Lab Report

Venezuela’s New Era

Venezuela’s New Era

"The painter — the one who holds the brush, who mixes the colors, the artist — is Hugo Chávez. If I hand over the brush, even to the person most dear to me, that person might begin to use other colors, because he has a different vision, and begin to alter the outline of the painting."

— Hugo Chávez, 2007

All the signs indicate that the Hugo Chávez era is over. After more than two months of intensive care in a Havana hospital, and following his fourth operation for cancer in eighteen months, the Venezuelan president is now back in Caracas. Confined to a bed and unable to speak, thanks to a tracheotomy, he seems unlikely ever to resume his presidential duties, despite official assurances that he remains in charge. The outsized ego that dominated the country’s politics for a decade and a half and that aspired to continental leadership is in the process of leaving the stage. Unable to conceive of life without power, he sacrificed the former for the latter. He leaves behind a political system adapted to satisfy the whims of one man, and an economy more dependent than ever on the international market price of a single commodity: oil. His departure threatens to shatter the illusion of stability that authoritarian rule invariably seeks to instill. 

For most of its history, Venezuela has been ruled by men in uniform. For four decades, however, from 1958 to 1998, it maintained a civilian, two-party system which in its early years resisted attacks from both the militaristic right and Cuban-trained leftist guerrillas. At its height, this system was regarded by many as a model democracy. But by the end of the century its flaws had become more apparent. A significant decline in per capita oil revenue contributed to a dramatic increase in poverty and exclusion. Social and economic indicators were in long-term decline, while botched or incomplete political and economic reforms merely opened the door to the forces that would deliver the coup de grâce. 

A mid-ranking army officer who had staged a failed coup in 1992, Chávez strode to power over the wreckage of the ancien régime. He was elected in 1998 as the embodiment of "anti-politics," the ultimate outsider. Explicitly committed to the dismantling of all existing institutions, he began by having the constitution rewritten and approved by referendum. To the three classical branches of government, Chávez added two more: An electoral authority and a "citizens’ branch", consisting of an ombudsman, the public prosecutor, and a state auditor. Their autonomy, however, would soon be fatally undermined. 

In 2006, Chávez declared himself a radical socialist. Despite his evident nostalgia for Stalin and the Cold War era, and his umbilical ties to Castro’s Cuba, he was careful to distinguish his "twenty-first century socialism" from the communism of the gulags. It was, he said, "humanistic." But he warned that, though peaceful, his "revolution" was armed and would not relinquish power to "the bourgeoisie." In fact, however, the leftist rhetoric and the increasingly frequent seizures of private property were less about ideology than the concentration of power. 

Shortly after leaving jail in 1994, Chávez had made contact with an Argentine neo-fascist sociologist, the late Norberto Ceresole. Their relationship had ended by the time Chavez was elected, but it had a lasting effect. Ceresole was a proponent of what he called "post-democracy." Disdainful of parties and politicians (especially those around Chávez), he advocated rule by the triad of "strongman-army-people." The Venezuelan electorate, he said, had given Chávez an indefinite mandate. 

In the hands of Hugo Chávez, the executive came to dominate not only the legislature (whose chavista majority never questioned presidential commands and several times granted him extensive powers by decree), but also the justice system, the electoral authority (CNE), and the "citizens’ branch," too. The regime is avowedly "military-civilian," and around 2,000 active or retired military officers hold positions in the state bureaucracy. Half of the country’s 23 states are run by former members of the armed forces (officially the "National Armed Forces of the Bolivarian Republic of Venezuela," or FANB). The high command swears public allegiance to the "revolution," in defiance of the constitution, as does a 125,000-strong militia. 

During his last presidential campaign, Chávez spoke of "making the revolution irreversible." He envisioned that, by 2019, two-thirds of Venezuelans would live in "communes," defined as the building blocks of a socialist society. The "communal state" is an aspiration of the radical left faction of chavismo, to which Nicolás Maduro, Chavez’s vice-president and anointed heir, belongs. It would run parallel to the "bourgeois" state (based on representative democracy and enshrined in the constitution), and would steadily appropriate more of its resources and powers. 

Since Chávez disappeared from view, however, little has been heard of the communal state. There are more urgent matters to be resolved on the economic and political fronts. Moreover, chavismo has always been an uneasy alliance of the hard left, the purely pragmatic, and those who are more interested in wealth and power than revolution. Encouraged to believe, like Italians under Mussolini, that Il Duce ha sempre ragione (the leader is always right), will grass-roots chavistas now simply transfer their allegiance to Maduro? Or will a power struggle within the regime split chavismo and derail the revolution? 

