Chávez Must Look Homeward

- Venezuelan leader would do well to more carefully choose his shots

In 1998, Venezuelans broke with political tradition by electing a well-known and controversial populist colonel named Hugo Chávez Frias as president. They ignored precedent because the long-established, IMF-inspired, neoliberal prescriptions were hurting the nation and no longer credible. In the eleven years since his rise to prominence, Chávez has changed the fabric of Venezuelan society through his self-denominated Revolución Bolivariana. Long-sought changes aimed at different sectors of Venezuelan society, such as the political system and the economy, have come at a heavy price: crime and violence are rampant, inflation is soaring, and Chávez’s often picante rhetoric has become an international punch line. While it is undeniable that he has brought about vast social change in his country and region, his explosive administrative style and the alarming divisive state of the country call into question his ability to manage his socialist revolution.

Venezuelan Leader Begets Problems

For many of the twenty-eight million Venezuelans, equality in the nation’s social, economic, and political forums is a top priority. This basic principle is the essence of la Revolución, which provided the provenance for the promises that carried Chávez into office on a wave of popularity. Despite the winds of change, Venezuela has shown considerable vulnerability in the current global recession, with an ailing economy, hunger, and huge inflation rates. Furthermore, the deteriorating safety net that has protected many of his core constituency—those who have been lifted from poverty by his social programs—has begun to exhibit signs of serious slippage. To top it all off, there has also been a growing dissatisfaction throughout his national constituency. It is up to Venezuelans to decide whether Chávez is honoring his own pledge to sustainably implement his promises, rather than mishandle a golden opportunity. Chávez’s policies, both his achievements and his failures, must be examined in order to analyze whether the principles set forth by la Revolución have been strategically advanced. Ultimately, the verdict will rest in the hands of average Venezuelans who will judge the effectiveness of Chávez’s approach based on their long-standing aspirations for a more just society.

Venezuela before Chávez

Before Hugo Chávez was elected in 1998, Venezuela was a vastly different country than it is today. While it was still one of the wealthiest nations in Latin America, the elite political and economic establishments systematically mistreated and marginalized the larger segment of Venezuelan society: the poor. For four decades, only two parties ruled—Acción Democratica (AD) and Partido Social Cristiano de Venezuela (COPEI). Both of these traditional parties were effectively blind to the masses while they faultlessly catered to the political and economic elite. This system was a foundation for the growth of severe economic stratification prevalent throughout the region. The poor were largely invisible to the rich, with little or no access to the country’s natural resources and foundations of power. Millions of Venezuelans struggled to survive and lacked the political voice to affect their circumstances. These conditions were rooted in a deeply entrenched system of neo-liberal economic fundamentals and a corrupt bureaucracy led by a series of tough-minded presidents who were democrats only in name.

By the 1970s, when President Carlos Andrés Peréz first came to power, the Venezuelan government had an unalterable profile of being pro-business and pro-United States. However, the debt crisis of the 1970s-80s plagued Venezuela, along with the rest of Latin America, eventually leading to an IMF-architected free-market restructuring in 1989, which was championed by Peréz. This directly contradicted Peréz’s “no IMF” campaign promise and stirred waves of civil unrest. The intensification of neoliberal adjustments consisted of privatization and the elimination of oil subsidies that had been used for social programs and domestic staples. The elimination of these subsidies sorely tested Venezuelans, and in reaction to Peréz’s implementation of the IMF policies, people took to the streets in protest beginning on February 25th, 1989. The result was a tremendous violence that ultimately became known as el Caracazo, which took the lives of anywhere up to three thousand Venezuelans.

After the violence subsided, an air of anger swept over the nation. Venezuelans were tired of ineffective U.S.-inspired free-market policies and a corrupt political system that underrepresented them. The resulting undercurrent boiled over again in 1992 when two separate coup d’etats were attempted, the more famous led by Hugo Chávez, who was later pardoned by President Rafael Caldera. In 1998, Chávez rode that very same wave of frustration and anger all the way into office, providing a fresh face, new voice, and promises to break the suffocating status quo. He swore to transform the government’s focus from catering to the elite to responding to the poor, leaving the neo-liberal system behind in favor of a socialist one. Eleven years later, the socialist Venezuela of today still remains a divided country embroiled in turmoil and engulfed by violence.

