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Chavez’s Way Forward

Friday 15 December 2006, by Niko Kyriakou with Martin Markovits

Hugo Chavez’s resounding victory in well-monitored elections earlier this month shows that the self-styled socialist’s controversial leadership and big social spending have genuinely won over Venezuela’s poor majority. But Chavez has raised eyebrows by dedicating his victory to the Cuban revolution and declaring the beginning of a “new society.” Is this declaration, as many critics are suggesting, code for the launch of a full-fledged communist state, Cuban-style? Is Chavez, who hopes to pass constitutional reforms that would do away with the country’s three-term presidential limit, taking the slow road to autocracy? Just what does the unorthodox ruler have in store for Venezuela and the region? And, how will Venezuela’s shaky relationship with the United States evolve during Chavez’s upcoming six-year term?

Election wrap-up

As expected, Hugo Chavez scored an overwhelming victory in Venezuela’s Dec. 3 presidential elections, snagging just under 63% of the electorate, or about 7 million votes, according to the National Election Council.

His only relevant challenger, Manuel Rosales, a free-market advocate and the governor of Zulia state, won 37% of the votes but failed to capture the majority in any of the country’s 27 states, even his own Zulia (although he lost there by just 1%).

The election saw the smallest voter abstention in Venezuelan history. Some 75% of eligible voters, or 16 million people, went to the polls.

Few voting irregularities were uncovered by the some 700 international election monitors present at voting centers; including delegations from the Organization of American States, European Union, Mercosur, and the Atlanta-based Carter Center.

“We observed one of the most forward and technologically advanced systems in the world. We would do well to emulate it in Germany,” said Kornelia Moller, the spokesperson for the German monitoring delegation and a member of the German Parliament.

Observers reached a consensus that the elections were “free, transparent, and democratic,” easing doubts about Chavez’s support for democratic elections.

Opposition candidate Manuel Rosales had been expected to declare election fraud in the case of his defeat, but when the election was deemed squeaky clean, the candidate tipped his hat—marking the first time the opposition has recognized Chavez as the country’s legitimate President.

To sum up, Chavez has emerged from an internationally sanctified election with a strong mandate, a relenting opposition, and a grip on the presidency through 2012. If he’s been harboring secret plans to become a dictator or unleash a communist plot, surely now would be the time.

Final Step to Fidel?

Following the Dec. 6 announcement of his reelection, Hugo Chavez declared the beginning of “a new era” and the “deepening” of his Bolivarian brand of socialism. He also said, rather ambiguously, that come inauguration day next January, the country would enter the “third phase” of the revolution.

There is considerable debate between scholars—and possibly between moderate and extremist factions of Chavez’s own party—as to what “new era” and “third phase” really mean.

“Nobody knows what will happen after inauguration day, that’s the big question,” said Margarita Lopez, a historian and a professor at the Central University of Caracas.

“He (Chavez) has been very vague, especially during the campaign. The only thing that he has been completely open about, in terms of specific policy, is changing the constitution to end presidential terms limits,” Lopez said. Chavez’s controversial proposal to slash all term limits on the presidency would give him a chance at life-long leadership.

But the socialist leader has dulled this apparently autocratic edge by promising to submit any upcoming constitutional changes to a public vote.

In his victory speech, the incumbent repeatedly mentioned democracy, commenting more than once that capitalist societies, unlike socialist ones, are incapable of true democracy.

These comments seem designed show the world that Chavez is not an autocrat, but a moderate who genuinely respects the democratic process. They also stick a finger in the rhetorical eye of Chavez’s diplomatic sparring partner, the Bush administration, which has declared itself the worldwide defender and promoter of democracy.

Chavez’s pro-democracy comments may have been directed at his campaign opponent who, like many of his critics, suggests that the leader is moving Venezuela toward a Cuban-style communism. During the campaign, opposition leaders often seized on Chavez’s words and photo ops with Castro to bolster the impression that the Venezuelan president seeks to convert the country into a communist state.

In his final campaign speech in the oil-rich city of Maracaibo, opposition candidate Manuel Rosales told a crowd supporters, “We’re going to choose between two paths: one side that believes in democracy … and the other that wants to establish in Venezuela a Castro-Cuban communist system that strips the people of freedom.”

The Venezuelan president’s unabashed admiration of Fidel Castro makes comparisons between the two leaders tempting. Chavez dedicated his election victory to the Cuban revolution and praised Castro’s social projects for Cuba’s poor. Venezuela has aided the Cuban economy by selling them cheap oil in exchange for billions of dollars in medical services.

Chavez has even positioned himself as heir to Castro’s role as the world’s leading radical statesman, frequently visiting the ailing leader over the past year and modeling many of his social programs, or missions, on Cuba’s own programs.

When taken in this context, accusations that Chavez may go communist appear more plausible. But the comparison wears thin beyond the shared rhetoric and close personal relationship between the two leaders.

While Castro has never faced an electoral process, Chavez has won four elections with an average of 59-60% support. Chavez arranged referendums on the new constitution and National Assembly, and even allowed the opposition to hold a 2004 recall on his rule, which he won overwhelmingly.

