Venezuela Politics DA

2ac Maduro DA
No link --- at worst Maduros positive response to the plan will be delayed until it is politically expedient but he is still likely to say yes because it is in his political self-interest to do so. Maduros legitimacy and power are declining now The Economist, 13 (6/8/2013, Latin Americas Venezuela problem: Ostrich diplomacy; Venezuelas neighbours studiously ignore
the crisis unfolding next door, http://www.economist.com/news/americas/21579067-venezuelas-neighbours-studiously-ignore-crisis-unfolding-nextdoor-ostrich-diplomacy, JMP) The reason for all the huffing and puffing is that Mr Capriles, who came within an ace of winning a snap presidential election on April 14th, has challenged the result in the supreme court and is seeking to persuade the regions governments of his case. Mr Maduro is the chosen successor of Hugo Chvez, who died of cancer in March, five months after being re-elected. He heads

a weak administration beset by political and economic problems and desperate to hang on to the international support that Chvez built up over more than a decade of oil diplomacy. With the Chvez charisma gone, the new presidents legitimacy in doubt and the money running out, bluster is one of the few resources not in short supply.

Boosting oil production and investment key to saving Maduros presidency Alic, 13 --- geopolitical analyst, co-founder of ISA Intel in Sarajevo (4/15/2013, Jen, Foreign Oil & Gas Companies Look to Status Quo in
Venezuela, http://oilprice.com/Geopolitics/South-America/Foreign-Oil-Gas-Companies-Look-to-Status-Quo-in-Venezuela.html, JMP)

The main energy issue for Venezuela is that oil production is struggling, down from a peak

of about 3.2 million barrels per day in 1998 to less than 2.8 million bpd now. One would hope that fixing infrastructure, completing refinery repairs and construction, and investing in exploration and new technology would be priorities but Maduro will not have funds to invest unless he makes controversial cuts to social programs, according to Southern Pulse, which does not believe that Maduro will attempt to cut f uel subsidies any time soon.

A top priority for Maduro will be boosting refining capacity, says Southern Pulse. Towards this end,
Maduro may be willing to negotiate if a partner steps forward to build a new refinery, which is a goal Chavez failed to realize.

If PDVSA fails to increase production, PDVSA President Rafael Ramirez may be replaced this year. One way for Maduro to keep his presidency afloat is to bring new proven wells online in the Orinoco Belt; but that will require major investment . PDVSA may need more than a minority-partner-with-a-service-contract at those fields if they want to start pumping soon.

Expanding oil investment will help Maduro stay in power Campbell, 13 (4/16/2013, Darren, A new leader could signal change for Venezuelas troubled oil and gas sector; If Nicolas Maduro can
reverse the industry's decline, it could siphon off investment in Alberta's oil sa nds, http://www.albertaoilmagazine.com/2013/04/a-new-leader-couldsignal-change-for-venenzuelas-oil-and-gas-sector/, JMP) Thats because Venezuelan heavy oil is a competitor to the bitumen and heavy oil Alberta produces, and as long as the Venezue lan oil and gas industry is badly underperforming, some of the investment that could be going to develop its reserves will flow to the oil sands. But now that Maduro is the new boss in Venezuela, is he likely to reverse the decline? Devon Energy Big Box To gain some insight into that question, I contacted Roger Tissot a native of Colombia who is now a British Columbia-based industry consultant who specializes in South America. Last June, Tissot wrote an essay on Chavez and the future of the Venezuela oil and gas industry that appeared in Alberta Oil. Maduro was Chavezs hand-picked successor, and knowing that, Tissot says no one should expect a drastic reversal of policies or a drastic turnaround in the industrys fortunes. However, the

status quo cant continue, either. Maduro needs oil and gas revenue to fund the countrys social programs and keep the country from falling into chaos. A better run, more free market-leaning oil and gas industry will help Maduro accomplish this and keep him in power longer.

Therefore, Tissot thinks Maduro has little choice but to shake things up when it comes to oil and gas matters.

One could expect a government more accessible to foreign investments, and foreign investors concerns (rule of law, security of payments, stability of contracts.) Although it is too early to say, one should expect the Venezuelan oil sectors after years of stagnation and mismanagement to perhaps start showing some signs of life again, he wrote in an email exchange. How soon and how deep is something that will depend on how Mr. Maduros administration performs.

U.S. support will help Maduro make gradual changes and improve ties with U.S. --- necessary to build coalitions at home and abroad to maintain legitimacy. Payan, 13 --- visiting fellow at the James A. Baker III Institute for Public Policy (3/6/2013, Tony, Chavez's death offers U.S. a chance to
foster change, http://www.chron.com/opinion/outlook/article/Chavez-s-death-offers-U-S-a-chance-to-foster-4334009.php, JMP)

The March 5 death of Hugo Chavez, Venezuela's president since 1998, means that change is coming. The change is not necessarily for the better - but it may represent an opportunity to reboot the relationship between the U nited S tates and Venezuela, and perhaps between the U nited S tates and all of Latin America .
President Obama did the right thing by reaching out to Venezuela as a nation. He correctly sees Chavez's death as a "new chapter" in the history of Venezuela. But he should now reach out to Vice President Nicols Maduro. This may sound counterintuitive, but here is why. Chavez's death portends a perilous road ahead. The country will have to hold elections within a month, and Maduro will surely run. Within hours of the president's death, Maduro was laying the groundwork by accusing the United States of espionage, expelling an American diplomat, blaming a U.S.-led plot for the cancer that killed Chavez, and appealing to the United Socialist Party of Venezuela to maintain unity. Maduro sounded more like a candidate than a vice president in mourning. The United States must look past this rhetoric. Maduro stands a good chance at winning the presidency and will need the domestic and international support that the charismatic Chavez did not require. In reaching out to Maduro, however, the United States must not overplay its hand. Doing so would make Maduro the inevitable successor - and create for him the opportunity to rally support by portraying America as the enemy - instead of having to run on a crumbling economy and an excessive personalization of power in Venezuela. At the same time, the United States should assure the opposition that it supports no one in particular. Chavez's death will embolden a united opposition, which could rally around Henrique Capriles, the governor of Miranda, whom Chavez defeated in the 2012 elections. Capriles could win, but his election will be an uphill battle; to win he will have to appeal to many of Chavez's supporters. Were he to win, Capriles would face a deeply divided country and the monumental tasks of decentralizing power, restoring the economy and finding a way to unite a country burdened by crushing poverty, income inequality and high crime rates. If Capriles comes to power with only the support of the upper and upper-middle classes of Venezuela, he will not be able to effectively govern; interference from the military and a grassroots movement against his administration could cripple his government. Thus, Maduro may be the best hope for the United States. He would represent the interests of the many unhappy poor - not only in Venezuela but throughout Latin America.

Chavez's death may create the opportunity for Maduro, with U.S. support , to make gradual changes within Venezuela and the country's relations with the U nited S tates.
What is not likely to change, however, is the flow of oil from Venezuela to the United States. Chavez's death does not represent a threat to oil supply from Venezuela. The country remains an important energy exporter, and it depends on that income. Venezuela's relations with its neighbors - Brazil, Colombia and Cuba - will likely continue unchanged in the short term, precisely because Venezuela's commercial relations are too important. If Maduro wins the presidency, a hard stand vis--vis the United States will benefit him and his party politically, and will represent an escape valve for many Latin American citizens who feel the continent's prosperity has done little for them. But this should not deceive the United States.

