Provider of in-depth & balanced analysis on hot issues around the world

The war in Ukraine accelerated a global energy crisis just as the world was beginning to recover from the Covid-19 pandemic. Venezuela has the largest crude oil and the eighth largest gas reserves in the world and can therefore offer an alternative for Europe to replace its fossil fuels imports from Russia. The problem is, of course, that EU–Venezuela relations have been in a sorry state since the EU denounced President Nicolás Maduro’s re-election in 2018 as neither free nor fair. Since then, the EU has adopted targeted sanctions against the Venezuelan government, thus adding to the maximum economic pressure that former US President Donald Trump imposed on Caracas in an attempt to fatally weaken Maduro. This approach has yielded no result in that respect, and the war in Ukraine, and its energy security implications for the EU, creates the occasion for a revision of EU and US strategies. The hope is that a “more carrots, less sticks” approach could convince Maduro to engage in meaningful dialogue with the opposition. The EU must seize this opportunity of rapprochement and readiness and push forward the recommendations put forth in its electoral observation mission’s report of 2021, reconcile internal disputes to focus on the big picture, give momentum to dialogue efforts, consolidate support among regional allies and rekindle its efforts towards humanitarian relief.A failed pressure strategyVenezuela used to be among the most prosperous countries in Latin America, but is now home to one of the largest external displacement crises in the world next to Syria and Ukraine, according to the United Nations High Commissioner for Refugees. When he came into power in 2013, President Maduro inherited from his predecessor Hugo Chávez a country in economic turmoil, high in debt and on an increasingly authoritarian track. The slump in oil prices in 2014 added fuel to the fire, prompting a wave of unrest to which Maduro responded with repression. He then tried to replace the democratically elected National Assembly, which had an opposition majority, with a loyalist Constituent Assembly in 2017. But it was after the 2018 presidential election, when Maduro secured a second term in what are widely considered rigged elections, that Venezuela descended into a full-blown political crisis. Juan Guaidó, speaker of the National Assembly, used a constitutional clause to declare himself interim president until new elections could be held, backed by more than 60 countries worldwide. In the following years, various negotiations attempts between Maduro and the opposition failed to solve the country’s political dispute, prompting fatigue in the opposition ranks while eventually consolidating Maduro’s authoritarian grip. As the political crisis unfolded, the EU and the United States responded with sanctions against the Maduro regime, although with different goals. The Trump administration pursued regime change through a maximum pressure strategy. Instead, the EU combined targeted restrictive measures with humanitarian aid and support for dialogue and mediation efforts. EU efforts have been hampered by: internal divergences, especially on the recognition of Guaidó as interim president; multipolar competition and the perceived excessive proximity with the United States; and regional fragmentation and polarisation. Sanctions have failed to produce substantial change as Russia and China, and to some degree Iran and Turkey, have continued trade (including in oil) and strengthened economic ties with the Maduro regimeHow has the EU mitigated constraining factors on its policy?There have been two issues over which the EU struggled, even failed, to reach consensus. The first was the recognition of Guaidó as interim president. While most member states eventually did so, Italy and Cyprus dragged their feet, until the issue became irrelevant in early 2021 when the term of the National Assembly of which Guaidó was speaker expired. EU divergences stemmed from the political composition of member state governments and their view of the EU’s role in the world. Left-leaning governments in the EU tended to frame the recognition of Guaidó as a US-led, “interventionist” initiative, while right-leaning governments advocated a confrontational approach to Maduro, including through the recognition of Guaidó. It was a missed opportunity to show EU unity and put the spotlight on the EU’s difficulty to reach agreement over its foreign policy. Second, internal disagreements within EU institutions and member states revolved around the opportunity to send an electoral observation mission to local and regional elections in November 2021, out of fear that this could whitewash the Maduro regime. The mission eventually garnered enough support to be deployed and was later largely perceived