To be sure, trying to discern what Donald Trump might do next on domestic and/or foreign policy is an exercise in abject futility.
For instance, reports out Wednesday suggest that at one point last summer, Trump essentially asked aides at an Oval Office meeting if he could invade Venezuela.
The original reporting on that was from AP, but multiple outlets have since confirmed it, with one official who spoke to CNN chalking it up to Trump’s penchant for saying things that are crazy or otherwise don’t make any sense:
The President says and thinks a lot of different things. He just thinks out loud.
Here sure does.
A person who subsequently spoke to Bloomberg said Trump is still considering “military action” as part of an “array of options”, echoing AP’s reporting, and mirroring reports out last year about a possible military “solution” for the crisis in Caracas.
Just so we’re all on the same page here, the idea of the U.S. military actually invading Venezuela is so far-fetched that it boggles the mind. It’s not even entirely clear what the goal would be, other than toppling Maduro and (I guess) propping up an opposition government in an effort to alleviate the humanitarian crisis and maybe gain some sway over the oil.
As Mark Feierstein, who oversaw Latin America on the National Security Council for President Obama told AP, “the concern is that it raised expectations among Venezuelans, many of whom are waiting for an external actor to save them.”
That’s dangerous for any number of reasons, not the least of which is that it raises the specter of the opposition taking risks they wouldn’t otherwise take on the hope that Trump would be willing to support an armed rebellion.
Anyway, the AP story is all kinds of hilarious, if you can get past the inherently tragic backdrop that is Venezuela’s descent into failed state status.
For instance, it documents how, at one point, H.R. McMaster had to literally “pull Trump aside” and explain to him that continually asking Latin American leaders (at dinner, no less) if they are “sure” they don’t want the U.S. to storm into Venezuela, Iraq-style, is dumber than a bag of hammers:
Then in September, on the sidelines of the U.N. General Assembly, Trump discussed it again, this time at greater length, in a private dinner with leaders from four Latin American allies that included Santos, the same three people said and Politico reported in February.
The U.S. official said Trump was specifically briefed not to raise the issue and told it wouldn’t play well, but the first thing the president said at the dinner was, “My staff told me not to say this.” Trump then went around asking each leader if they were sure they didn’t want a military solution, according to the official, who added that each leader told Trump in clear terms they were sure.
Eventually, McMaster would pull aside the president and walk him through the dangers of an invasion, the official said.
America would later learn that just three months prior to that episode (and this isn’t related to Venezuela, but it underscores how concerned McMaster probably was by September) McMaster called Trump an “idiot with the intelligence of a kindergartner”, at a dinner with Oracle CEO Safra Catz.
One wonders if John Bolton (McMaster’s replacement) would have been so quick to try and dissuade Trump.
Of course Maduro immediately seized on this week’s reporting to reinforce the idea that America is conspiring against his government (and I mean, America is conspiring against his government – rightfully so – but as ever, Trump’s involvement makes the whole thing amenable to accusations that U.S. foreign policy is being conducted by someone who is even more of a buffoon than Maduro). Here’s what he told a military ceremony on Wednesday:
You cannot lower your guard for even a second, because we will defend the greatest right our homeland has had in all of its history, which is to live in peace.
Clearly, anything Maduro says can be immediately dismissed as disingenuous or otherwise absurd, but the point here is that Trump doesn’t help the situation in Venezuela by asking the country’s Latin American neighbors if he has carte blanche to send in the Marines.
If you want to laugh heartily at something which, again, is only funny if you can get past the humanitarian crisis that serves as the backdrop, I would strongly encourage you to skim “Venezuela’s Debt Negotiation Tactics Leaned Heavily On Purported Drug Lords And Actual Pancakes” and “Turns Out Cocaine Kingpin Not Best Choice To Lead Venezuela Debt Restructuring Push“, which detail the involvement of Tareck El Aissami in last year’s debt “negotiations”.
As far as how desperate the situation is in Venezuela, suffice to say they’re just as screwed as they were last month and the month before that and the month before that, etc. For instance, a cup of coffee in Caracas now costs one million bolivars. That, according to Bloomberg’s “Cafe Con Leche Index”:
“Today’s price is the equivalent of almost one-fifth of the monthly minimum wage,” Bloomberg wrote, late last month, adding that “to buy a cup with the most common bill in circulation — the 100-bolivar note — you’d need to gather up a stack of 10,000 of them.”
That’s hyperinflation for you.
“The macro continues deteriorating and hyperinflation has worsened, reaching a peak last month (110% in May according to the National Assembly) and could have surpassed 200% this month according to Inflación Verdadera,” BofAML wrote, in a note dated June 29, before dryly reminding you that “the government has not announced a plan to reduce the fiscal deficit and fight hyperinflation.”
Oil production is of course crashing. This is pretty much the only chart you need on that:
For those who are keenly interested, here are some further excerpts from the BofAML note mentioned above that just kind of help to flesh out how dire this situation really is following the farce of an election last month:
Amid a collapsing economy, Maduro announced a new cabinet reshuffle and a new PDVSA board. Delcy Rodriguez, a Maduro loyalist replaces Tarek El Aissami as vicepresident. El Aissami becomes economics VP, reinforcing his previous role in the economic front. Maduro argued that this change will pursue an economic revolution but so far we have not seen plans to stop the hyperinflation. El Aissami is considered closer to a more modern wing in economic terms for Chavista standards, normally open to negotiations with private sector business. However, the rent seeking activities, power groups and shrinking USD revenue limits the ability to introduce policy changes. Maduro also appointed Calixto Ortega, an engineer that studied public policies in Columbia University as central bank president. Diosdado Cabello, second in rank in Chavismo becomes the head of the powerful Constituent Assembly replacing Delcy Rodriguez. The recent changes confirm a very high turnover in the ministries that makes very difficult to elaborate a reform plan for the medium term. Ministers of defense and the interior Vladimir Padrino and Nestor Reverol continue in those positions. The cabinet changes seem to give more power to loyalists of the regime with very high exit cost (sanction persons) which may lead to more radicalization of policies and a more embedded control of military allegiances. Most bonds are in default. Venezuela sovereign coupon payments have not been made since the V19s and V24s grace period ended in 12 November. All non-collateralized sovereign and PDVSA bonds are in default or in the grace period and arrears reached $4.5bn (reserves are $8.4bn). Given these delays markets are keeping an eye on potential acceleration of the bonds. Our baseline is for prolonged default of Venezuela sovereign bonds (which are already in default) this year given lack of financial options and collapsing oil production).
Needless to say, invading the country is not going to solve the economic problems. You might be able to get rid of Maduro, but at least in the short-term, the humanitarian crisis would invariably worsen because the country would become a war zone.
Additionally, military action would engender all manner of ill-will in Latin America, would almost certainly piss off Moscow and Beijing (with the latter having this week loaned Venezuela some $250 million from the China Development Bank to boost oil production) and would be almost impossible to reconcile with Trump’s “America first” mantra.
Finally, it’s not entirely clear that Trump is the man for the job when it comes to rescuing a bankrupt country – after all, he’s bankrupting America right now, both morally and financially.