Chavez was, in a way, a one-of-a-kind man, and his power stemmed from his personality. There is no one who can take his place and whoever comes next will need to build coalitions at home and abroad to maintain legitimacy .
This is an opportunity for change, and it must be seized with thoughtfulness and diplomacy.

--- XT: No Legitimacy Now

Close election and declining economy are taking Maduros legitimacy Meacham, 13 --- director of the Americas Program at the Center for Strategic and International Studies (4/16/2013, Carl, Venezuela
Post-Election: Can Maduro Govern? http://csis.org/publication/venezuela-post-election-can-maduro-govern, JMP) Surprising many analysts and pollsters, Henrique Capriles of the Democratic Unity Roundtable (MUD) secured over 49 percent of the vote compared to Nicolas Maduros 50.6 percent. Maduros narrow victory portends trouble in consolidating his power as Venezuela's president and holding together the ruling United Socialist Party of Venezuela (PSUV). Capriles has called for a recount of the votes, citing the close margin and alleged widespread irregularities. This has thrown into question how Venezuelas National Electoral Council (CNE)whose director has already stated that the results are irreversiblewill respond. Although few expect a recount to overturn Sunday's result, Maduros

mandate to lead the country.

weak showing means that he has little or no

Q1: What can we expect in the short term? A1: Capriless call for a recount has raised many questions about how the current government might proceed. Though Capriless campaign cites over 3,000 instances of electoral mischief, and has implied that there were many more, at this time there does not appear to be enough votes to be found to overturn the result. Unless it can be demonstrated soon that Maduro committed massive fraud, given Venezuelas votin g system which prints a paper ballot after voting in case of a recount, it will be difficult for the opposition to make the case that the current government stole the election. Reports circulated Monday that Maduro would move to have himself sworn-in before any audit can take place, calling into question the government's intentions regarding a recount. Given the close finish, Maduro's rush to be sworn-in makes for a very tense political climate. Q2: Where does the MUD go from here? A2: Capriless

strong showing will likely boost the MUDs efforts in the short-term and will likely see new opposition-led efforts to thwart government initiatives under the new president. Capriles himself will likely be at the head of these efforts and will likely continue to hammer away at the legitimacy of Maduros victory .
But longer-term prospects for the party are more difficult to gauge. Maduro will now be president until 2019 and legislative elections will not take place until 2015, giving the opposition few opportunities to seize momentum from yesterdays showing into future races. If the MUD is able to capitalize on its strong showing, if

Maduro fumbles with his handling of the economy during the beginning of his presidency, and if demonstrates that he is unable to keep his coalition together, the opposition may face better electoral prospects moving forward. But with the PSUV still firmly in control of all branches of the government, the MUD still has a difficult road ahead.
Q3: How will Maduros showing affect his ability to govern? A3: In many ways, the

results reflect a disaster for Maduro and likely signify the continued decline of Venezuelas economy. The results also mean that political divisions within Maduro's coalition will worsen. Maduros lack of political experience and weak political base caused many to wonder how he might hold
together the numerous factions that make up the PSUV, even with an easy victory. Now, with the elections' close results, how Maduro responds to voters frustrations, from high inflation to rising violent crime rates, will come under increasing scrutiny. If Maduro is unable to secure quick improvements in these arenas, he may find himself facing a quick backlash from former supporters. Diosdado Cabello, head of the National Assembly and widely considered Maduros main rival, raised eyebrows by tweeting during election night that the PSUV needed to undergo a perio d of selfcriticism. This was viewed by many as Cabello trying to increase his appeal with those moderate Chavistas who voted for Capriles.

Lacking the strong base of support and resounding electoral victories that Chvez enjoyed, Maduro is likely to find rival factions within the PSUV more assertive. Add to this a reinvigorated opposition, and prospects for Maduros ability to run the state appear poor at best.

Maduro is politically weakeconomy, corruption, social inequality Roberts and Daga 13Research fellow for economic freedom and growth in the center for international trade and economics,
visiting senior policy analyst for economic freedom in Latin America at the Heritage Foundation, respectively (James M., Sergio, Venezuela: U.S. should push president Maduro toward economic freedom, TheHeritageFoundation, 4/15/13, http://www.heritage.org/research/reports/2013/04/venezuela-us-should-push-president-maduro-toward-economic-freedom) Hugo Chavezs hand-picked successor, former trade union boss Nicols Maduro, appears to have defeated Governor Henrique Capriles by a narrow margin in a contentious and hard-fought special election on April 14. Venezuela

is in such shambles after 14 years of seat-of-the-pants mismanagement that Maduroassuming his victory is confirmedmay ultimately be forced to pursue more moderate policies and seek help from the U.S. to restore stability.

The Obama Administration and Congress should exploit this opening by using U.S. leverage to push Venezuela to turn from Chave zs failed experiment in oil-cursed[1] 21st-century socialism toward economic freedom. An Economy in Ruins

The foundations of economic freedom in Venezuela have crumbled. When Chavez took office in 1999, Venezuela scored 54 out of 100 possible points in The Heritage Foundation/Wall Street Journals annual Index of Economic Freedom. Today, however, after 14 years of Chavezs soft authoritarian populism, Venezuela merits a score of just 36 points. This nearly 20-point plunge is among the most severe ever recorded by a country in the history of the Index. Its 2013 rank174th out of 179 countriesplaces Venezuela among the most repressed nations in the world.[2] Venezuelas dismal economic freedom score is reflected in statistics that translate into real-time hardship for Venezuelans, who must spend more of their incomes on higher prices for necessitiesif they can find them on empty store shelves. There are scarcities of nearly all staple food and fuel products. In fact, according to the Banco Central of Venezuelas (BCV) shortages index,
Venezuela faces the most severe food shortages in four years.[3] And what food is available comes at a price: Mary OGrady re ports in The Wall Street Journal that over the past 10 years inflation in food and nonalcoholic beverages is 1,284%.[4]

Financial disequilibrium in Venezuela is the result of a sharply widening fiscal deficit that reached almost 15 percent of gross domestic product (GDP) last year.[5]
Government control of the formerly independent BCV also contributed to a massive expansion of the money supply. There are anecdotal reports in Caracas of people paying as much as 23 bolvars for one U.S. dollar in the black market as of early April. The official rate is just 6.3 bolvars per dollar and that is after a significant 32 percent devaluation in February.[6]

These problems were aggravated by Chavezs foreign adventurismwhich drained billions of

petrodollars from the economy to keep afloat the failed economy in Fidel Castros Cubaas well as generous subsidies to his Chavista cronies in the region through such schemes as ALBA and PetroCaribe. Corruption and Weak Rule of Law As reported in the Index, political

interference in Venezuelas judicial system has become routine, and corruption is rampant. The landscape in Caracas and elsewhere in the country is littered with half-finished, publicly funded infrastructure and housing projects. The government funds needed to complete them often disappear. As government expanded under Chavez, corruption became institutionalized. Chavez doubled the size of the public sector, many of whose 2.4 million[7] employees have no real job other than to work to keep the regime in power. A World Economic Forum (WEF) survey found little trust among
businesses, politicians, the judicial system, and the police in Venezuela.[8] The tragic result is that Venezuela is now one of the most dangerous countries of the world. According to the Venezuelan Violence Observatory, in 2012 nearly 22,000 people were murdered.[9]