as a success by EU member states. The EU electoral observation mission (EOM) produced a report with recommendations that have become the benchmark for the conditions for a free and fair election in the agenda of the Mexico-based talks between the government and the opposition. The region’s fragmented and polarised approach to the Venezuelan crisis has been another factor hampering EU efforts. Trump’s push for regime change, embraced by most Latin American countries led by right-wing governments in 2019–20 (crystallised by the creation of the so-called Lima Group) exacerbated geopolitical tensions in the region. The EU-backed creation of the International Contact Group (ICG) in 2019, which aimed to promote dialogue but did not bear fruit because it coincided with the recognition of Guaidó and the EU's rapprochement with the Lima Group. Regional polarisation was epitomised by the appointment of a Guaidó representative in the Organization of American States, despite Maduro’s decision to withdraw from the pan-American body, and the prolonged stalemate in the Community of Latin American and Caribbean states (CELAC). The EU was dragged into a polarisation spiral where its policies were associated with those of the Trump administration, even though they had different objectives. Besides, Trump’s policy of maximum pressure as an instrument for democratisation proven ineffective in a context of geopolitical competition with China and Russia. Their support for the Maduro regime allowed it to survive, even though at the cost of the country’s descent into economic disaster. Russia in particular also invested political capital by participating in the Mexico talks as the government’s accompanying country.A changed scenario, a new strategy?President Biden’s election and Latin America’s shift towards the left created openings for a more constructive international engagement with Venezuela, which have further widened after the outbreak of the Ukraine war, providing the EU with a new set of foreign policy options. The EU and the US, together with Canada and the United Kingdom, have signalled a willingness to agree to conditional sanctions relief. The Biden administration has permitted American oil company Chevron to resume limited oil operations in Venezuela in exchange for an agreement by Maduro and the opposition to continue dialogue after a year of stalemate. The talks have made no progress other than an agreement to turn up to 3 billion US dollars of frozen government fund into aid to be distributed by the UN and the International Red Cross to alleviate the domestic humanitarian predicament. Although a more concessions-based foreign policy towards Venezuela may not lead to the regime change some have hoped for, it could still make Maduro willing to allow for fairly free and democratic elections in 2024, when his second term comes to an end. However, it is clear that the humanitarian crisis will not be over shortly, and the implementation of the 2022 agreement between government and opposition is proceeding slowly. Increased EU humanitarian aid could help promote goodwill in Venezuela and in the region, and thus is not solely to be considered an altruistic gift, but an important part of the EU’s foreign policy arsenal. Finally, Venezuela and the broader region of Latin America and the Caribbean is not only important due to its natural resources, but an important political partner for the EU in its bid to defend a rule-based global order. This has become ever more evident since the war on Ukraine, which has seen some Latin American countries refusing to pick sides. Over the last few years the political landscape in Latin America changed with the election of leftist presidents in almost all countries in the region, with interest in seeking a negotiated response to the crisis in Venezuela. The International Conference on Venezuela convened by Colombian President Gustavo Petro in Bogotá in April 2023 is an illustration of the region’s renewed engagement on the issue. The upcoming EU–CELAC summit in July, the first in eight years, is an opportunity to engage with regional partners to foster political cooperation on global and regional issues, including Venezuela. The EU’s pragmatic rapprochement with Venezuela offers the prospect for some progress in the negotiations between government and opposition, but it should not be perceived as a relegation of EU’s commitment to democratic norms. The EU should not waste the opportunity to step up its diplomatic engagement with the region and coordination with the US and like-minded countries to ensure that Maduro concedes a real level playing field for the 2024 elections while at the same time pursuing its strategic goal of diversifying energy supplies. This article is brief published under JOINT, a project which has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 959143.

