Published by Economist Intelligence Unit

Event

The US has declared Venezuela a national security threat and imposed sanctions on seven Venezuelan officials.

Analysis

These latest developments mean that bilateral relations are at their lowest point since the countries called back their respective ambassadors in 2010. The move comes a week after Venezuela demanded that the US remove more than 80% of its diplomatic staff from its embassy in Venezuela's capital, Caracas, within two weeks, and implemented strict (albeit reciprocal) visa requirements for US citizens looking to enter Venezuela. Venezuela has also banned senior US officials from the country, including a former president, George W. Bush, and a former vice-president, Dick Cheney.

The response from the US has been to accuse Venezuelan officials of violating human rights and engaging in corruption. Seven mid-level officials have been targeted, including the head of the country's intelligence services, Gustavo González; the director of the national police, Manuel Pérez Urdaneta; and Justo Noguero, a former national guard commander and the current director of the state mining firm.

The Venezuelan president, Nicolás Maduro, who has long rallied against the US, accused the latter of working to topple his government, before parading the seven on state television, describing them as heroes. Mr González was even named as interior minister.

Critics are suggesting that Mr Maduro's goading of the US—as well as a recent crackdown on the opposition—acts as a distraction from domestic problems. Mr Maduro remains in serious trouble at home: his popularity is in the low twenties, and many of his chavista supporters are turning away from him as the economy continues to deteriorate. Mr Maduro is likely to use these developments to seek decree powers, given what he describes as the "imperialist threat" against Venezuela. This will make the legislature, control of which the government is likely to lose in elections later this year, even less powerful—a major blow for the opposition. However, Mr Maduro's provocations are unlikely to rally supporters behind him, meaning that his position will remain tenuous, and the risk of political instability will remain acute.

Impact on the forecast

We continue to believe that legislative elections will be held in the fourth quarter of 2015, despite some concerns that the government may postpone or cancel them, given the president's dismal approval ratings. However, authority is likely to be transferred to the already-powerful executive before then, meaning that the opposition will have very little influence on the policy framework regardless of the election result.