Analysis | Why Venezuela’s ‘two presidents’ are ready to talk

1. How did the stalemate come about?

Guaidó declared himself interim president by claiming Venezuela’s constitution allowed him to take that step as head of the National Assembly, which he called the country’s last democratically elected body. Maduro, narrowly elected after the death of left-wing president Hugo Chavez in 2013, had won re-election in 2018 in a vote the opposition and foreign observers said was fraudulent. Foreign governments, led by the US, have handed over their recognition to Guaidó and supported him as the rightful leader. That put Venezuela in a bizarre situation: Maduro had the presidency in Caracas and all the power in Venezuela, but Guaidó was recognized as interim president by dozens of foreign governments.

2. What led to Guaidó’s downfall?

Maduro never lost the support of the country’s military and police. Guaidó initially appeared to pose a serious threat to the regime, as he repeatedly managed to bring large anti-government crowds onto the streets. His recognition by foreign governments gave him access to significant resources, including gold abroad, bank accounts, and assets such as the US refinery Citgo Corp. the disruptions of the 2020 Covid pandemic. Pressure on Maduro eased as the country’s economy improved from catastrophic to merely bad. By the end of 2022, all but a handful of countries had stopped recognizing Guaidó or switched their recognition back to Maduro. Guaidó’s support fell to just 12% at home from 60% in 2019. Fractures emerged within the opposition movement. In December, a majority of lawmakers in the opposition-led National Assembly voted to end his caretaker government, effectively removing him as the key figure among the anti-Maduro forces.

3. What led to the economic improvement?

After world oil prices fell sharply in 2014, Venezuela, which relied on oil for 98% of its revenue, plunged into crisis. In 2018, inflation soared to 250,000% a year and constant shortages of everything from baby food to toilet paper ensued, eventually displacing more than 7 million residents. Oil production fell by more than half after the US imposed export sanctions. As of 2020, Maduro eased price controls and allowed the US dollar to circulate – it was already widely used on the black market when Venezuela’s currency, the bolivar, became worthless. He pursued more market-friendly policies by cutting government spending, reversing expropriations, reducing private sector intervention in activities, and lifting tariffs on thousands of imported products. Maduro used the support of countries like Iran to help orchestrate a rebound in oil production: Crude oil production has more than doubled from 2020 lows, though it’s still a fraction of its pre-1990 levels. US sanctions.

4. Where did that leave the country?

Maduro’s measures helped temporarily reduce monthly inflation to single digits by 2022, though it remained the highest in the hemisphere, and reduced poverty. They also created bubbles of prosperity in some areas, especially Caracas, where a sense of normalcy returned. The proliferation of dollars and the widespread availability of basic necessities was enough to quell most of the pressure on Maduro. Meanwhile, electoral victories by leftist leaders in Colombia and Brazil ensured a friendlier regional reception, with new initiatives aimed at economic cooperation. Portugal and Spain recently appointed ambassadors to Caracas, while the US opened a direct line of communication with the regime, improving its prospects of regaining international recognition. The US also eased some sanctions against the all-important oil industry for the founding OPEC member in late November after the government signed a humanitarian deal with the opposition. That included a license to Chevron Corp. to expand some activities. However, most of the restrictions remain in place and the Biden administration has threatened to tighten them if negotiations with the opposition fail.

5. Where is the opposition?

After the dissolution of Guaidó’s interim government, rifts widened between the many parties that make up the opposition. Guaidó’s own party, Popular Will, left a coalition known as the G4, and Popular Will leader Leopoldo Lopez accused several other opposition leaders of being accomplices of Maduro. Meanwhile, three other parties have appointed a council of three exiled politicians to run the National Assembly, led by a little-known doctor who lives in Spain. However, the new leadership has had little impact on Venezuela’s pro-democracy movement. And the public bickering has raised the question of whether the opposition can implement a plan to hold primaries and unite behind a single candidate to take on the government’s candidate, most likely Maduro, in the 2024 election.

6. What is the opposition seeking?

Opposition deputies held two rounds of talks with the government in Mexico; in 2022 they made what appeared to be a groundbreaking agreement to join forces and work on some of the humanitarian issues facing the country, such as repairing power grids and the water system, upgrading schools and buying medicines and vaccines. The idea was to use about $3 billion in funds frozen in foreign accounts to enable the United Nations to do the job. But implementing the plan has been a slower and more complex process than originally thought, with questions about how the funds – most of which are in foreign bank accounts – would be managed. The opposition has asked for guarantees that independent election observers will be invited to the 2024 elections and that previously excluded candidates will be allowed to participate. But Maduro and his chief negotiator, Jorge Rodriguez, have stated they are not prepared to return to the negotiating table until the humanitarian plan is implemented. Meanwhile, the US has threatened to reverse the imposed sanctions if Maduro does not make concessions during the negotiation process.

• A Businessweek report on how the US approach to Venezuela is beginning to bear fruit.

• A piece in The Atlantic about how the fall of the caretaker government gives the US a chance.

• Bloomberg Intelligence on the oil industry in Venezuela.

• The Washington Office on the Latin American podcast Venezuela.

• Bloomberg’s Cafe con Leche index tracks inflation in Venezuela.

–With help from Nicolle Yapur and Fabiola Zerpa.

More stories like this are available at bloomberg.com