Chávez: Social Policies and Impacts

In his decade-long tenure, Chávez unquestionably has endeavored to improve conditions for the average Venezuelan. Of his many achievements, perhaps the most obvious is the hope and excitement he has brought to the country’s poor. Before his presidency, millions of Venezuelans had felt deserted, neglected, and marginalized by their government to the point where they could not envision change. Chávez reintroduced them to a hope that had previously been squelched. These promises of hope and equality for the poor took shape through his social misiones.

Barrio Adentro is one of Chávez’s original misiones that officially began in 2003. Its goal was to provide a national single payer system of health care comprised of free health clinics in poor Venezuelan barrios. The first clinics, which covered basic health care, dental care, and sports training, were so successful that the government created Barrio Adentro II. This second phase introduced more advanced and comprehensive diagnostic and rehabilitation centers. Individual bodies such as the World Health Organization (WHO) and the United Nations Children’s Fund (UNICEF) have praised these programs for their numerous successes, such as the drop in female infant mortality rates from 1.9% to 1.7%. Approximately 30,000 individuals, including thousands of Cuban doctors, staff the Barrio Adentro network of clinics. The program’s success can also be attributed to the job opportunities it has provided for the poor as staffers in the clinics.

Building on the success of the Barrio Adentros, Chávez implemented similarly structured missions covering such fields as nutrition (Misión Alimentacion), literacy (Misión Robinson), and eye diseases (Misión Milagro), among others. He’s also allocated US$57 million for future independent community improvement projects. Chávez has even extended his vision of equality and support to the indigenous community through Misión Guaicaipuro, specifically working to protect indigenous peoples from land expropriation, human rights abuses, and resource exploitation. There is still a long way to go, but under Chávez, these groups have experienced a higher degree of attention, protection, and integration than many had thought possible.

The misiones also have served to significantly reduce the degree of extreme poverty in the country. According to a study in the academic journal Social Medicine, between 1998 and 2007, extreme poverty drastically decreased from 20.6% to 9.41%. Overall poverty also declined during this period, from 42% of households living in poverty in 1999, to 37.8% in 2005. The extensive network of social programs and the lowered poverty levels are impressive examples of Chávez’s conversion of revolutionary campaign promises into tangible social results.

Although Chávez continues to implement positive social programs, he is also seemingly attempting to cement his position, prompting accusations of constitutional and civil rights violations. Whether or not Chávez is purposely attempting to create division, his approaches have left many feeling alienated, vulnerable, and disenfranchised, the media being a prime example. Much of the international community has become concerned over free speech violations as Chávez’s adversary treatment of the media in Venezuela has become widely documented, although his critics tend to downplay the media’s often unprofessional assaults against Chávez. While the hostilities are largely mutual, to Chávez critics, the government has a responsibility to remain unbiased in its law enforcement. On the other hand, Chávistas see this argument as lacking substance because of the opposition’s own virulent tactics.

Chávez’s confrontation with the media partly stems from a 2005 law that prohibits the writing and airing of material that is “deemed a danger to national security,” a violation punishable by jail time. There has been intense speculation that by lawfully establishing a vaguely worded prejudicial atmosphere, Chávez could implicitly intimidate the press by enforcing self-censorship, all the while avoiding accusations of doing so. In 2007, the conversation turned from speculation to accusation when Venezuelan authorities refused to renew Radio Caracas Television Internacional’s (RCTV) license. For many, this was blatant censorship given the fact that RCTV has been Chávez’s most formidable critic since 1998. Chávez advocates came forth with a powerful charge of their own, accusing the network of being actively engaged in the 2002 coup and other unprofessional actions, thus completely warranting its shutdown.