An inefficient and non-transparent regulatory environment that is hostile to private foreign direct investment obstructs long-term development and hampers entrepreneurial growth. The investment regime is tightly controlled by the state and favors investors from China, Russia, Iran, and other democracy-challenged countries.[10] Investor protection in Venezuela is ranked at 140 out of 144 countries, according to the WEF report.[11] In 1998, before Chavez took power, there were more than 14,000 private industrial companies in Venezuela; in 2011, after 13 years of extensive nationalizations and expropriations, only about 9,000 remained.[12]
The Chavez government did make one product very inexpensive for Venezuelans: Generous energy subsidies mean a car can be filled up with 15 gallons of gasoline for less than one U.S. dollar.[13] Although that might buy short-term political advantage for the Chavista government, in

the long term these energy subsidies are very destructive to future economic growth, since Venezuelan companies have a distorted cost base and thus cannot compete globally. Operations of the state oil company, PDVSA, have also deteriorated significantly under Chavez. When he took office, PDVSA was
producing 3.5 million barrels per day (bbl/d); today, it is down to 2.5 bbl/d.[14] Social Programs and Inequality Ironically, Chavezs

years in power did not result in much reduction of poverty and inequality. Although some measures of income inequality (such as the Gini coefficient) did improve under Chavez,[15] according to a recently published research paper by Darryl McLeod and Nora Lustig[16] that used data for 18 Latin American countries, market democracies such as Chile and Brazil were far more successful at reducing inequality and poverty than the populist Chavista regimes. Despite its vast oil wealth, Venezuelas economic growth performance has also been poor. Between 1999 and 2012, average annual per capita growth was just 1.1 percent, while in
the top four Latin American countries (Panama, Peru, the Dominican Republic, and Chile) the rate was 3.6 percent.[17] Not surprisingly, the rate of private investment in Venezuelaunder 5 percentis also one of the lowest in the region. In Peru and Chile, it is almost 20 percent.[18]

Maduro is politically tankedeconomy is in the rut and marginal victory discredits him Padgett 13Miami-based journalist and writer for TIME (Tim, Venezuelas Election: Even if Nicols Maduro won, he lost, TIME: World,
4/15/13, http://world.time.com/2013/04/15/venezuelas-election-even-if-nicolas-maduro-won-he-lost/) Here is the one unmistakable reality of Sundays special presidential election in Venezuela: even

if Nicols Maduro won, he lost. This race had a rarefied gauge, and it wasnt simply the vote tally. It was whether the authoritarian-socialist model left by the firebrand Hugo Chvez, who died in office because of cancer last month after a 14-year reign, can survive without his demigod presence. That is, his actual presence and not his reincarnation as a bird, as Maduro goofily claims the late Chvez appeared to him recently. By defeating his centrist rival Henrique Capriles by an embarrassingly tight margin of 50.7% to 49.1% after Chvez routed Capriles just six months ago by 11 points Maduro, whom Chvez had handpicked as his successor, laid bare two things about Chavismo without Chvez. The first is that el comandante, who always ran a onecaudillo show, failed to groom anyone who could fill his red beret politically. The second is that Venezuelans, with Chvezs blustering figure gone, now recognize the raft of economic and social messes he left behind. And that makes the political landscape ahead in Venezuela, which holds the worlds largest oil reserves, volatile if not potentially violent. Maduro, who to his credit said hed accept the full vote
recount Capriles is demanding, called his win a fair, legal and constitutional triumph, and it probably was, despite opposi tion concerns about the Chavista-packed National Election Council, known as CNE. But Capriles argued hed scored an equally important victory by exposing how vulnerable Chvezs United Socialist Party (PSUV) is in the absence of the late Presidents charismatic bond with i ts base. This

Capriles declared, is a sand castle.

system,

Yet however flimsy it may be and the Venezuelan opposition, despite Sundays impressive performance, is no reassuring rock, either

Maduro and the Chavista leadership, including military honchos who have strongly hinted they wont accept an opposition President, have insisted since Chvezs cancer was

diagnosed two years ago that only their leftist, anti-U.S. Bolivarian revolution is divinely anointed to rule. Now, with their humiliated backs against a wall, and bereft of the political tools their exalted leader possessed, the question is how heavy a hand theyll resort to in order to preserve Chavismos dominance and the petrowealth it presides over. The wild card is Maduro himself, whose lack of an electoral mandate means he has to worry not only about an emboldened opposition but also about challenges from inside his PSUV. Chvez was never quite the dictator his foes claimed, but he was notorious for measures like antidefamation laws that made insulting him a criminal offense. Maduro,

50, a former bus driver and union leader, is a diehard acolyte of Cubas communist regime and its rigidly vertical power structure; and as a result, says Javier Corrales, an expert on Venezuelan politics at Amherst College in Massachusetts, the fear is that hell go after dissent now to make up for his weak position, that hell see sabotage of the fatherland and the revolution all around him. Thats an especially valid concern, Corrales notes, since Maduros wing of Chavismo is actually not the strongest. Chavistas like the National Assembly president, Diosdado Cabello, who wields closer ties to business and the armed forces than Maduro has, may now smell blood in the water, making Maduro a potentially more defensive and authoritarian leader. But any new Venezuelan leader, mandate or no mandate, would chafe at the crises on his Bolivarian plate. Chvez certainly deserves kudos for using Venezuelas vast oil resources to reduce its inexcusable poverty. But his often reckless economic MO may have undermined that very crusade in the long run. L avish and indiscriminate social spending has spawned a currency debacle the street exchange of more than 20 bolvares to the U.S. dollar mocks the official rate of just over six to the dollar which in turn has helped make Venezuelas inflation rate, which consistently tops 20%, among the worlds highest. Chvezs nationalization of hundreds of private companies has left the countrys nonoil sector woefully unproductive, but even the state-run oil monopoly, Petrleos de Venezuela, suffers from significant underinvestment. Food shortages, energy blackouts and infrastructure breakdowns have become increasingly common as has official corruption, the plague Chvez came to power decrying. Some analysts insist the economic perils are exaggerated. Opponents of the Venezuelan government are hoping for an inflation-devaluation spiral that will help bring down the

government, Mark Weisbrot, director of the left-leaning Center for Economic and Policy Research in Washington, D.C., wrote recently in the Guardian. But none of these