For now, there is every indication that the movement’s disparate factions are being held together by the well-founded fear that internecine warfare would cause them to lose the impending presidential election. Before leaving for Havana in mid-December, Chávez unequivocally named Maduro as his political successor, declaring that he should be the candidate if a fresh presidential election were to be called. That left the civilian radicals around Maduro, including members of Chavez’s immediate family (notably his brother Adán, governor of their home state of Barinas), in at least nominal control. 

The all-important supreme court (TSJ), along with the citizens’ branch of government, is dominated by individuals loyal to Maduro, whose most visible rival is former army lieutenant Diosdado Cabello, president of the National Assembly (parliament) and vice-president of the ruling United Socialist Party of Venezuela (PSUV). Cabello was re-elected to his post in early January, but the Maduro faction holds the two vice-presidencies of parliament. 

Cabello, who took part in Chavez’s failed 1992 coup (and whose contemporaries are now generals), is widely believed to wield decisive influence in the FANB. But although he undoubtedly has many military allies, and may be favored by some of those who regard Nicolás Maduro as too close to the Cuban regime of Raul Castro, it is an exaggeration to say that the PSUV vice president controls the armed forces. Senior generals, and in particular the high command, will likely remain loyal to whoever represents the best guarantee for their personal interests. Discontent among middle-ranking officers — over corruption, for instance, or the presence of Cubans in the barracks — would be unlikely to benefit Cabello. On the left, meanwhile, he is regarded with deep suspicion, if not outright hostility. 

In the absence of Chávez, the new, collective leadership must improvise a fresh way of resolving disputes. In the past, the presidential fiat represented the final court of appeal. Candidacies — for state governor, for instance, or parliamentary deputy — were ultimately decided by the leader himself. The clearest evidence that things have changed is the decision to hold party primaries to determine candidacies in the upcoming local elections, set for July 14. If that process proves successful it will suggest that rival factions can work out a modus vivendi, at least in the short term. 

On January 9, one day before Chávez was supposed to be sworn in for his next, six-year term, the TSJ’s constitutional branch ruled that the ceremony was a mere formality. Citing "administrative continuity," it said the re-elected president, along with his entire cabinet, would remain in office pending a fresh date for the swearing-in, to take place whenever the president’s health permitted it. Sweeping aside constitutional provisions for "temporary" and "permanent" absences on the part of the head of state, the court determined that Chávez was merely enjoying indefinite parliamentary permission to leave the country, and that he would only be "absent" in the constitutional sense if he himself issued a decree to that effect. 

All this leaves the opposition Democratic Unity (MUD) alliance in something of a quandary. Its presidential candidate, Miranda state governor Henrique Capriles Radonski, lost the October 7 presidential election by over a million votes, despite an energetic, imaginative, and largely gaffe-free campaign. In regional elections on December 16, the opposition lost four of the seven states (out of 23) that it controlled, including key strongholds Zulia and Carabobo. It is under strong pressure from within its own ranks to take a more aggressive stance towards the government, whose disdain for the constitution is more apparent than ever. But despite a re-launch currently under way, major changes in leadership or tactics look unlikely with an election looming. 

Vice President Maduro, who self-evidently lacks the Chávez charisma and has a rather weak public profile, is (on paper) a rival who can be defeated, despite the government’s control of the CNE and its blatant abuse of state resources in elections. But Maduro has already embarked on a barely-disguised presidential campaign. One poll gives him a large lead over Capriles. The MUD, on the other hand, which has strongly hinted that Capriles will once more be its candidate, cannot be seen to launch a campaign without being accused of declaring the president already dead. 

On the political front, the government is pursuing tactics that have served it well over the past 14 years, aimed at polarizing the electorate by attacking the opposition (even physically) while accusing the MUD of plotting coups and assassinations as part of an alleged plan by Washington to oust the revolutionary regime. Calls for dialogue have been rejected, opposition politicians are being threatened with arrest, and the media intimidated. Demands for information on the president’s true state of health are dismissed as "morbid" and "disrespectful" towards Chávez and his family. Under these circumstances, holding together a coalition committed to electoral politics is an arduous task. 

Most political commentators predict a Maduro victory in any election held in the next few months. The wild card is the economy, which is showing signs of severe strain thanks to the distortions produced by price and exchange controls, a hostile business environment, poor planning, and profligate spending in pursuit of Chavez’s re-election last year. Full-scale adjustments, which ought to have come once the election season was out of the way, have been postponed, no doubt to avoid derailing Maduro’s prospective candidacy. 