Outright hostilities grew when approximately 200 radio stations across the country were shut down in August of 2009, most of which were very small, local opposition stations. Here, government officials responded by warding off charges of censorship through an insistence that these stations were being closed because of license requirement violations, and not their political convictions. Chávez’s critics maintain that rather than talk, he is attempting to aggressively silence them and that his failure to negotiate a compromise has brought justified criticism upon his administration. Regional specialists also found that, like many of his other controversial policy moves, Chávez took a divisive approach, which has resulted in a propaganda war. This on-going confrontation alone runs the risk of escalating into an irresolvable conflict, which many fear could lead to civil war.

On a different front, Chávez is currently attempting to pass a law that would subject labor union elections to state scrutiny, which would be a clear violation of constitutional self-determination provisions. However, government officials make a good case that the notoriety of union leaders and their alleged penchant for corruption warrant the close government oversight of the current legislation. There also have been reports of pro-Chávez officials arbitrarily charging labor protesters with subversion because of protests in close proximity to designated security zones, i.e. the factories where they work. Chávez’s opponents insist that in trying to undermine the main unions, he has antagonized one of the most powerful allies of leftist governments, a mistake that could come back to haunt him. On the other hand, Chávistas cite the unions’ involvement in the 2002 failed coup as justification for the president’s wariness.

With his administration already embroiled in warfare along any number of sectors, Chávez’s choice to continue performing a constitutional tight rope act seems unwise. On February 15, 2009, President Chávez oversaw the passage of a constitutional amendment that eliminated term limits, allowing him and other elected officials, to run for re-election indefinitely. Despite international opposition, the referendum was carried out legally, but with troubling implications. Chávez pursued a change in one fundamental aspect of democracy—legally-mandated self-succession, making long-term abuses of power more possible. In addition, by eliminating presidential term limits, Chávez has made the revolution almost entirely synonymous with himself. This is a risky move because once Chávez is replaced, the revolution may have no chance of surviving without the guidance of its iconic leader.

With no term limits and with a discretionary eighteen-month period of rule by decree, accusations of a virtual Chávez dictatorship are not surprising. It seems that President Chávez, instead of subscribing to a philosophy that unifies his country by bringing differing elements of the population together, has chosen a different path. He continues to pursue ex parte measures to accomplish his goals, such as twice attempting to pursue elimination of term limits instead of finding more conciliatory means to maintain his influence after his initial referendum was rejected by the electorate. The results of such choices are obvious when looking at the violence, deep political polarization, and biting rhetoric, which has threatened the long-term viability of the revolution.

A Faltering Economic Transformation?

Some of President Chávez’s most progressive feats have been in the economic arena. Here, he has experienced two particular triumphs: restructuring the banking system and protecting Venezuela’s main sources of wealth. Chávez enforced stepped-up measures of banking regulatory provisions in order to prevent institutional misconduct. By implementing comprehensive regulations, Chávez has ensured the curbing of future banking abuses, saving Venezuela from a possible Wall Street-like debacle that could profoundly damage the national economy.

Secondly, while certainly controversial, Chávez’s nationalization campaign of large private industries has translated into a number of real benefits for the country. Instead of Venezuelan resources being exploited by profiteering foreign corporations, Chávez has made sure that the nation is the primary beneficiary of its national resources. The profits from oil and other minerals’ extraction and refinement, as well as the resources themselves, are now in the hands of their real owners—the Venezuelan people. This gives the government enhanced revenue for a greater number of social programs, as well as the raw materials needed to sustain its industrial sector. With the extra funds coming from the growing state-owned sector, Chávez’s social programs have helped Venezuela better weather the recent economic tribulations than other nations. For instance, according to the IMF, Venezuela’s predicted 2009 GDP growth is -1.9%, while countries like the Czech Republic and Germany are suffering through -4.3% and -5.2% contractions, respectively. While Venezuela is certainly not immune to outside trade and investment permutations, especially due to its dependency on oil revenues, the government’s social programs have been able to mitigate some of the immediate negative consequences impacting average Venezuelans.

