Venezuela Back From Brink as Top Court Reverses Shock Ruling
Venezuela Crisis Deepens, Bonds Sink as Maduro Ally Pushes Back
(Bloomberg) -- Venezuela’s top court reversed its decision to strip power from the opposition-led National Assembly in favor of the ruling socialist party, a move that critics say had driven the oil-producing nation to the brink of dictatorship.
President Nicolas Maduro announced the court’s move -- statements that removed earlier rulings transferring the assembly’s functions to the court -- on state television on Saturday. The decision came a day after the nation’s top prosecutor, a Maduro ally, labeled the Supreme Court’s March 29 move unconstitutional.
Maduro applauded the decision while warning regional leaders he wouldn’t accept any “meddling” into domestic affairs. He said he rejected “vulgar interventions” by foreign governments “that make demands on Venezuela while their countries are up in flames,” an apparent reference to protesters in Paraguay setting that nation’s congressional building on fire Friday night.
The court’s reversal came as small demonstrations flared across the capital for a second day amid calls from opposition leaders for more protests. “Here there was a coup d’etat and the streets must not go silent given this action that cannot be erased by a stroke of a pen,” National Assembly Vice President Freddy Guevara said in a statement.
One-Man Rule
Ravaged by an economic depression and food shortages for years, Venezuela has been on tenterhooks since the Supreme Court’s ruling further stoked claims by the opposition and foreign countries that Maduro is moving the government toward one-man rule. Worried investors have dumped the government’s bonds, and opposition leaders sought to capitalize on the chaos by calling on the military to “restore” constitutional order.
Anti-government student demonstrators clash with national guard officers during a protest on Friday, March 31.
The top court’s earlier move drew criticism from the U.S., Brazil, Colombia and Argentina, among others, and the Organization of American States labeled it a “self-coup.” Washington-based OAS scheduled a special meeting on Monday to review the events in Venezuela, convened at the request of more than a dozen member states.
Hundreds of protesters attempting to block Caracas’s main roadway clashed on Saturday with national guardsmen, who fired teargas and pepper spray onto the crowds. Guevara called the demonstrations the beginning of “non-violent, organized and sustained protest with which we exercise the necessary pressure to achieve change.”
Yet the calls to the street remained dwarfed by prosecutor general Luisa Ortega Diaz’s criticism a day before -- that the court ruling “ruptured” Venezuela’s constitutional order -- an almost unheard of public condemnation by a high-ranking government official of the direction the faltering country is heading. Maduro has long sought to use the courts to prevent congress from challenging his rule.
“It’s my duty to manifest concern of such event,” said Ortega Diaz, who was appointed to her post a decade ago by the late Hugo Chavez.
The public rebuke by the nation’s top prosecutor was, perhaps, the clearest sign yet that support is eroding for Maduro within the dominant socialist party that his mentor Chavez assembled over the last two decades. Analysts noted that high-ranking ruling party members have long presented a unified front, despite years of political unrest and economic hardship.
“This clearly constitutes a milestone in recent political Venezuelan history,” said Angel Alvarez, a political consultant.
Facing mounting criticism at home and abroad, Alvarez said Ortega Diaz’s comments suggest “there are much deeper internal conflicts within Chavismo than we are able to see.”
Foreign ministers from Argentina, Brazil, Uruguay and Paraguay, at an event in Buenos Aires, called on Venezuela to ensure the full separation of powers. Saturday’s Supreme Court reversal came as a result of international pressure on Caracas, said Argentina’s foreign minister Susana Malcorra.
The clash of powers in Venezuela has heightened investor concern that the fractured country is headed for default. Some said they worried that while Maduro has so far insisted on meeting foreign bond payments amid the economic collapse, a further escalation of the crisis may erode that determination.
The government’s benchmark bond due in 2027 declined 3.3 cents to 46.2 cents on the dollar on Friday, the biggest fall in two years, according to data compiled by Bloomberg. Bonds issued by the cash-strapped state oil company PDVSA, which has $2.5 billion of debt maturing next month, also declined. Its securities due in 2035 sank to 43.2 cents on the dollar.
Officials from Venezuela’s top court tried to tamp down fears of a power grab, insisting that recent rulings -- and their adjustments -- didn’t blur the lines of power. Reading a communique on state television, Supreme Court President Maikol Moreno said the decisions “have not deprived the parliament of its functions nor annulled it.”
Still, government opponents are quick to point out that missing from the rollback is a recent ruling that granted Maduro widespread powers to authorize oil joint ventures without congressional approval. The decision, also issued on March 29, provides a legal framework that could allow the embattled president to raise funds by giving him the authority to form new ventures -- potentially with allies including China and Russia -- that typically involve signing bonuses paid to the government.
“They are trying to sell off what’s left of the country’s oil wealth,” Elias Matta, an opposition legislator and member of the National Assembly’s oil committee, said in an interview. “The government is desperate for dollars and doing illegal business, that’s why it has not changed the sentence.”
--With assistance from Nathan Crooks
To contact the reporters on this story: Andrew Rosati in Caracas at arosati3@bloomberg.net, Noris Soto in Caracas at nsoto9@bloomberg.net, Fabiola Zerpa in Caracas Office at fzerpa@bloomberg.net.
To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, David Papadopoulos at papadopoulos@bloomberg.net, Bernard Kohn, Ros Krasny