran, Trump made it clear how important the US considers the crisis in Venezuela to be.
World leaders and journalists at home will spend the next week dissecting the speech in an attempt to determine what Trump was saying between the lines. The effort will prove to be an exercise in futility. Today’s address was clear, concise, painstakingly honest, and made an indelible impression on America’s allies and enemies alike.
As Venezuela remains perched on the brink of dissolution and Venezuelan President Nicolas Maduro continues stripping away the last remnants of democracy in the once vibrant land’s government, the United States has decided to begin hitting Maduro where it hurts. On Friday, it was announced that President Trump has signed an executive order imposing new sanctions on Venezuela. These will focus on Venezuela’s outstanding debt which has been a major economic vulnerability for the country. Venezuela, and its state-owned oil company PDVSA, owe international investors upwards of $100 billion. Sixty percent of the debts were issued in the US and are subject to US law. The new sanctions will stop Venezuela from borrowing money from international capital markets. They will also Maduro’s government from refinancing existing debts that are coming due later in 2017, likely setting up a financial crisis for Maduro to contend with in the fall.
The nuclear option for the United States has always been to prevent Venezuela from exporting oil. The chaos such a move could unleash on international energy markets makes it unpalatable to say the least. The sanctions ordered on Friday are a workable alternative to the nuclear option. For example, Citgo, which is PDVSA’s US energy company, can continue to sell gas in the US. However, it cannot send its profits back to Venezuela where it could finance PDVSA, and the Maduro government.
The next move for the Trump administration will be centered around diplomacy. The US has to make certain that nations like China, and Russia do not step in to fill the financing void that US sanctions will create. More importantly, Maduro needs to be informed that fiscal collapse can be headed off by restoring Venezuela’s democratic institutions. Washington has hinted at this possible scenario, but so far Maduro has not reacted to it. For his part, Maduro has launched a counterattack against US sanctions, and it is aimed at a domestic audience. “All they’re trying to do to attack Venezuela is crazy,” he said on Friday. “With the efforts of our people, it will fail and Venezuela will be stronger, more free, and more independent.”
In essence, Maduro has brought a knife to a gunfight. He is fighting an economic battle with nothing more than stale socialist rhetoric. Behind the scenes, he is likely hoping for intervention by China or Russia to keep his socialist paradise from going down the tubes completely. If that doesn’t come about, Maduro and Venezuela will be dangerously short on options and time.