It is certainly important to acknowledge the government’s aforementioned accomplishments, it is also important to address the massive setbacks that have developed under the Chávez administration. While a number of Venezuela’s current economic quandaries are in reality out of his control, many either have been poorly handled by the Venezuelan leader. One example that combines both outside circumstances and Chávez’s personal missteps can be found in specific corners of the Venezuelan economy. Despite nationalizing profitable industries, the economy is ailing due to high rates of inflation, an over-reliance on falling oil revenues, and a shortage of foreign direct investment. Inflation rates are astronomical, reaching 30% in recent months. Even though the rates of poverty have improved in recent years, that improvement is now unraveling.

Presently, inflation is so high that the average member of the lower class cannot afford basic amenities on their real wage salaries, and as a result, are sliding back into poverty. Inflation has not only affected the lifestyles of individuals: even discount food stores have suffered greatly. Many of these stores are closing down around the country because people cannot afford basic food items, even with the forty to fifty percent price cuts called for by the government. Although poverty rates have been steadily falling for a decade, today, around 40% of the population still can be found below the poverty line, a number that is inching upwards.

Chávez could have taken measures to ensure the structural integrity and sustainability of la Revolución Bolivariana. Instead, he at times miscalculated and now leads a country that still relies on oil for 90% of its export revenue and 50% of its federal budget. This has made for an asymmetrical economy with a devastating lack of FDI. Even though much of this plight pre-dates Chávez, his system of allowing Venezuela to rely almost entirely on oil for its revenue has put the country at the mercy of volatile international markets. In good economic times, oil prices are high and the country flourishes. However, when oil prices drop, Chávez’s misguided policies allow the economy to falter. Unfortunately, diversifying the country’s economy has not been the top priority for the Venezuelan leader and little progress has been made in this area.

As poverty continues to increase, people have been counting on the social programs which are also massively suffering. Not only have a number of Barrio Adentro clinic projects been abandoned, (only 3,000 of the planned 8,000 were actually constructed), budgetary cuts have also meant the scaling back on many of the services they once provided. Chávez has been forced to reduce expenditures and subsidies for hospitals, food, energy, and education. In 2009 alone, funding of social programs by Petroleos de Venezuela (PDVSA) dropped from US$7.1 billion to US$2.7 billion. Today, the programs are in a precarious position due to Chávez’s miscalculated over-reliance on oil proceeds for program funding which has placed the entire network in jeopardy. Consequently, even though the president has gone ahead with building the social safety net he promised, mistakes in the planning process may significantly reduce his ability to provide for a soft landing.

Venezuelans must now live with the financial repercussions of having no easy economic recourse in the event of low oil prices. Millions of Venezuelans are now hoping that the recession will pass quietly and without serious collateral damage to the country’s social structure. To make a bad situation worse, Chávez’s hostility towards foreign investors has scared off money from overseas, despite historical grounds for Chávez’s justified fears of private sector abuses. Nationalizing major industries has helped to keep the wealth at home, but it also has discouraged a number of potential investors and much needed foreign capital. As The Economist points out, state run and private corporations alike are apprehensive over investing in Venezuela. Chávez’s proposed contracts for oil extracting ventures are today demanding “a 60% share and operational control in each block while not putting up any money. On top of that the government will take a 33% royalty and a windfall tax.” Many corporations are wary of investing in Venezuela under such harsh terms with no assurances that Chávez will not expropriate their installations down the road. This fear has resulted in the country witnessing capital flight without any economic remedies to offset the dire transitional effects of such a rush.

While Chávez has made miscalculations when dealing with the national economy, on the international economic front, he has fared far better. Due to his differences with the U.S. government, Chávez has tended to steer away from the historically dependent relationship with Washington in favor of building financial ties with other nations such as Cuba, Iran, Russia, and most recently, China. Russia has agreed to begin joint oil drilling ventures, Venezuela and Iran are exploring the country’s uranium deposits, and China has invested in Venezuelan oil fields, all providing sizable sums of investment. While these relationships are largely considered controversial, they could provide Venezuela with a much-needed alternative to the narrowly structured U.S.-Venezuela trade relation. More important than even the symbolic rebellion over the unprecedented nature of these ties are their portentous economic implications. While oil revenues can cover much of the governmental costs for Venezuela’s expensive social programs, no nation can have a robust economy without a stable FDI structure. Given Venezuela’s tense relationship with Washington, Chávez has found a natural substitution with trade alternatives presented by Russia and China.