January brought the highest level of scarcity in basic foodstuffs since 2007-8. Many consumers were unable to find sugar, cooking oil, chicken, and other price-controlled goods, including pre-cooked corn-flour, a staple product used to make some of Venezuela’s most typical foods. Some seasonal factors were partly to blame, but the crisis (which may yet worsen) is a warning to the government and the public that all is not well with the economy. 

As Venezuelans headed off for carnival weekend, Finance and Planning Minister Jorge Giordani and Central Bank President Nelson Merentes announced a 32 percent devaluation of the bolívar. They also abolished a second-tier exchange rate, at which about a fifth of the private sector’s demand for hard currency had been supplied. The net effect was to increase worries about the shortage of dollars — and send the black market rate even higher — without fully resolving the government’s need to balance the fiscal books. 

Although oil is still selling for around $100 a barrel, and seems likely to remain high, the official exchange rate of 6.3 bolívars to the U.S. dollar is less than 30 percent what the greenback is worth on the black market. Experts say a further devaluation is almost inevitable before too long, in order to increase government revenue in bolívar terms. According to leading economist Asdrúbal Oliveros, the recent adjustment will only cover about a third of this year’s fiscal deficit. 

A rise in the price of subsidized gasoline is also long overdue. At the official exchange rate, it costs around a dollar to fill the tank of an average Venezuelan’s car. The cost to the exchequer is of the order of 4.4 percent of GDP. But the government seems terrified of provoking the kind of backlash seen in 1989, when a sudden, sharp rise in gas prices helped provoke violent riots and looting that left hundreds dead. The current plan seems to be to adopt stopgap measures until the problem of the presidential succession is out of the way. 

These short-term problems, however, are the tip of the iceberg. Unlike most of its neighbors in Latin America, Venezuela is much more heavily dependent on a single export product — oil and its derivatives — than it was in 1998, before Chávez came to power. According to official figures, around 96 percent of foreign earnings came from this source in the first half of 2012. That is due mainly to a sharp rise in oil prices, but also partly because of a collapse in non-oil exports in recent years. 

Oil revenues help maintain a grossly overvalued currency, which has made it much more profitable to import than to produce locally, especially if you can obtain dollars at the official rate, and virtually impossible to compete in the export market. Productivity has slumped, thanks partly to labor laws that prevent employers firing workers even for chronic absenteeism. Expropriations, often without compensation, have discouraged productive investment and created a bloated state sector which is absurdly inefficient. 

Dismantling price and exchange controls would be difficult even for a government committed to a market economy. But the problem is compounded by the huge vested interests they have spawned. One senior private sector figure, for instance, estimates that over $20 billion a year is being corruptly siphoned off by well-connected crooks who have access to cheap hard currency and pad their import bills. Indeed, the penetration of the Venezuelan state, including the military, by organized crime will pose a major challenge to future governments. 

Anxiety over the country’s future is not confined to Venezuela. Throughout the region and among the country’s main trading partners elsewhere in the world, such as China and Russia, there is concern that this bizarre, slow-motion change of government may have a destabilizing impact. Countries that have benefited from Chavez’s politically-inspired largesse (notably Cuba) and those with major business interests (like the Chinese and the Brazilians) fret that the baton may not pass smoothly from the ailing Chávez to his anointed successor. 

Despite calls by Washington and Brasilia for elections to be held swiftly in the event that Chávez is unable to resume the presidency, Venezuelan democracy is low on the list of priorities. The revolution has dedicated much time and money to fostering clientelistic relations with its Latin American and Caribbean neighbors. When the ambassador of Panama sought to put the regime’s unconstitutional behavior on the agenda of the Organization of American States, he received virtually no support and was sacked by his own government for his pains. 

Assuming the regime can manage the inevitable transition to a post-Chávez era, economic realities may force the adoption of a more pragmatic set of policies, including a rapprochement with the private sector, once the pugnacity of the campaign period can be left behind. However, ideology — and the need to be seen to be loyal to the Chávez legacy — may prevail. In either case, a likely economic "hard landing" would sharpen social conflict, whereupon a leadership bereft of his special rapport with the masses may drift inexorably towards the outright repression of dissent that Chávez himself was mostly able to avoid. 

Such a crisis would strengthen the hand of those who hold the guns. As so often in Venezuela’s history, the military may be the final arbiter.