problems present a systemic threat to the economy. Others, however, arent as sanguine: many ratings agencies now consider V enezuelan debt among the riskiest in South America. And thats hardly helped by the security emergency Chvez let fester during his presidency, which has saddled Venezuela with South Americas highest murder rate and made Caracas one of the worlds most dangerous capitals today. The violent crime crisis, in fact, points up Chavismos core flaw perhaps better than any other: Chvezs subordination of de mocratic pillars like the legislative and judicial branches to his whims has handed heirs like Maduro a more institutionally dysfunctional Venezuela. If voters were trying to tell Maduro and the Chavistas anything on Sunday, its that Chvezs demise has made it more apparent to them that his revolution wasnt the 21st century socialism he insisted it was. Early on in Chavezs reign, I often sat down with his younger presidential aides and asked them about the international communitys fears that he aspired to be the next Fidel Castro something Chvez in later years would freely admit. Back then most of those Chavistas winced: Fid el is the old Latin American left, they sniffed. Or about growing rumors that Chvez wanted to nix presidential term limits and rule for life. Thats exactly what he later did, but back then they insisted, No, he wont, that would be a return to Latin Americas bad old caudillo days. Or that hed nationalize large swaths of Venezuelas economy and forge bosom-buddy alliances with human-rights pariahs like Iran just to spite the U.S. It all came to pass, of course but back then, I heard denial on all counts from the 21st century socialists. Today, if I ever mention this to Chavistas, they dismiss my excessive bourgeois thinking. To which I can only say after Sunday: it looks like Venezuelans would like to see more bourgeois thinking. Maduro may well be savvy enough to get that (though his rather boorish campaign attempts to convince voters that the unmarried Capriles is gay make me wonder). But the irony is that a large bloc of voters may well consider the 40-year-old Capriles who stumped for the socialist-capitalist third-way project that has proved so successful under more moderate leftist leaders in Brazil to be a more 21st century socialist than Maduro is. Either

way, Sunday left little doubt that while Chavismo narrowly won a presidential election, it certainly lost any divine claim to rule. And that was the voters talking, not a bird.

Maduros credibility is low economic reforms boost it Lees 4/15 - an attorney in Washington, D.C., and editor of the comparative-politics blog
Suffragio.org(Kevin, If He Holds on to Victory, Maduro Will Have an Extremely Hard Job, The Atlantics, Apr 15, 2013, http://www.theatlantic.com/international/archive/2013/04/if-heholds-on-to-victory-maduro-will-have-an-extremely-hard-job/274984/, Daehyun) But the curse is now on Maduro. Despite a flowery and defiant victory speech late Sunday night after Venezuela's National Election Commission declared him the winner with just 50.66 percent of the vote to 49.17 percent for his aggressive challenger Henrique Capriles, Maduro's tenure in office, whether it lasts six days or six years, will be haunted with the doubt of half the nation's voters. In the short term, he faces an immediate crisis over the audit of election results that could further delegitimize his victory. Capriles defiantly refused to accept Sunday's election results in an early morning address to the nation. Wielding a thick stack of alleged election day violations, Capriles demanded a recount of 100 percent of the votes. While he stopped short of declaring victory himself, he ominously noted that his campaign had a different count of the results. Venezuela's army made clear last night that it was siding with Maduro for now, but that could change if the audit doesn't line up with the election commission's declarations. Maduro was always going to face an economic crisis in the long run. But now, just five weeks after Chvez's death, Maduro faces a governability crisis as well. If his election is upheld and he serves until the end of his term in 2019, Venezuela will have marched through 20 years of chavismo. Maduro takes office with an economy under siege -- the country has become increasingly reliant on imports; PDVSA, its state-run oil company actually produces less oil today than it did when Chvez took office; both international finance markets and Chinese lenders seem unwilling to fund a growing public debt; and the country is plagued with growing inflation that was already in double digits before the government officially devalued its currency in February and a informally devalued it even more in March. It's far from certain that Maduro is up to the task of salvaging it all from a major economic crisis or recession. That half the nation believes Capriles won certainly won't help matters. It will make Maduro's position even weaker within the inner guard of the chavistas who run Venezuela's government, and Maduro's weak victory essentially makes chavismo a lame-duck movement more than ever. But though Venezuela seems in dire need of at least some basic changes in economic policy, Venezuela's problems run far deeper in its society than even the most surgical reforms could fix. When the

smoke clears, the deeper curse Maduro faces will come from neither Maracapana nor Capriles, but the curse that began in 1918 with Venezuela's oil exporting prowess -- the resources curse. At first glance, Venezuela's history makes it seem like any other South American country. Independence won in the 1810s. Check. Civil war between "conservative" and "liberal" oligarchs throughout the 19th century. Check. Military-backed caudillos in the early 20th century. Check. Gradual advance of democracy in the late 20th century. Check. But though Venezuela shares many of the difficulties that its neighbors have faced, it assumed an additional macroeconomic burden as a petro-state with complications that plague Venezuelan governance to the present day. Although Chvez came to power proclaiming a new, 'Bolivarian,' socialist fifth republic, he in many ways simply replicated what came before -- a relationship between the government and the governed whereby Venezuela's leaders trade a slice of the country's oil wealth in exchange for the political support it needs to win and retain power. That's why the fiercest battles over chavismo came not in 1998 when Chvez was first elected, but in 2002, when Chvez took direct control over PDVSA. That year saw Chvez briefly fall from power for 47 hours during an aborted coup and, later, a quixotic general strike among PDVSA employees that caused a minor recession. Chvez responded by replacing most of PDVSA's employees with loyalists and, increasingly, has used the oil company as a direct source to disburse funds for social programs, bypassing the formal government budgeting process. Before 1958, the system was based on the caudillismo of military leaders like Marcos Prez Jimnez. For the next 40 years, the system was based on a two-party oligarchy, split between the nominally center-left Democratic Action and the nominally center-right Copei. Chavismo marked a rupture from this system in two ways. First, he diverted a larger share of Venezuela's oil wealth to the poor than ever before -- although the deployment of those funds was never incredibly efficient, nor was it without corruption. Secondly, he flattened the system through his own personality cult. PDVSA, the state oil company, has a stronger brand in Venezuela than the PSUV, the governing United Socialist Party. It was Chvez personally who doled out the gifts. It's the second part that will make Maduro's task especially difficult. Chvez would have been a hard act for anyone to follow, but Maduro is a bland apparatchik in contrast whose legitimacy, so long as he remains president, will forever be challenged by his narrow victory . He ran a largely defensive campaign, wrapping himself in Chvez's legacy. Provided that his victory is upheld, it's hardly a mandate forchavismo, let alone madurismo, but it's not at all clear whether chavismo would ever actually work without Chvez, the personal embodiment of the latest iteration of Venezuela's petro-state clientelism. Maduro's weakness means it's more likely than not that Venezuela is headed for tough times ahead, even beyond the economic turmoil. Maduro spent negligible amounts of time advocating anything more than the broadest slogans, but the opposition refrained from calling from any radical departure from Venezuela's fundamental system, offering essentially a more workable chavismo that retains social welfare programs, but with less crime and a better business climate.