While an autocrat might have crushed coup members who ousted him in 2003, Chavez reacted with notable moderation.

“He could have executed all the coup members. In the United States, attempting to depose a head of state is an executionable [sic] offense,” said Larry Birns, director of the Council on Hemispheric Affairs, an independent non-profit research organization based in Washington, DC.

To the contrary, Chavez permits a highly critical media (95% according to Birns) and an organized political opposition, neither of which generally flourish in autocratic states.

However, in his eight years as president, Chavez has curbed some freedoms and centralized power. Insulting the president or another public official is now a crime, and some journalists complain that new laws promote self-censorship. The president’s party has a monopoly on the 167-member National Assembly, (the result of the opposition’s boycott of National Assembly elections last year), and New York Times writer Juan Forero calls the courts “little more than adornments.” Billions of dollars of the country’s vast oil wealth flows directly from the state-run oil company to the executive branch.

Chavez says he respects the right to own private property but has expropriated several privately owned buildings in Caracas and allowed the homeless to live there as part of his Negro Hipolita mission, which provides housing and rehabilitation for substance abusers. He has also expropriated fallow farmlands and handed them over to the poor for cultivation, although his government has paid market prices or better for these properties.

Many of the country’s wealthier citizens asserted prior to Dec. 3 that they would flee the country if Chavez were reelected. Four days after Chavez’s victory became apparent, Brian Penn, chief spokesman for the U.S embassy in Venezuela, said he had seen no spike in visa applications to the United States over the past weeks, however. Penn added that he could not answer whether the United States would grant emigrating Venezuelans asylum as it did for Cuban refugees fleeing Fidel Castro in the 1950s.

Chavez Under Pressure?

Interestingly, Hugo Chavez may be under internal pressure to advance a communist model.

“One thing the election revealed is that there is a split going between the Chavistas,” said Lopez. On one side are “radicals who are heavily influenced by the Cuban revolution and want a Cuban style system,” the historian said. They advocate starting with the confiscation of private property. According to Lopez, this communist faction is led by the Energy Minister and chief of the state oil company (PDVSA), Rafael Ramirez, and the Mayor of Caracas, Juan Barreto.

On the other side, are a group of moderates who seek “limited socialism and want to keep moving things the way they are presently going,” she said. “This faction includes Vice President Jose Vicente Rangel and Justice Minister Jesse Chacon.”

“They favor expanding the missions and some changes to private property law, but for the most part want to leave capitalism alone. There is an economic boom going on right now and these Chavistas are now buying cars and houses and living on the East side of Caracas like Altamira,” Lopez said.

In her view, Chavez’s own position is a mystery. She describes the leader as hanging back, waiting to make his move. But there are some signs that Chavez may be aligned with the moderates.

Earlier this year the mayor of Caracas, Juan Barreto, threatened to seize the city’s Country Club golf course, located in Chacao, the richest neighborhood in Caracas. Barreto said the course took up space that could be used for much-needed housing, and entered into a debate with the mayor of Chacao, who refused to allow the course to be confiscated. Differing from his earlier seizures of private property, Chavez stepped in and publicly reprimanded Barreto, insisting he drop his case.

Capitalism Flourishes, Not Communism

Ironically, many of Chavez’s supporters would probably oppose not just a departure from democracy but also a crack down on the free market. The reason for this is that the popularity of Chavez is in some ways connected to the consumer fervor taking hold of the country.

Spurred on by great spikes in oil prices, Venezuela has become Latin America’s fastest growing economy. Oil was at $11 a barrel when Chavez first came to power in 1998; it currently stands around $56. This boom has driven gross domestic product up 10.2% in the last quarter alone. Oil accounts for half of all the country’s tax revenues and 80% of export revenues, according to Germany’s Spiegel Magazine.

Astoundingly, the Central Bank reports that consumption has risen 32% above 2005 levels, and there is seven times more money on the streets than there are goods and services available in the market, according to the country’s polling company, Dataanalisis.

In the third quarter of 2006, $8.6 billion worth of imports entered Venezuela, equal to the average annual figure for the last decade, according to the country’s retail association.

The Venezuelan economic forecasting firm, Ecoanalytic, predicts a 40% increase in car sales in 2007, a 36% rise in the purchasing of telecommunications goods (internet, cell phones, fixed lines, and computers), a 32% increase in commercial sales, and a 29% increase in construction (already up 32% in 2006).

Increased spending has not just come from the rich. In a country of 27 million, government figures show a drop in the number of Venezuelans living in poverty from 44% in 1998 to 34% this quarter .

Monetary liquidity, according to the Central Bank, stands at 110 trillion bolivares ($52 billion), equivalent to one-third of Venezuela’s gross domestic product (GDP). With all this free-flowing cash, how many of Chavez’s poor supporters and well-paid government employees would really support an economic lockdown?

Race Against Time

Rather than shift toward a communist state, Chavez may be racing against time to create a stable regional trade block in which a capitalist economy can thrive alongside his Bolivarian socialist model. One point in particular indicates this possibility.

