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CIAO DATE: 04/03
Venezuela Alert: Chávez Era Part II
Lowell R. Fleischer *
Hemisphere Focus: 1998-2000
Series VIII, Issue 15
September 12, 2000
Overview
After his convincing victory in the July 31 presidential elections, Venezuelan President Hugo Chávez Frias has all the power he could possibly want to press forward with his "peaceful revolution." Without a doubt, he is the most powerful president in the democratic era of the country. However, during his 18 months in office, he still has not given a very detailed answer to the question of what he will do with all that power. Beyond a much-repeated list of generalities, he has yet to detail an economic plan that will give confidence to investors and provide more than hope for the 80 percent of Venezuela's 24 million people who live in poverty.
As Expected, Chávez Wins Easily
As expected, Chávez defeated his main challenger, Francisco Arias Cárdenas, former governor of the oil-rich Zulia state, as well as former comrade-in-arms of the president. It was an easy win, with 59 percent of the vote for Chávez to 38 percent for Arias. Despite his recent drop in popularity as measured by public opinion polls, Chávez actually received a larger percentage of the vote this time than he did the first time around when he won 56 percent of the vote to 39 percent for his opponent. Claudio Fermin, a former leader of Acción Democrática (AD) who once served as the mayor of Caracas and who claimed he was the only civilian in the race, came in a distant third with less than 3 percent of the vote. However, the 43 percent abstention rate was the highest ever in Venezuela, perhaps indicating growing discontent with the democratic process, or simply frustration with having to go to the polls yet again-the fifth time in less than a year. Abstentions have risen steadily from a low of 12 percent in the 1983 election.
Despite the fact that there has been considerable confusion over election results in several areas of the country, and that troops had to be sent to quell disturbances in the Andean state of Mérida, the elections were described as clean and fair by international observers. Ruben Perina, head of the OAS observer team, said that the elections were "marked by integrity, transparency, security, and credibility." Similarly, the Carter Center said that there were a few glitches but no major problems.
However, Arias is challenging the results and is even suggesting that Chávez should not have been inaugurated. Arias claims that 51 percent of the results reported by the electronic voting machines (Venezuela and Brazil are the only two Latin American countries to use other than paper ballots) show unexplained irregularities. He said that the most common flaw was a discrepancy between the number of votes counted and the number of voters registered in each district. The electoral council has received more than 60 official complaints.
President's Party Controls Assembly
Chávez supporters won 60 percent of the seats in the new 165-member unicameral legislature. Chávez' own Movimiento Quinta República (MVR) captured 93 seats, and the allied Movimiento al Socialismo (MAS), another six. Although Chávez and his allies fell five or six seats short of the two-thirds majority the president wanted, his lieutenants will be able to enact whatever legislation they want with minimal arm-twisting. This could possibly include a so-called enabling law, which would permit the president to push through by decree his proposed emergency economic program, and would further consolidate the concentration of power.
AD did manage to retain 92 of the 335 mayoral posts that were contested in these so-called mega elections. In this area, AD out-performed Chávez' MVR, which won 79 city halls. COPEI did better in the municipal elections than in the congressional ones, winning 50 races for mayor.
Opposition Remains Split and Badly Organized
It is difficult to gauge how effective the relatively strong opposition presence in the new Congress will be, because these forces are divided between more than 10 disparate parties with ideologies ranging from neo-liberal to radically left. Given the makeup of the Congress, however, it is likely to provide only a weak check on the concentration of power in the president's hands. Arias has no bloc he can call his own in the legislature, and if he wants to fulfill the position of opposition leader he will have to work hard to rebuild a national power base. Arias has announced that he will soon form a political organization of his own. It will take a lot of effort to harness the considerable, but badly organized, opposition to Chávez.
The Internet is available to only about four percent of Venezuela's 24 million people, but has become a breeding ground for opposition to Chávez. One site, AntiChávez.com, is listed as the "official website of Chávez' enemies." Another internet portal in Venezuela, not a specialty site for Chávez haters, recently conducted a survey of the president's post-election popularity in which an astonishing 67 percent of respondents answered no to the question "once Chávez has been reelected and sworn in, do you want to stay in Venezuela?"
One highlight of the elections was the impressive showing of the new Primero Justicia party, made up of highly-educated and well-financed professionals, which won five seats in the National Assembly, three mayoral posts, and representation on the Legislative Council in both the state of Miranda and the newly-created Greater Caracas metropolitan government. Some local analysts are already predicting a rosy future for the "bright boys" of this party who have been described as the " new generation of Venezuelan politics" by one of its members, popular TV talk show host Julio Borges, who was elected to the assembly.
President Defends Economic RecordÉ
President Chávez turned his attention to the slumping economy in a typically lengthy three-hour television address to the nation just after his re-election victory. The speech was sprinkled with conciliatory overtures to political adversaries whom, not too long ago, he used to call "counterrevolutionaries." The president announced new social programs to provide short-term employment, and said that he would draw up a pension fund plan within three months to replace Venezuela's bankrupt social security system.
Chávez did not provide many details, but hinted that the job creation plan would involve cooperatives and the use of army conscripts. He said he was considering an agrarian reform program to give peasants unused public or private land and would spend 50 million bolivars (US $ 7.5 million) on free public cafeterias for the poorest Venezuelans. He announced plans to launch programs to promote exports for the automotive, plastics, software, and handicrafts industries. He also announced loans to promote small and medium businesses, and said the government would reactivate 15 industrial centers aimed at generating 6,000 new jobs in the steel and iron production, tooling, and shipbuilding sectors.