--- XT: Expanding Oil Production Saves Maduro

Expanding oil production is key to sustain Maduros presidency Kalms, 13 --- analyst specializing in Middle East and Latin American national security affairs, Masters in International Affairs from
Colombia (3/29/2013, Dominic, Hot Issue: After Chvez: Succession in Venezuela, http://www.jamestown.org/single-hotissues/?tx_ttnews[tt_news]=40669&tx_ttnews[backPid]=61&cHash=284ee84f6ffe1c0745b3f186a09e1dff, JMP) Oil After Chvez

Oil not only plays an important role in Venezuelan foreign policy but is quite literally the economic lifeline of the country, accounting for 94 percent of total exports, 50 percent of its the budget
and 30 percent of its GDP; it is estimated that Venezuela has the largest oil reserves in the world with 297.4 billion barrels of extra-heavy crude and bitumen in the Orinoco Belt. [6] Oil

essentially propelled Chvez into the presidency and kept him in power as he tapped the cash flow from the state oil company Petroleos de Venezuela (PDVSA) to initiate generous domestic spending programs. If Maduro expects to benefit similarly from this vast oil reserve, he will have to address Chvezs reckless energy policies. From 1998-2013 Venezuela witnessed a 40 percent decline in total crude exports and a 30 percent decline in total crude output costing the government billions in revenue. In addition, because
Venezuela heavily subsidizes its domestic fuel, their gas prices are the cheapest in the world at $0.06 per gallon of premium gasoline, which led to a 39 percent increase in domestic oil consumption over the last decade and further reduced supplies available for export (Bloomberg, February, 13). [7]

Equally problematic is the Chavismo policy toward international oil contracts and International Oil Companies (IOCs). Chvez used oil as a tool of foreign policy, creating organizations like PetroCaribe and the

Bolivarian Alternative for the Americas (ALBA), which allow strategic allies of Venezuela to purchase Venezuelan oil under generous terms, such as paying 5 percent to 50 percent of the bill within three months and 25 years to pay off the rest, at one percent interest (Council on Hemispheric Affairs, July 22, 2008). These generous subsidies end up costing the Venezuelan government over $4 billion a year in lost revenue. In 2007 Chvez went even further with his socialist policies when he made the decision to force foreign oil companies to give PDVSA a 60 percent share in all production projects (Energy Information Agency, October 3, 2012). This caused a flight of foreign investment capital and a technical brain drain as foreign companies were forced to either accept this new Production Sharing Agreement (PSA) or surrender their assets and flee. Unable to accept these terms, many multinational oil companies such as ConocoPhillips and ExxonMobil were forced to exit the Venezuelan oil market, losing billions in revenue and assets, which Chvez then nationalized (El Universal [Venezuela], September 21, 2012). Immediate changes to these energy policies seem unlikely, particularly given the assurances from the President of PDVSA Rafael Ramrez, who told reporters outside the National Assembly on March 8 that while our government is here and the people remain in charge, our oi l policy will remain unchanged (InfoLatam, March 12). However,

if Maduro is to succeed as president and revive the

Venezuelan economy he will have to address these failed energy policies on three fronts. First, Maduro will need to find a way to bring back IOCs to Venezuela to boost production output and bring back technical expertise and foreign investment, while

ensuring he does not lose political credibility with Chavistas. In the long run Venezuela will need to renegotiate the PSAs with IOCs and relax their strict currency controls allowing companies to repatriate profits. Second, Maduro will need to decide if Venezuela will reduce the volume of subsidized petroleum products it exports to Petrocaribe and ALBA, which cost the government billions in lost revenue. However, if these subsidies are suspended or drastically reduced, it would cause gas price shocks for Venezuelan allies like Cuba and Nicaragua and likely cause political instability. It is therefore unlikely that Maduro will go this route. Finally, Maduro must decide if he can cut the domestic petroleum subsidies that allow Venezuelans to enjoy such cheap gas. This popular domestic social program has further eaten away at oil export profits. However, the last cut to domestic fuel subsidies in 1989 caused the El Caracazo riots in the streets of Caracas killing hundreds of people. [8] Economic Problems in a Post Chvez World

Beyond oil, Maduro will have to manage the shortages of everyday goods that have plagued Venezuela for decades. It seems likely that some time post-election, Venezuela will see another currency devaluation in order to boost oil exports and gain hard currency to offset any increased cost of imports. The government is concerned about political instability from shortages and has been handing out hard currency recently in order to boost imports. This policy is unsustainable in the long term but the continued depletion of Venezuela's hard currency leaves little room for short term economic policy. Fiscal stimulus packages are inflationary, as is the continued devaluation of the currency, thus the only long term solution for Maduro will be to increase oil exports to gain enough dollar reserves and hard currency to stabilize Venezuelas economic imbalances.

Thumpers
Multiple issues thump Inflation, shortages, and crime CSM 5/17 News Source(Christian Science Monitor, Venezuela's Maduro still waiting on
Washington's recognition, May 17, 2013, http://www.csmonitor.com/World/Americas/2013/0517/Venezuela-s-Maduro-still-waiting-onWashington-s-recognition, Daehyun) With neither side showing any inclination toward compromise, the standoff between the two countries also shows no sign of ending. But Maduros long-term challenges are looming. Inflation in the socialist country is nearing 30 percent, there is public anger over the chronic shortages of basic goods, and the ballooning murder rate exceeds Europe and the United Statess combined. Maduro is going to have to tackle these problems if hes going to last as president, says Mr. Munck. [U]nless theres some change in the way he handles the situation, the US isnt going to budge.

Maduro Cred High

Maduro credibility is increasing OAS and US support is increasing Times of India 4/20 News Source(Backed by Latin America, Maduro sworn in as
Venezuelan president, Apr 20, 2013, http://articles.timesofindia.indiatimes.com/2013-0420/rest-of-world/38692755_1_nicolas-maduro-diosdado-cabello-presidential-election, Daehyun) SAO PAULO: In a strong rebuff to Washington's refusal to "recognize" Nicolas Maduro as the new president of Venezuela, leaders of the biggest Latin American countries, including Brazil, Argentina, Bolivia and Ecuador, on Friday attended his swearing-in ceremony in Caracas. Several South American presidents, including Dilma Rousseff of regional heavyweight Brazil, flew to Caracas on Friday morning from Lima, where they had gathered for an "extraordinary session" to discuss the impasse in Venezuela. At the meeting, the leaders issued a joint statement saying it "congratulated Nicolas Maduro for his election as president." The group also urged "all sectors involved in the electoral process to respect the official results of the presidential election". Later in the day, Maduro was sworn in for a six-year term before the National Assembly (NA). With 17 Latin American presidents and delegations from 47 countries present in the Venezuelan assembly, Maduro was administered the oath of office by NA chief Diosdado Cabello, and he received the presidential sash from Hugo Chavez's daughter, Maria Gabriela. During Maduro's inauguration speech, a man grabbed the microphone and was dragged away. Since morning hundreds of thousands people gathered on the streets of Caracas to show their support for the new president, who has received the backing of all countries in the region. The meeting in the Peruvian capital was an important development for the region as Maduro received the support of Unasur or the Organisation of South American Nations for his new government hours before he was to be sworn in to succeed the late Hugo Chavez who died of cancer on March 5. Before leaving for Lima, Maduro accused the opposition of triggering post-election violence with the help of the US embassy in Caracas. "We have stopped a coup in its first stage. They are beaten, but they are coming back with a new attack," Maduro said before flying to Peru for the meeting of South American leaders. Since Sunday, when Maduro was declared winner in the election, the country has been in a state of flux with the country's opposition refusing to accept the result and indulging in violence in Caracas and other cities. The situation became tense as Washington threw its weight behind the Venezuelan opposition by supporting its demand for a "vote by vote" recount and the European Union suggesting an audit of the vote. The governments of Brazil, Peru, Ecuador, Colombia, Bolivia and Argentina, among others, had recognized Maduro's victory on Sunday itself, but Washington did not. With the US and EU continuing to raise doubts about the validity of the Venezuelan election on Thursday, the Lima meeting of the Latin American leaders decided to fully support Maduro even as the head of Venezuela's national election council (CNE) ordered to widen an electronic audit of the vote. The CNE announcement took the heat out of a dispute caused by the opposition candidate Henrique Capriles Radonski who lost the election to Maduro by 1.8% margin or 300,000 votes. "We do this in order to preserve a climate of harmony and isolate violent sectors that are seeking to injure democracy," said Tibisay Lucena, the CNE chief, insisting that the expanded audit was not a recount, but would cover all ballot boxes not audited on election day. Maduro also had the backing of the country's Supreme Court, which said it was impossible to conduct a manual recount. Capriles, who has been demanding a "vote by vote" manual recount since Sunday, accepted the CNE decision on Thursday. In Lima, the Unasur meeting too welcomed "the decision of the CNE to implement a system that permits a full audit of election results." Nearly all Latin American countries have recognized Maduro's election,