Today, the country is singularly dependent on a volatile resource: oil. Traditionally, oil is a cyclical commodity; that’s why he is anxious to push forward integration,” said Miami Herald columnist Fred Rosen. “If oil [price] goes down, this may be Chavez’s soft underbelly,” he said.

According to Rosen, Chavez’s regional integration plan, modeled after the European Union and currently embodied by the Mercosur trade block, is designed not only to support independence from the United States but also to diversify the economy.

“Chavez’s idea to lead regional integration will allow South America to diversify its economy to rely not only on oil and natural gas but a diverse set of industries,” Rosen said.

While oil prices may be more stable than in the past, especially considering the voracious energy appetites of growing powers like India and China, price volatility could be motivating Chavez to speed-up regional integration.

Recent Moves

Seeking to nurture this integration, the Venezuelan president’s first action following the news of his victory was to depart on a continental tour of various regional center-left governments, which now include Cuba, Brazil, Argentina, Bolivia, Chile, Uruguay, Nicaragua, and Ecuador.

Arriving in Brazil the day after his official victory, Chavez told reporters that the main topic on his agenda would be boosting Latin American integration by giving Brazil and the rest of South America easy access to Venezuela’s vast oil reserves.

The hallmark of these energy proposals is the estimated $200 billion “oil pipeline of the south” that would travel an 8,000-kilometer distance from Venezuela to Argentina’s Rio de la Plata. Chavez and Brazilian President Lula da Silva are also in negotiations to build a $25 billion Venezuelan refinery plant in the Brazilian state of Pernambuco.

Another topic in discussion is the creation of a continental military force for South America. Chavez has said that true Latin American integration cannot be complete until the armed forces of the region are reorganized.

Foreign Minister Nicolas Maduro, who accompanied Chavez on his trip, said that Mercosur has entered a new phase in which it will no longer be strictly an economic entity. “Because of the philosophies and backgrounds of the presidents of Argentina, Paraguay, Brazil, and Venezuela, Mercosur will take a new direction that will now encompass social and political issues,” Maduro said.

U.S. spokesman in Venezuela Brian Penn said the United States would be willing to negotiate trade deals with the South American economic union.

Relations With the U.S.

The United States purchased some 60 billion liters of oil from Venezuela in 2006, transferring $20 billion to the country. But Chavez may be attempting to push South America closer together as a means of replacing the United States as a principal trading partner in the long-term.

Chavez’s recent moves to integrate regionally include helping neighboring nations slough their debts to the International Monetary Fund. Venezuela provided the wherewithal for Argentina’s recent repayment of its IMF debt by purchasing more than a billion dollars in Argentine public bonds. With Argentina and Brazil paying off their debt and Bolivia’s decision not to sign a new agreement with the multilateral lending institution, Latin American nations have begun to break free from the restrictive IMF conditions that long prevented policies aimed at redistribution of wealth and improving conditions for the poor.

In yet another sign of declining U.S. clout in the region, Mercosur countries rejected the U.S.-sponsored Free Trade Agreement of the Americas (FTAA) at the presidential summit of the Americas held in Mar del Plata, Argentina in November 2005. When the United States responded by threatening to revoke long-standing trade preferences to the region, countries like Peru and Colombia jumped, practically begging the United States to approve bilateral deals before preferences expire at the year’s end. But talks with Ecuador and Uruguay have stalled, showing that heavy-handed U.S. tactics, while still influential, no longer carry the mandate they once did.

Today, Washington must double paddle to maintain a strong presence in Latin America, although it maintains powerful trade deals with Mexico, Paraguay, Chile, and across Central America.

As Hugo Chavez attempts to lubricate the path toward regional integration with cheap oil for the region, the United States can only be expected to grow more and more testy with the vagabond head of state. However, transparent elections have made it hard for the pro-democracy touting United States to raise a rhetorical hand against Chavez.

U.S. Ambassador to Venezuela William Brownfield has recognized Chavez’s victory and expressed hopes about improving relations between the two countries, and U.S. Embassy spokesman Brian Penn said this about the future of bilateral relations with its fourth largest oil supplier: “We realize in the big areas we are fundamentally going to disagree. However we do agree that there are other areas where we can talk and have good relations, like fighting narco-trafficking, making energy deals, and fighting terrorism.”

But Chavez, showing a blatant disregard for diplomacy with the United States, voiced pessimism about the possibility of improving the two countries’ abrasive relationship, complaining that the powerhouse would most likely continue to put “conditions” on any potential dialogue. It may be that by integrating with regional states—and establishing trade with Iran, China, and other Asian powers—Chavez hopes to gradually transfer his country’s oil sales away from the United States, which currently buys some 60% of Venezuela’s annual export.

What seems more certain is that as regional bonds thicken, the rewards will become more visible, providing an increasingly inviting incentive for the rest of Latin America to turn away from the “empire” and toward Simon Bolivar’s dream of continental integration.

Niko Kyriakou is a roaming freelance reporter based in Latin America. Martin Markovits is a reporter based in Caracas, Venezuela. Both are contributors to the IRC Americas Program, at

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