If the Global Gateway is to compete with the Belt and Road Initiative, it must go big, green, digital, and ethical. And it can prove it in Latin America  The European Union launched its Global Gateway initiative in December 2021, but its results have not yet matched the expectations it raised. If it is to compete with China’s Belt and Road Initiative (BRI), the Global Gateway must be bold, green, digital, and ethical. The digital alliance that the EU is setting up in Latin America and the Caribbean provides an opportunity for the EU to put its money where its mouth is.  On 14 March, the executive vice-president of the European Commission, Margrethe Vestager, and several ICT ministers from Latin America and the Caribbean established the EU – Latin America and Caribbean (EU-LAC) Digital Alliance – one of the European Commission’s initiatives launched in the framework of the Global Gateway programme. The alliance will focus on three pillars: investments in connectivity, aimed at closing the gap in internet access between the region and the EU, and within and between the countries of the region; cybersecurity, where despite the great progress made by the region, significant gaps remain that threaten citizens, businesses, and sovereign states alike; and digital rights, a field of enormous potential, as both regions share a human-centric approach to digital transformation. The project is of major strategic importance and potential for the EU. Russia’s invasion of Ukraine has given new prominence to the EU’s relationship with Latin America and the Caribbean. The region comprises 33 countries which are key to sustaining a rules-based multilateral order and whose votes China and Russia have courted in the United Nations General Assembly. There are also massive investment opportunities in the green and digital sectors in Latin America and the Caribbean, making it an important region in the EU’s search for strategic autonomy. However, relations between the two regions have gone through numerous ups and downs since leaders first spoke of a “strategic association” at an EU-LAC summit in Rio in 1999. In recent years, the EU financial crisis, the United States’ lack of interest in the region, and the covid-19 pandemic have allowed China and, to a lesser extent, Russia to expand their presence in the region: while EU trade with the region doubled between 2008 and 2018, China’s trade multiplied tenfold thanks to its strategic approach through the BRI, which has added to China’s already significant foreign direct investment flows and loans to the region. The EU is seeking to revitalise this relationship. But for the EU-LAC partnership to be successful, it is essential that these political agreements and declarations are accompanied by a meaningful investment agenda and package, as well as a clear roadmap for implementation. So far, the EU’s approach to the region has focused on programmes such as the Bella submarine cable connecting Europe and the region and the Copernicus Earth observation satellite system, which lack the scale to change perceptions of the EU. For its part, the Global Gateway programme is far from mobilising the €300 billion in investments initially announced, and the €3.5 billion  earmarked for investment in Latin America is insufficient to alter the strategic balance in a region where the required investment just for connectivity is estimated at $51 billion. The digital transition that the EU and the countries of the region want to promote could be the catalyst for a change of step in relations The digital transition that the EU and the countries of the region want to promote could be the catalyst for a change of step in relations. But for this to be feasible, certain conditions must be met. Firstly, if the Global Gateway is to be attractive for the region and effectively compete with the BRI, it must rebalance its geographical focus to pay more attention to the region. At present, 60 per cent of projects are focused on sub-Saharan Africa, while only 20 per cent are devoted to Latin America, and another 20 per cent to Asia. It should then focus more efforts on digital initiatives: currently, energy and green transition initiatives make up 80 per cent of projects, while digital initiatives account for 15 per cent and social initiatives for 5 per cent. The projects identified in the digital field are almost exclusively focused on connectivity issues, such as financing fibre, cable, satellite, and 5G investments. Closing connectivity gaps is urgent. Currently, over 35 per cent of Latin Americans still do not have access to a fixed broadband internet connection, and 20 per cent do not have mobile broadband access  – twice the average for OECD countries – concentrated in the lowest income quintile and rural and remote areas. However, the digital agenda in 2023 must be one of transformation, not just connectivity. It should therefore include issues such as cybersecurity, the digitisation of public administrations and services (including health, migration, justice, and taxation), training and education in key skills, the regulation of artificial intelligence, and data governance. Alongside the deployment of 5G and investment in digital, technical, and soft skills, this would bring the financing requirements for the region closer