Brazil, Argentina, Peru, Ecuador, Colombia, Chile, Bolivia and Uruguay among others. With the Lima meeting sending out a strong message against any outside "interference" in Venezuela or South America, the Organization of American States (OAS) too changed its position on Thursday, with its chief Jose Miguel Insulza recognizing Maduro as the winner of Sunday's presidential election. "We are respectful of the legal and constitutional framework of Venezuela" said Insulza, who had earlier backed the opposition's demand for a recount. With Latin America closing ranks behind Maduro, Washington too softened its stand on Thursday as US secretary of state John Kerry expressed hope that Venezuela would keep an "open door" whatever happens, but said an audit of the vote would help provide confidence that Maduro's victory "has been fairly arrived at."

Maduros credibility isnt affected by the US not recognizing him CSM 5/17 News Source(Christian Science Monitor, Venezuela's Maduro still waiting on
Washington's recognition, May 17, 2013, http://www.csmonitor.com/World/Americas/2013/0517/Venezuela-s-Maduro-still-waiting-onWashington-s-recognition, Daehyun) A lot of Venezuelans seem to think that a close election is not a valid election, so this leaves room for Maduros critics to question it, says Mark Weisbrot of the Center for Economic and Policy research, an independent think-tank in Washington. Mr. Weisbrot says he thinks the US is trying to take advantage of this situation. Far from putting a dent in Maduros credibility, other observers believe that continued tensions between Venezuela and the US serve as a positive for a president whose supporters have come to expect belligerence towards las imperialistas. In many ways John Kerry is doing Maduro a favor by not recognizing him, says Jones. The USs refusal to cooperate plays into the socialists broader narrative that the US is conspiring to defeat Venezuelas revolution.

Plan kills Credibility

The plan kills Maduros credibility hardline approach is key Fox News Latino 4/17 News Source(U.S.-Venezuelan Relations Remain Tense Under
Maduro, Experts Claim, Apr 17, 2013, http://latino.foxnews.com/latino/politics/2013/04/17/us-venezuelan-relations-remain-tenseunder-maduro-experts-claim/#ixzz2b4pBZ0wz, Daehyun) Chvez could overcome the detractors because he was viewed as a national hero, Maduro doesnt have that, said Larry Birns with the Council for Hemispheric Affairs. To maintain his credibility within the Chavista movement and fend off opponents from within his own party, Maduro needs to maintain his opposition to the U.S. and continue to paint Americans as imperialist intruders, experts said. Hes got to worry about the opponents that will pose a threat to his rule, Birns said. These are difficult times for Maduro and no one knows how the scenario will play out.

American Politics

Plan Popular
Bipartisan support for counter-narcotics cooperation Noriega 5 Assistant Secretary for Western Hemisphere Affairs(Roger, Plan Colombia:
Major Successes and New Challenges, May 11, 2005, http://20012009.state.gov/p/wha/rls/rm/2005/q2/46564.htm, Daehyun) Good afternoon. Mr. Chairman, Ranking Member Lantos, members of this distinguished Committee, I want to first express our appreciation for your leadership and ongoing interest in our policy toward Colombia and your steadfast support. Your willingness to receive Colombian government officials here, and your continued interest in sending Congressional delegations to Colombia, is a crucial foundation for our Colombia strategy. I would be remiss if I did not also express our appreciation for the many contributions Speaker Hastert has made. U.S. policy toward Colombia supports the Colombian governments efforts to defend and strengthen its democratic institutions, promote respect for human rights and the rule of law, intensify counter-narcotics efforts, foster socio-economic development, and address immediate humanitarian needs. We seek to help Colombia end the threats to its democracy posed by narcotics trafficking and terrorism. The success of our policy is due in no small measure to the continuing bipartisan support we have received from the Congress for our programs in Colombia.

Strengthening relations with Venezuela has bipartisan support Noriega 4 - ASSISTANT SECRETARY OF STATE, BUREAU OF WESTERN HEMISPHERE
AFFAIRS, U.S. DEPARTMENT OF STATE(Roger, THE STATE OF DEMOCRACY IN VENEZUELA, Jun 24, 2004, http://www.gpo.gov/fdsys/pkg/CHRG108shrg96730/html/CHRG-108shrg96730.htm, Daehyun) Mr. Noriega. Thank you very much, Mr. Chairman. First of all, I apologize for being tardy. I will not offer any excuses. We thank you, Mr. Chairman and Senator Nelson, for your interest and engagement in U.S. policy toward Venezuela. That is very critical. I will summarize my written statement, Mr. Chairman, and submit it for the record. I want to express my appreciation, first and foremost, for your clear and thorough statements, both of which I think reflect a strong bipartisan consensus behind our policy toward Venezuela, and it reflects an agreement, a meeting of minds between the executive branch and the legislative branch, which I think is also very helpful as we pursue our interests. My statement will seek to update you on the current conditions and current challenges that Venezuela is facing and our efforts to help the Venezuelan people strengthen their democracy and bring a peaceful end to the political unrest in that country. My colleague, Ambassador Maisto, will address the important role that the Organization of American States has played and will continue to play in Venezuela. Mr. Chairman, the administration's policy in Venezuela has been and remains to work with our international partners, led by the OAS, the Friends of the Secretary General, coordinated by the Brazilian Government, and the Carter Center, to support the efforts of the Venezuelan people to achieve a constitutional, democratic, peaceful, and electoral solution to the current political polarization in that country, as called for by OAS Resolution 833. Mr. Chairman, our engagement is entirely consistent with the commitments that we and the Venezuela Government have made under the Inter-American Democratic Charter, and it is a statement of solidarity with the Venezuelan people who, as all of the people of the

Americas, have a right to representative democracy. In addition, our bilateral interests are to recover a cordial, constructive and mutually-beneficial relationship that Venezuela and the United States had enjoyed for decades.

