02/26/2014 02:44 pm ET Updated Apr 28, 2014

No End in Sight to Protests in Venezuela

JUAN BARRETO via Getty Images

Violent protests have now rocked Venezuela for the past three weeks. Initially concentrated in middle-class urban areas, which have been staunchly opposed to the socialist government for many years, they have now spread to areas where the government had traditionally counted on solid support. In contrast to recent social unrest in Ukraine, where demonstrations have been sparked by a single event (the president's decision not to sign a trade pact with the EU), in Venezuela there has been no obvious single trigger.

Instead, public frustrations have been gradually building in recent years. The economy has gone from bad to worse: at 56 percent, inflation is the highest level anywhere in the world and food shortages are making it difficult for consumers to purchase even basic staples. One in four products are unavailable on supermarket shelves. Meanwhile, crime rates have spiralled upwards. President Nicolás Maduro is not personally responsible for these problems, which are rooted in the reckless policy stance of his predecessor, Hugo Chávez, who led the country from 1999 until his death from cancer last March. That said, Maduro's irrational decisions and policy blunders since taking office have exacerbated an already-bad situation.

Why Now?

But why have protesters taken to the streets now? Part of the explanation lies in the opposition's poor showing in local elections in December. Failing to defeat the charismatic Chávez was understandable, some argued, but if the opposition could not even make gains at the grassroots level against the inexperienced and ineffectual Maduro at a time when the economy was in free-fall, then how would it ever succeed in winning a presidential election?

Much of the opposition coalition, known by its Spanish acronym MUD (Democratic Unity Roundtable), feels that the official electoral system fails to ensure a level playing field. The independence of the agency responsible for organising elections and counting the vote, the CNE, has been seriously questioned following political appointments to its board (with four of the five members aligned with the ruling PSUV party). But the opposition's continual criticism of the CNE has partly backfired, since the public is less inclined to go out and vote if they feel that their vote either will not count, or will be manipulated in order to engineer a government victory. Simply put, there are large swathes of the opposition that do not believe that they are able to defeat the PSUV playing by the rules.

Another factor persuading people to take to the streets is the fact that the country's electoral calendar is surprisingly empty. In a country that has seen almost-annual elections (local, legislative, presidential or recall referendums) for some years, the next time that people are scheduled to go and vote is not until December 2015, in legislative elections. The opposition must wait even longer, until 2017, for the opportunity to dislodge Maduro from the presidency. Against this backdrop, people have been persuaded to take to the streets, with the protest movement seeking 'La Salida' (the exit, referring to the removal of Maduro).

What Now?

Understanding the causes of the recent unrest is one matter, but looking ahead to how events might unfold is much trickier. Maduro is showing little sign of bowing to the opposition's demands, nor of being open to the possibility of a national dialogue with his critics. He has flatly refused to engage with the opposition, who he accuses of conspiring in a "fascist" coup plot. Foreign media outlets have been hounded for covering the demonstrations (which have received virtually no coverage in the dominant state media), with one Colombian news channel being taken off the air entirely. Several U.S. diplomatic staff have been threatened with deportation for allegedly meeting with students who have taken part in the protests. When the president has addressed the protesters' grievances, it has only been to shift blame -- accusing private retailers of hoarding supplies and causing food shortages.

So unless social unrest worsens dramatically, pressure from the demonstrators is unlikely to force Maduro to resign. Another possibility is that he may be ousted by a senior PSUV politician. The ruling party is notoriously divided and there are several powerful factions that could tire of the president's handling of the protests. Yet this is a risky strategy: if Maduro were to step down (either by choice or by force) then the constitution rules that a fresh presidential election must occur within 30 days. It would take a brave politician from the ruling party to risk such a gamble. While the protests are ostensibly aimed at removing Maduro, it is far from clear whether anyone from the PSUV would have the capacity to win a subsequent presidential election.

A Poisoned Chalice

In addition, it has become increasingly evident that any subsequent leader would be inheriting a poisoned chalice. The economy is suffering from numerous distortions, brought about by years of price and capital controls. The Central Bank has been printing money as if there was no tomorrow for years now; the amount of cash in circulation plus deposits held in the local banking sector is 63 times higher than a decade ago (compare this to Mexico, where money supply has grown by a factor of five and Brazil, at under three).

With the amount of foreign currency more or less unchanged, it is no wonder the country is facing a currency crisis. The official exchange rate remains fixed at BsF6.3:US$1, but it is virtually impossible to access U.S. dollars at this rate. Many people are forced onto the black market, where dollars currently trade for BsF75:US$1. Difficulty in accessing dollars is ultimately the cause of the shortages, since businesses have been unable to import supplies.

There is no solution to the economic problems in prospect. Any attempt to ease the distortions would involve a gradual lifting of the price and capital controls, as well as a slow depreciation of the fixed exchange rate. But this would cause inflation to rocket even higher and would plunge the economy into a steep recession. There is no sign that anyone from the ranks of the PSUV would dare attempt such an adjustment, even if it is in the interests of the long-term health of the Venezuelan economy.

Social Unrest Set to Continue

So for now, Maduro looks set to cling on to power, in the hope that the protests will gradually die down. Chávez withstood several bouts of unrest during his tenure. Yet Maduro may have underestimated the opposition's sticking power this time around. If protests grow and the death toll mounts, the army may be forced to step in to restore order. However, the military has little loyalty to Maduro and would be highly unlikely to prop up his regime. In this scenario, an interim civil-military administration is possible until new elections were held.

So in the short term, things in Venezuela look set to get worse before they get better. Even if the opposition were to win power, they could be in for a rude awakening if they try to put the economy back on track. Perversely, this would be likely to spark further social unrest, as many of the protesters will have taken to the streets under the belief that an opposition-led administration would do a better job than the incumbent government. In the long run, that may be a correct assumption, but it is unclear whether the Venezuelan population would be happy to put up with short-term pain for long-term gain.