to $300 billion, which is 3 per cent of regional GDP. To address these geographical and thematic imbalances, the region therefore requires a more intensive European investment plan. The Global Gateway envisages mobilising private financial resources by setting up co-financing mechanisms from development banks, in particular the European Investment Bank, the CAF bank, Central American Bank for Economic Integration, and the Inter-American Development Bank. Despite the current meagre projections, it should be possible to mobilise the funding. After all, the EU is the leading foreign direct investor in Latin America, its telecom companies are global players, it plays a pioneering role in digitalisation in banking, insurance, infrastructure, energy, public services, industry, agriculture, and mining, and it holds first-class cybersecurity and hybrid threats capabilities. The launch of the digital alliance is expected to be accompanied by a business meeting of key Euro-Latin American companies, which, if confirmed at high-level, is a promising sign.   The EU’s digital agenda is attractive to third parties compared to China’s BRI because it includes green, social, and ethical components, making it an ally of the green transition, not a competitor. Many of its initiatives contribute to both digital and green goals, including the development of the ‘internet of things’ for the design of smart cities, the use of big data and cloud data to monitor the temperature of the oceans, and artificial intelligence applied to the protection of biodiversity. Europe’s rights-based, human-centric approach to digitalisation should also appeal to Latin America and the Caribbean. The region is seeking to align its approach with that of the EU, with a special focus on social, gender, and territorial inequalities and inclusiveness, which are not Chinese priorities. The cost of these inequalities is huge: achieving full gender parity in Latin America would expand the region’s GDP by $2.6 trillion – the equivalent of Brazil’s economy. Closing the internet access gap and investing in skills will help reduce these inequalities in the region, especially among women and in rural areas, and help younger generations. The Global Gateway has been criticised for over-promising and under-delivering. The EU-LAC Digital Alliance offers an opportunity for the EU to show the worth of the Global Gateway and demonstrate that it can offer an alternative to the Chinese Digital Silk Road.

Imagine a future in which countries desperate for investment give up a patch of their territory and subcontract governance to a board chosen by a foreign corporation. Sound like the East India Company of the past? Until the 2021 election of Honduran president Xiomara Castro, the past was now—Zones for Employment and Economic Development (Zonas de Empleo y Desarrollo Económico in Spanish, or ZEDEs) had been permitted to establish their own near-tax-free paradises in company-governed territorial fiefdoms. The investor-governed territories include one that accepts its own cryptocurrency and allegedly tramples rights of indigenous and Afro-Caribbean populations, another where small farmers were forced to sell their land—all were criticized by the United Nations as threatening basic human rights and criticized by Honduran civil society for worsening problems of tax evasion and narcotrafficking. What is clear is that they violated basic democratic principles of representative government and undermined national sovereignty, including denying the validity of international labor and environmental treaty obligations agreed by the Honduran state.   It all began when a 2009 Honduran military coup ousted a democratically elected president. The next Honduran president and the Congress passed a law to cede portions of its territory to corporate investors as “charter cities” but were blocked by the Supreme Court. In response, Congress impeached the judges, packed the court, and engineered a new law to create ZEDEs. According to a study published in Central American Journals Online, ZEDEs are comparable to the Spanish colonial model, creating foreign-controlled economic zones on Honduran territory. The president of the Congress, Juan Orlando Hernández, went on to be the next president, governing two terms after his handpicked Supreme Court-sanctioned reelection. Eight years later, Hernández now sits in a U.S. jail awaiting trial for narco-trafficking, the same charges on which his brother was sentenced to life in a U.S. prison. Last year, the first opposition government elected since the coup made doing away with ZEDEs part of its electoral campaign, and among the first laws passed by the new Congress was ZEDEs elimination. The law passed unanimously, including votes from the very party that had put the ZEDEs in place. The reversal was the culmination of a broad civil society movement that brought together women, indigenous, Afro-Honduran, labor, and local business interests. Predictably, only the foreign investors want the paradises to remain. It is worthwhile to look at the record of the ZEDEs. They found resonance among conservative Honduran economists and were championed by Paul Romer, an economist who extrapolated from the experience of places like Singapore and Hong Kong to presume that cities