Mercosur DA

UQ Collapse Inev
Mercosur is collapsing on its own the US isnt relevant LBC 6/6 - a division of the Latin Trade Group, offers key market intelligence beyond the daily
headlines, through extensive rankings, indexes and statistics(Latin Business Chronicle, The beginning of the end for Mercosur?, Jun 6, 2013, http://www.latinbusinesschronicle.com/app/article.aspx?id=6056, Daehyun) Argentinas Interior Minister Florencio Randazzo announced yesterday that his government would be renationalizing two rail concessions held by the Brazilian company Amrica Latina Logstica (ALL). The announcement came almost a year after the country renationalized a 51 percent stake in oil company YPF from Spains Repsol, and amid a number of high-profile cases of Brazilian companies abandoning the Argentine market. The decision was poorly received by Brazilian industries, who are increasingly exhausted by the difficult of conducting business with their Mercosur associate. The move also comes at a time when Brazilian business seems more interested in bilateral agreements with other South American countries, say analysts. Dysfunction within Mercosur especially disputes between Argentina and Brazil is nothing new. The bloc long ago abandoned its founding mission of a common market with the free movement of goods, services, and currency across borders. More often the story today is of protectionism, trade disputes, and diplomatic rows. Both countries have established long lists of exceptions to free trade, and goods often get stuck at the borders of member countries for weeks. Brazilian companies have also increasingly been frustrated by the Argentine market. In April, Brazilian mining giant Vale abandoned a $6 billion potash mining project in the country citing inflation and currency controls as impediments to doing business. In late May, Brazilian state-oil company Petrobras considered divesting its Argentine assets, but abandoned the idea after failing to secure a buyer. Officially the Argentine government said it seized ALLs lines due to the companys serious and repeated failure to comply with the terms of their contract. In line with rationales of other Argentine nationalizations, it said that company had underinvested in the tracks, and had failed to pay a number of fines and royalties. The Brazilian company which has held the lines since 1999 said the countrys political and economic situation had made the concession impossible to run and that it was looking for buyers. In response to the move by Argentina, the Industry Federation of the State of Sao Paulo (FIESP) said Brazil should free itself from the straitjacket of Mercosur, adding this country is going nowhere with partners like Argentina and Venezuela. In an op-ed the editorial board of O Estado de Sao Paulo, said the decision came at a particularly difficult time for Argentine-Brazilian relations, and gave more ammunition to critics of the fractious trade bloc. The op-ed also notes that this comes at a crossroads for Brazilian business: After years of seeking protection from the government, Brazilian industry is realizing the internal market is no longer sufficient to guarantee its future success. As their share of exports is falling, and they lose market share in South America, the industry is now pushing the government to pursue more bilateral agreements. Regional attention for trade integration has largely moved from the bloc to the open-market and Asia-focused Pacific Alliance, consisting of the continents Pacific-coast economies. To that end, Mercosur junior partner Uruguay announced this week that it would be seeking full membership in the Pacific Alliance. The country, which already has free-trade agreements with the four Pacific Alliance members (Chile, Colombia, Mexico, and Peru), cited inactivity

and protectionism within Mercosur and said they believed the Pacific Alliance would offer great integration potential for their economy.

Mercosur is dead and Argentina has killed it Barillas 7/15 Spero News editor, former US diplomat, who also worked as a democracy
advocate and election observer in Latin America. He is also a freelance translator(Martin, Argentina is killing MERCOSUR trade group, Spero News, http://www.speroforum.com/a/YRMQEHBXOV48/74181-Argentina-is-killing-MERCOSURtrade-group#.Uf_kJZLOuaU, Daehyun) Speaking for a Brazilian business association in Sao Paulo, Rubn Barbosa accused the government of Argentina of dealing a mortal blow to MERCOSUR the regional grouping that was originally focused on economic integration that has since become a political forum for the regions leaders. Over the last few months, said Barbosa, there were measures adopted that killed MERCOSUR. Argentina is responsible for putting an end to MERCOSUR. Barbosa, who is the president of the foreign trade council of the Sao Paulo Industrial Federation, was interviewed on Radio Mitre a station in Buenos Aires. According to Barbosa, MERCOSUR of today, as an instrument of commercial policy, is done. It doesnt serve to open up trade, having become a political forum. What we have seen is the judgement on Paraguay and the entry of Venezuela without negotiation or accord. He also denounced restrictions imposed by Argentina, while also referring barriers certain Argentine products (e.g. wine, grapes, citrus products, and medications) encounter in entering the Brazilian market. Barbosa recalled on June 30 that the Asuncin Treaty had opened up trade between the countries of MERCOSUR. The current situation, said the business leader, is quite the opposite. Uruguayan business against MERCOSUR Uruguayan business sectors have denounced the 45th MERCOSUR Summit Meeting for having focused on political issues while putting trade issues on the back burner. This has meant, say some Uruguayan business interests, that MERCOSUR has not functioned as it should. We believe that MERCOSUR is not working as it should on the trade barriers between countries, which do not produced exchange but impedes it, said Teresa Aishemberg the chief executive of the Union of Uruguayan Exporters. She added that the leaders of the internal block formed by Argentina, Brazil, Uruguay and the new member, Venezuela, should have focused on accelerating trade and eliminating barriers found within them that impede free markets. Another failure on the part MERCOSUR, according to the Uruguayan association, is that it has not encouraged foreign trade. Aishemberg said Since the 1990s, tariffs have gotten better within MERCOSUR, thus increasing trade, but now we need them to honor their promises. Economic and trade issues were given just a few lines in the final document issues by this years MERCOSUR summit meeting. The document noted a perceived need to proceed towards facilitating trade within MERCOSUR, while emboldening the regions economy. The statement also promised joint action in addressing the current world economic crisis while reaffirming the governments interest in signing a balanced and mutually beneficial trade agreement with the European Union. Bolivia is now in the process of joining MERCOSUR, which was originally conceived as a grouping of the southernmost countries of South America. In 2012, following the impeachment and removal of Paraguays President Fernando Lugo, Paraguay was suspended from MERCOSUR. In its absence, Venezuela was admitted despite Paraguays previous objections. Adding Bolivia would continue MERCOSURs leftward and anti-American course. Ever since mid-2012, Argentina has waged a soft trade-war against Paraguay by imposing onerous inspections and other delays for Paraguayan exporters who

must pass their products through Argentine territory on its way to the world market.

Link Turn
Current Venezuelan policies wreck the Mercosur the plans reforms solve Kotschwar 12 research fellow, has been associated with the Peterson Institute for
International Economics since 2007(Barbara, Will Venezuelas Entry Be Mercosurs Swan Song?, Jul 31, 2012, http://www.piie.com/blogs/realtime/?p=3035, Daehyun) Today, July 31, 2012, Venezuela officially becomes a full member of the Mercosur customs union. But Venezuelas accessionnearly a decade in the makingeffectively puts to rest the pretense of Mercosur as a serious economic integration arrangement. Mercosur, the acronym for the Common Market of the Southern Cone, started promisingly enough, a political triumph of cooperation over conflict with former nuclear arms competitors Brazil and Argentina pledging instead to work towards a common economic future. But in recent years, Mercosur has gone through backsliding and missed out on opportunities seized by other Latin American countries engaging in trade deals with Asia and other parts of the world. Adding oil-rich Venezuela, with its disdain for trade liberalizing initiatives, would likely not contribute to a further easing of trade restrictions. In addition, membership by Venezuelaled by the increasingly autocratic and eccentric Hugo Chavezwould make a mockery of the compacts stated commitment to democracy. The Treaty of Asuncin, signed on March 26, 1991, created a free market among Argentina, Brazil, Paraguay, and Uruguay and bound them together with a four-tiered common external tariff, common trade rules and regulations, and the objective of macroeconomic policy coordination. Mercosur was seen at the time as a shining emblem of Latin Americas new regionalisma new type of Latin American economic integration arrangement that, unlike its predecessors in the 1960s and 1970s (think: the Andean Pact, the Latin America Free Trade Association, or LAFTA, or the Central America Common Market, or CACM) was aimed towards liberalization, competitiveness, and global integration. Mercosur has had its detractors. The World Bank famously published a paper whose title implied that Mercosur would bring down world welfare as a result of its potential for trade diversion.1 But many studies predicted welfare gains for Mercosur members from further integration and liberalization.2 Mercosur is also largely credited with bringing Venezuela back from the brink of dictatorship. In 1996, in a meeting at San Luis, Argentina, Mercosur added a so-called democratic clause, requiring democratic institutions for membership. In the period 19901999, intra-regional exports grew by an average annual rate of 24.5 percent, compared to exports to the rest of the world, which grew by 8.7 percent. In the 2000s, intraregional exports grew by 6.3 percent, compared to growth for the rest of the world of nearly 10 percent. Intra-regional trade in Mercosur took off in the early days, initially comprising 5 percent of the regions exports in 1990. Intraregional flows reached a high of 25 percent of trade flows by 1998. Intraregional trade has ebbed and flowed, however, largely with the fortunes of the Mercosur member economies, falling to a low of 11 percent of total exports in 2001 and leveling off at 15 percent in the last few years, displaced by dynamic exports to East Asia. As seen in the figure below, after initial success, Mercosur has stagnated. Mercosur has weathered many crises: the 1996 Paraguay coup attempt; Brazils 1999 devaluation; Argentinas 2002 currency crisis; and the 20082009 world economic slowdown. The customs union has periodically been dogged by economic tensions between the members that have caused key players Argentina and Brazil to bend Mercosurs rules to the extent that analysts have often predicted their break3. From Argentinas 3 percent statistical tax applied to imports (including from other Mercosur countries) in the 1990s, to recent nonautomatic import licenses from Brazil and Argentina, Mercosur members have applied

