Caracas Starts To Crack

With revenue sources vanishing, the military may take matters into its own hands.

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As Venezuela has plunged deeper into crisis, President Nicolas Maduro has managed to keep his grip on power in large part by placating key elements of Venezuela's military. Generals have been put in charge of ministries, state-owned enterprises, and other rent-generating opportunities. Defections and purges have rumbled quietly along, but core branches such as the Bolivarian National Guard and the intelligence service have remained loyal to the regime. 

Now, the well is drying up. Oil production has cratered under mismanagement. Venezuela is already late on more than $6 billion in bond payments, and creditors are beginning to circle. State-owned oil firm PdVSA, which owes billions to service companies and has defaulted on more than $2 billion in bonds, recently lost rulings against ConocoPhillips and a Canadian mining company that will pave the way for claimants to seize assets of Houston-based subsidiary Citgo. The Maduro government's announcement yesterday that it would devalue the currency was a remarkable admission that the state is broke. 

A Predata signal that anticipates major shakeups and incidents related to the Venezuelan military within a 30-day window has now hit its highest level since June of last year, when it spiked before a rogue criminal investigator hijacked a helicopter and attacked the Supreme Court in what was later understood to be an aborted coup attempt. In early August, the signal shot upward just days before a failed drone attack against Maduro. 

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Venezuela experts such as Vanessa Neumann at risk firm Asymmetrica have said that Maduro's crackdown on dissident elements in the armed forces has intensified. Just last week, the arrest of a prominent general in the military's counterintelligence service was captured on a cell phone and posted to Twitter. A backlash may be on the horizon.