Chávez’s initiatives have not been limited to other continents alone. In fact, his most newly established involvements have been very close to home. Under his guidance, Venezuela has grown into a regional power player with deep investment in South American integration and development. In 2007, Venezuela and Brazil started a joint financial venture called BancoSur. This organization is meant to be a friendlier, Latin American-equivalent of the IMF, and is designed to provide financial aid in continental development projects, such as roads, pipelines, and railways. Chávez, along with other regional leaders, also launched TeleSur, a Latin American regional TV network that according to its chairman Andrés Izarra, has a “[common] aim to present Latin America’s vision of itself to the world.” In addition to these ventures, Chávez has been instrumental in founding PetroSur and PetroCaribe, organizations that facilitate the financing of subsidized oil purchases for Latin American nations and other parties.

Perhaps most importantly, Chávez has initiated a new concentration on continental trade. Countries can exchange subsidized Venezuelan oil for non-traditional products from otherwise underutilized industries as a way of boosting regional integration and development. One example is the 2006 trade deal between Venezuela and Bolivia where, according to the Council on Foreign Relations, Bolivia agreed to exchange goods and services for discounted Venezuelan oil and a US$1.5 billion investment.

Latin American integration and growing economic independence from the United States is becoming more of a reality everyday. In this regard, Chávez has done an innovative job of navigating regional politics and economic arrangements. Chávez and the Venezuelan economy have managed to make progress in weakening U.S. influence in the region while promoting Venezuelan interests and projecting its power, no small accomplishment in a region historically dominated by the United States.

A Tarnished Image

Since appearing on the world stage in 1998, Hugo Chávez has become an international figure with his erratic personal behavior, legendary incorrect commentary, and often offensive evaluations of other leaders. Rather than comporting himself as a decorous world leader and sober national representative, he has at times behaved as what some have described as “a petulant child.” After calling former President Bush “the devil” at the UN General Meeting in 2006, leaders across the globe have cited the incidence as evidence of his “clownish” behavior and lacking political gravitas.

Chávez’s raffish style is further exemplified by his behavior at an Ibero-American Conference in 2007 in which he repeatedly interrupted the Spanish Prime Minister José Luis Rodriguez Zapatero, causing a rare outburst from the Spanish King Juan Carlos I, who told Chávez “que te calles.” Of course, to many, Chávez scored a winning response when he addressed the Spanish monarch as “Mr. King”, reminding him that he did not achieve office via election. Chávez admirers would further argue that Chávez’s derelictions are mainly a matter of style, that the Venezuelan leader is a preeminent democrat, and that his multiple shortcomings are trivial in nature.

Where is la Revolución Bolivariana Going?

Although now in diminishing numbers, clearly a majority of Venezuelans still feel confidence in their leader. They have elected him three times by wide margins, reinstated him after an attempted coup, and eventually passed a referendum to end term limits on his presidency. Despite the continued confidence in him, there is a growing sense of doubt and disaffection over the direction in which Chávez is taking the country. For those who lived during the second term of Carlos Andrés Peréz, Venezuela looks much like it did then—a country of deep political divisions, an economy in trouble, and the resumption of widespread poverty. These similarities to the 1980s show that, like Peréz, most of Chávez’s major promises of a systemic overhaul of the country’s institutions remain largely unfulfilled.

Yet, it is undeniable that Chávez has brought fundamental change to Venezuela. The poor have been given a political voice with an attentive audience and hope for a better future, something Peréz could never boast accomplishing. Nonetheless, Chávez’s unique opportunity for equalizing Venezuelan society may be slipping through his fingers; instead of reorganizing his priorities and devoting himself to the careful management of his revolution, he continues to choose making unsubstantiated grand-standing speeches. If Chávez is to make progress in achieving his 21st century Socialist Revolution, he may want to go after more bunt singles than home runs that turn out to be strikeouts.

This analysis was prepared by COHA Research Associate Monique Blanco

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