protectionist measures against each othermeasures that go against the law and spirit of customs unions. While Mercosurs flexibility may have allowed the union to survive several crises, it can also be seen as having eroded the integrity of the endeavor. According to the latest report from Global Trade Alert (GTA), which tracks trade protectionist measures, of Argentinas 142 red measures (measures that certainly discriminate) implemented since 2009, 72 targeted Brazil, at least 3 exclusively. Of Brazils 49 red measures, 5 affected Argentina (one targeted only Argentina and Uruguay). Uruguay, notably, levied no measures against Argentina or Brazil. Mercosurs trajectory over the past few years has increasingly differentiated it from the trade policies of several other Latin American countries, particularly those participating in the Alianza del Pacfico (Pacific Alliance) and the Central American countries. The Pacific Alliance is an agreement among Chile, Colombia, Peru, and Mexico to deepen integration in order to forge trade ties in the Asian region, supplemented by competitiveness and infrastructure strengthening measures. While the Pacific oriented countries have negotiated free trade agreements with partners ranging from the United States to the European Union to Japan and China, Mercosur remains mired in a decade-long negotiation with the European Union and a handful of framework trade agreements. While the combined GDP of the Pacific Alliance is slightly less than two-thirds that of Mercosur, exports are more than one-third higher. In fact, rather than enhance their portfolio of trade agreements, Mercosur has pursued the opposite strategy, with Brazil renegotiating and Argentina pulling out of ACE 55, their automotive trade agreement with Mexico, following trade deficits with Mexico in that sector. It is notable that Argentina nationalized Repsols share of Argentine oil company Yacimientos Petrolferos Fiscales (YPF) in the wake of an energy trade deficit. Venezuelas membership in Mercosur signals more of the same. In strategic terms, this union links the regions largest oil producer (Venezuela reportedly holds worlds largest oil reserves) and two main agricultural producers. This alliance could serve to integrate markets in the north of South America, a region that is still relatively undeveloped. It does not, however, bode well for further trade liberalization, transparency, or the rule of law. Venezuela slipped into full membership after Mercosur leaders, at the June 29 Mercosur Summit, temporarily suspended Paraguay, in response to what they called an institutional coup. This suspension was convenient for Venezuela, as Paraguays Congress had to date refused to ratify Venezuelas membership, which has been pending since Venezuela applied for membership in December 2005. Decisions in Mercosur are taken by consensus, and with lone holdout Paraguay removed from membership, Venezuela was in. On July 31, Venezuela will sign a Protocol of Accession to Mercosur and will have four years to adopt the common external tariff (CET) as well as all the Treaties, Resolutions, and Decisions that make up the Mercosur framework. Venezuela will immediately have a full vote in the consensus-based regime. In the next four years, Venezuela will need to adjust its tariff schedule to the Mercosur CET. According to World Trade Organization (WTO) statistics, currently Venezuelas protection of agriculture (15 percent average most-favored nation, or MFN, tariff; 16.6 percent trade-weighted) is greater than that of Mercosur (Brazils average MFN tariff is 10.3 and trade-weighted is 11.0 percent). On non-agricultural commodities, Venezuelas trade-weighted tariff of 11.4 percent is higher than Brazils 9.9 percent and lower than Argentinas 12.3 percent. Venezuela currently has a trade deficit with all Mercosur partners. Venezuelan President Hugo Chavez has established a commission responsible for assessing the strategic aspects of the national economy and the markets that will be open for Venezuela in the large South American region, under the principles of respect for asymmetries and technological gaps and complementariness of productive chains. This could signal a commitment to using Mercosur as a vehicle for addressing some of Venezuelas competitiveness deficitsor a desire to revert back to the types of production sharing arrangements see in the Latin American trade agreements of the protectionist trade policies seen during Latin Americas

import substation industrialization (ISI) period in the 1960s and 70s. Of certain interest to Venezuela is Mercosurs Program for the Integration of Production, created by Common Market Council Decision of December 2008. Its aim is to strengthen the complementary production of companies in Mercosur countries and provide support to small and medium enterprises that have not benefitted from the compacts market opening opportunities. While Mercosur members have publicly welcomed Venezuela, some in the region have expressed concern about its full membership. One concern relates to the integrity of the democratic charter. President Chavez has clamped down on opposition politicians and limited the media. Venezuela ranks 96th on the Economists 2010 democracy index and is characterized as a hybrid regime (Uruguay, the 21st, is a full democracy; and Brazil ranks 47th, Argentina is 51st, and Paraguay is 62nd in the category flawed democracies). Another concern is Venezuelas trade policy. Venezuela exited the Andean Community customs union in protest against its partners negotiations towards a free trade agreement with the United States and set up a barter arrangement, the Bolivarian Alliance for the Americas (ALBA), to be an alternative to the then ongoing Free Trade Area of the Americas negotiations. 4 Venezuela has also been less than responsive to international trade and investment institutions: Last week Venezuela completed its withdrawal from the International Center for Settlement of Investment Disputes (ICSID), the international forum for investor-state arbitration disputes. (The ICSID is referenced in Venezuelas bilateral investment treaties, or BITs, with Mercosur members, among others.) Jose Botafogo Goncalves, a Brazilian architect of Mercosur, expressed his misgivings to Brazilian newspaper O Globo: Venezuela doesnt meet the basic requirements to enter Mercosur, he said.Venezuelas problem is Chavez, who doesnt like free trade and wants to transform the bloc into a political platform. Mercosur has long been heading in that direction anyway, but Venezuelas entry may seal that deal . Former President Fernando Henrique Cardoso is famously quoted as saying, in the context of the Free Trade Area of the Americas (FTAA) negotiations, that Mercosur is our destiny.5 Venezuelas addition to Mercosur seems to indicate that this destiny will continue to be an inward-looking one.