could carve out independent regulatory regimes to promote development in the midst of poorly governed areas. Originally part of an oversight board to the charter cities, Romer resigned in response to Honduran government evasion of oversight processes and lack of “transparency.” Romer’s fears appear to have been well-founded, as the oversight board established for the ZEDEs is now a self-perpetuating body that even a think tank founded to support charter cities views skeptically for including "Ronald Reagan’s son (a conservative media personality), anti-tax activist Grover Norquist, and a member of the Habsburg dynasty.” It goes on to say that “the ZEDEs were clearly more of an ideological exercise than a practical exercise to generate development.” Romer may have gotten out just in time for additional reasons, as the record of the ZEDEs has been poor in terms of economic, environmental, and democratic impacts. Compared to what Honduras would have collected otherwise, even conservative estimates suggest the tax exemptions offered to the ZEDEs would cost equal to almost half of current sales taxes by 2025 and a value equal to all current import taxes by 2026. Worse, some of the ZEDEs build investor paradise workplaces and residences but appear to provide almost no public services, except their private police, even as they deny the Honduran state sufficient tax revenue to provide schools, health clinics, and courts. Pitched as model cities, ZEDEs are actually far from that, including one that offered preferential treatment for agricultural investments and mining concessions, evading existing environmental and other regulations on decidedly nonurban activities. In the face of social opposition to the ZEDEs, the Honduran Congress had toughened punishments for blocking property or businesses, making it easier for ZEDEs private security forces to repress protesters. Private security force and paramilitary violence against opponents of megaprojects like ZEDEs is common in Honduras—and in one case a lawyer representing indigenous communities opposed to the original charter cities law was murdered, sparking condemnation from the State Department, but impunity for the killers meant there was no proven link to his political work. In spite of this poor record, most of those who want to preserve the ZEDEs point to potential benefits without any evidence. Supporters claim ZEDEs will be a boon to employment, but rates of unemployment have remained unchanged since ZEDEs began, estimates of the actual number of ZEDEs jobs created hover around 15,000 in the eight years ZEDEs have been on the books, and ZEDEs undermine and evade existing labor legislation. Supporters present ZEDEs as complementary to U.S. nearshoring, but estimates of benefits to Honduras from nearshoring lag behind eight other Latin American countries, none of which have ZEDEs. Supporters argue ZEDEs will head off growing Chinese influence, but China is one of the countries interested in investing in ZEDEs. Supporters suggest ZEDEs will address problems of corruption, but the director of the ZEDE oversight board was secretary of the presidency to the jailed former president and has continued to draw a salary even after fleeing to neighboring Nicaragua to escape his own corruption and narcotrafficking investigations. Supporters argue ZEDEs will generate trade, investment, and growth, but since the ZEDEs law was passed in 2013, trade as a percentage of GDP dropped in five of eight years and is now lower than it was before, foreign direct investment decreased as a percentage of GDP every year except 2018, and GDP growth was below 4 percent in six of the eight years. Overblown aspirations have two main problems: first, they violate basic democratic principles of citizen representation, adherence to rule of law, and international treaty obligations; and second, in the eight years since ZEDEs were allowed, none of these promises have been fulfilled. Why the sudden kerfuffle about an obscure scheme abandoned by its founder, instituted by a corrupt politician now in jail in the United States, revoked by the country that adopted it, and that showed minimal actual impact? Perhaps because one ZEDE investor has provided grants to think tanks to start a dialogue on the issue, the results of which may have convinced some in the State Department, the U.S. Embassy in Honduras, and a few members of Congress, even threatening the newly elected Honduran government with reprisals such as withdrawal of aid, forced restitution payments, or limiting the Honduran share of the Partnership for Central America, the private sector investment plan led by Vice President Kamala Harris. For the richest country in the hemisphere to threaten to withhold or extract resources from the third-poorest country lends credence to the critiques of those who viewed the ZEDEs as colonial. Worse, withholding funds or forcing restitution would undermine the core intent of the Harris plan—invest in Honduras to stem outmigration, address low growth, and improve governance. Instead of listening to those who are advocating for a few private corporations’ desire to cash in on their fiefdoms, the United States should be supporting stronger Honduran institutions, starting with respecting the democratic will of the Honduran people.