The opposition party in Venezuela won the majority of seats in the National Assembly (Venezuela’s parliament) in national elections early in December.
It was a dramatic political and economic development in a nation where, for the past 17 years, socialists—Hugo Chávez and current president Nicolás Maduro— have controlled the legislative body.
With the opposition’s Democratic Unity Roundtable coalition, or MUD, sweeping 112 of the 167 seats, it remains to be seen how the balance of power between the executive and legislative branches will play out. A confrontation could trigger calls to remove Maduro in a referendum. Yet that “could also be hugely destructive,” notes Christopher Sabatini, an adjunct professor at Columbia University’s School of International and Public Affairs.
Most analysts found the elections, which were held during a deep economic recession and a deterioration in US-Venezuela relations, including diplomatic sanctions, surprisingly free and fair. Venezuelans don’t see a political power struggle as the best way to heal the nation’s ills—its main challenge being shrinking revenue from the country’s key oil and gas sector.
Venezuela’s oil production has declined by more than 350,000 barrels per day since 2008. Exports have been hit even harder. Margins are shrinking. Political and macroeconomic instability has reduced levels of crucial foreign investment in the sector. State-owned oil company Petróleos de Venezuela (PDVSA) could see a cash flow deficit of up to $20 billion in 2015, according to a recent report by Columbia University’s Center on Global Energy Policy.
All eyes are on the former opposition as it turns its attention to economic policies, rather than access to power. They “have the power of the purse, control the budget and can create more-transparent investment rules, even if the president rejects them,” says Sabatini.
Francisco Monaldi, a fellow in Latin American Energy Policy at Rice University’s Barker Institute for Public Policy, notes several areas where Venezuela’s energy policy has improved, including the elimination of subsidies to Caribbean and Latin American countries and having a higher percentage of cash flow back to PDVSA from oil sent to China in repayment for loans. “There’s also a public discussion about raising gasoline prices, and the company is asking to be allowed to increase the amount of dollars that it sells at a depreciated exchange rate,” Monaldi says.
All these factors may help reroute Venezuela’s economic future.