Vicente Brito, the president of the umbrella organization of business associations, called Fedecámaras, and a fierce critic of the government, applauded the calls for unity and dialogue in Chávez' speech. However, other Venezuelan businessmen and economists expressed skepticism about the president's announced plans. "What the government is doing is letting petroleum profits revalue the bolivar, and that will pummel our industry and agriculture," said Henry Gómez, president of Fedeindustria, the national manufacturing association. Fedecámaras is working on its own broad-based economic recovery and employment plan to increase employment (perhaps by shortening the work week) and reverse what it says is a trend toward the informal sector. According to the business organization, as much as 70 percent of the economy is now in the informal sector, an estimate deemed high by other observers.
Hugo Farias, a proponent of dollarization and the opening of Venezuela's economy, lamented "micro management" and the lack of clear policies on foreign exchange in Chávez' speech. "The state is intervening in very reliable sectorsÉthe state is seeing itself as the motor of economic activity and I believe this is not the role of the state," he said.
Chávez defended his economic record saying that the economy grew by at least 2 percent in the second quarter of the year, an estimate that would put the government ahead of its announced goal of 2.2 percent growth for the year. But critics continue to complain that Chávez' fierce anti-business rhetoric and friendliness with the leaders of Cuba and Libya have alienated investors, leading to Venezuela's first economic contraction during a boom period for world oil prices. The economy has been paralyzed as much by uncertainty and confusion as by wrong-headed policy decisions. In addition, there has been no continuity of economic policy for at least the last ten years. By some estimates, capital flight over the last two years has been about $8 billion. Based on his repeated comments about a "humane economy" and the need for a "third way" between "savage capitalism" and "unrealistic communism," Chávez seems to be more drawn to a government-controlled economy like Cuba's, rather than a liberal free market version like Mexico's. There is a general consensus in the private sector that Venezuela's image must be changed to welcome rather than reject trade and investment. The legal code and labor laws must be revised to be more business friendly. Also, the growing crime problem must be tackled quickly.
Despite heavy criticism by many business leaders and economic analysts of Chávez' economic team for its continued reliance on state-oriented economic policies, the president stood by them all when he reshuffled the 14-member cabinet in late August.
Éand Repeatedly Criticizes the United States
Shortly after the elections, Chávez embarked on a tour of OPEC nations and became the first elected head of state to visit Baghdad since the 1991 Persian Gulf War. During the visit, Chávez denounced the United States for intervening in Venezuela's sovereign affairs by suggesting he call off the trip, which the State Department deemed "inappropriate." After a stop in Jakarta, he flew on to Tripoli for a meeting with Moammar Gadhafi and used the occasion to take another jab at the United States by calling the 1986 bombing of Tripoli and Benghazi a "criminal act."
Chávez also took swipes at the United States in his most recent inaugural address before the new assembly, to which no foreign dignitaries were invited. He urged "an end of embargoes, bombardment, sanctions, and threats of the most powerful," adding that "we will keep fighting for a multipolar world," a favorite rallying cry that implies closer relations with other "third world nations." In another recent post-election speech, he said that "the world needs profound political change. Yes, we want democracy, but real democracies, not the false democracies that always cause misery, injustice, and inequalities in the name of liberty."
In comments to reporters on arriving in Brasilia for a meeting of 12 South American presidents, Chávez made comments about the Free Trade of the Americas (FTAA) process that are guaranteed to annoy U.S. officials and contribute to the growing concern about Chávez. "For god's sake, FTAA can't grab us this way and wipe us off the map," he said. "We need to re-launch negotiations between blocs because in 2005 we have FTAA."
On the other hand, and despite Chávez' refusal to permit U.S. planes engaged in drug trafficking intelligence to overfly Venezuelan territory, Venezuela has continued to cooperate in anti-narcotics activities. U.S. embassy officers in Caracas called two August seizures of between seven and eight tons of cocaine in a remote jungle corner of northeastern Venezuela "an example of excellent cooperation over a period of several months" between the two countries. "The important thing is that even without the overflights, drug packets (sic) are being discoveredÉ.The overflights are unnecessary," foreign minister José Vicente Rangel told the press. When receiving new U.S. Ambassador Donna Hrinak, the foreign minister downplayed any tensions between the two countries, saying that differences are dealt with on a friendly basis.
Economic Prospects Remain Uncertain
Chávez faces a situation that has no precedent in Venezuelan history. Even with the price of a barrel of locally produced crude oil rising so dramatically, economic prospects remain at best problematic. The government's strategy toward the private sector remains unclear, despite some advances in gas and telecommunications policy. The oil windfall is being channeled into fiscal spending, and the fundamental reforms needed to cut waste and reduce future fiscal liabilities are being put off. In addition, political uncertainty will remain high as the new assembly interprets and implements the new constitution.
As long as this uncertainty dominates the scene, international investors will remain on the sidelines. Without this needed investment, the economy is likely to continue in the doldrums despite the relatively high price of oil.
Lowell R. Fleischer is a senior associate in the Americas Program at CSIS. He is also contributing editor of the Latin American Law and Business Report and the North American Investment Report. A retired foreign service officer, he served in Venezuela and was the former deputy director of the Washington office of the Council of the Americas. Fleischer has taught at the University of Connecticut and the University of Massachusetts and has served a consultant to the World Bank and the U.S. Institute of Peace. He is a graduate of Ohio Wesleyan University and holds M.A. and Ph.D. degrees from the University of Connecticut. Back.
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