Tag Archives: chavez

Venezuela

We’re starting to see what Madurismo will look like in Venezuela

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It’s been nearly three weeks since I returned from Caracas to cover the Venezuelan presidential campaign, but the post-election situation there remains far from becalmed, unfortunately. Venezuela Flag Icon

Here’s a quick review of where things stand after another week that was, wherever you stand on the Venezuelan political spectrum, not a very good week for Venezuela and its political and legal institutions:

  • The opposition candidate Henrique Capriles, who leads the Mesa de la Unidad Democrática (MUD, Democratic Unity Roundtable) coalition, is taking his challenge directly to Venezuela’s Supreme Tribunal of Justice that contests over 2.3 million votes in over 5,700 polling stations from the April 14 vote.  A planned audit of the election will continue under the supervision of Tibisay Lucena, the head of Venezuela’s national electoral council, though Capriles and the MUD opposition have rejected the terms of the audit.  Although the audit will recount the votes, it will not audit aspects of the voting process, such as voter signatures and fingerprints, that could confirm that the votes were legitimately cast, not just properly tallied.  Capriles and his allies have also alleged a wider range of election-day concerns, including voter intimidation and dumped ballot boxes.  
  • In Venezuela’s Asamblea Nacional (National Assembly), which is dominated by the chavista party, the Partido Socialista Unido de Venezuela (PSUV, the United Socialist Party of Venezuela), opposition deputies have not only been prohibited from speaking, but were attacked in a vicious assault last week on the floor of the National Assembly while its chavista president, Disodado Cabello looked on with a smile.  No matter if you’re in Ukraine or in Venezuela, brawling politicians on the floor of a parliament are always unseemly:
  • Meanwhile, the government of president Nicolás Maduro has taken an increasingly harsh political line against the United States, attacking U.S. president Barack Obama for ‘meddling’ in internal Venezuelan affairs.  Maduro has railed against the Obama administration, which has not yet recognized Maduro’s victory on April 14, and which has aired concerns about the vote.  Maduro’s new administration has added additional tension to U.S.-Venezuelan relations by imprisoning a U.S. documentary maker on charges of inciting political violence in Venezuela.  Maduro, who suggested during the campaign that the United States may have caused the cancer that killed his predecessor, Hugo Chávez, has argued that the United States is fomenting post-election violence as well.  For good measure, he’s also accused former Colombian president Álvaro Uribe of attempting to assassinate him and he’s even attacked Peru’s foreign minister Rafael Roncagliolo.
  •  Maduro’s new cabinet, appointed in late April, looks much like the previous one, with many familiar high-level chavista faces retaining much of the power in Venezuelan government.  Rafael Ramírez remains the country’s energy minister and head of the national oil company, Petróleos de Venezuela, S.A. (PDVSA); Elías Jaua, a former vice president, will remain foreign minister; and Cabello remains the president of Venezuela’s national assembly.  The longtime head of the finance and planning ministry, Jorge Giordani, will remain merely planning minister and Nelson Merentes, formerly the head of Venezuela’s central bank, will become finance minister, a post he held briefly in the early 2000s as well.  Merentes’s promotion has caused some optimism internationally, and Merentes is seen as more of a pragmatist than Giordani and dislikes Venezuela’s currency controls, which have artificially skewed the flow of dollars to importers.  It’s not clear, however, that Giordani will relent control over economic policymaking, given that he’s been the economic czar of Venezuelan government since virtually the beginning of the Chávez era.

What is the sum impact of all of this?

So far, it seems that madurismo is the same as chavismo, but with less charisma, fewer petrodollars and the possibility of a more violent government than under Chávez.

With no signs that Capriles is giving up his challenge, Maduro faces a real legitimacy problem, and he’ll continue to do so as long as Capriles challenges the election’s audit process in a court system that’s widely seen as tilted more toward politics than toward impartial interpretation of the law.  In the best case scenario, chavismo somehow lost 600,000 supporters between Chávez’s reelection in October 2012 and Maduro’s own election in April.  In the worst case scenario, Maduro and the chavista government simply bought, scared or muscled enough votes last month to steal the election.  It’s not an enviable position, especially given Venezuela’s ongoing economic troubles.

But Maduro also faces serious challenges within the PSUV and the ruling chavista elite.   Continue reading We’re starting to see what Madurismo will look like in Venezuela →

Venezuela

Gettin’ Raucous in Caracas

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Here’s a piece I wrote for an LGBT website on the Caracas gay scene a couple of weeks ago– and how the election season put a damper on exploring Caracas’s nightlife.  It’s not my typical foreign policy analysis, but perhaps some of you will enjoy it nonetheless if you ever find yourselves with a free night in Venezuela’s capital.

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CARACAS, Venezuela — Perched in a valley of a mountain range that runs along the Caribbean coast on the northern rim of South America, Caracas isn’t exactly the first thing you think of when you think gay destination.Venezuela Flag Icon

But you’d be surprised at how much fun life could be in the capital of the Bolivarian Republic — Sean Penn can’t be completely wrong, right?

My chief obstacle was the ley seca, the dry law that went into effect at 6 p.m. Friday night in advance of last Sunday’s election.   Nothing kills a South American party faster than public teetotaling, though Venezuelans had figured how to circumvent that law fairly discreetly after a similar dry spell following the death of former president Hugo Chávez and another during semana santa (Holy Week).  But the state of things left nightlife a bit more subdued than it would have otherwise been.

Being stuck in Caracas during election season isn’t all bad, though.  In a society that now, more than ever, is incredibly political polarized, gay life is one of the few parts of Venezuelan society where chavistas — the followers of Chávez and his successor, president-elect Nicolás Maduro — mix with opposition supporters.

Unlike in the United States, both sides court the gay demographic, and early in the most recent campaign, opposition candidate Henrique Capriles lashed out at Maduro for using homophobic language to slur Capriles (he’s called Capriles a ‘little princess’), arguing that there’s no place for the kind of machismo language that ostracizes and excludes gay Venezuelans.  Despite Maduro’s language, the Venezuelan government hasn’t been wholly bad for LGBT rights.  Chávez’s 1999 constitution attempted to include language banning discrimination on the basis of sexual orientation, though Chávez in 1999 outlawed discrimination by statute.

Capriles, for the record, is fairly easy on the eyes and incredibly fit, in contrast to either Maduro or Chávez.  He’s also single, though he’s been linked to numerous women in the past, so don’t get any ideas.

Notwithstanding the pre-election ley seca, and the post-election tension, which continues even now to threaten Venezuela’s political stability, I still found some time to see the best of gay Caracas while covering the election and its policy issues.

Don’t expect Buenos Aires or Rio — Caracas isn’t a hard-dancing party town.  Instead, expect a surprisingly sophisticated mixed scene — the term in Caracas for the more gay-friendly scene is ‘en ambiente,’ but really the entire neighborhoods of Altamira and Chacao, as some of Caracas’s safest neighborhoods, come alive with a chill scene at night.  Forget what you’ve heard about the ‘murder capital’ of the world — Altamira and Chacao are walkable by night with the precautions you’d use in New York or Los Angeles.

I was lucky to have Julian Eduardo — a.k.a Stayfree — to show me around town.  He’s an icon of gay life in Caracas as one of the first Venezuelans to come out publicly, and he was for a while one of the hosts of a popular television show, ‘Noches de perros,’ making him one of the first openly gay figures on Venezuelan television.  He said that Caracas has become increasingly sensitive to LGBT issues over the past decade.  Though gay life in Venezuela may not be as out and proud as in countries like Argentina and Uruguay, which have both enacted gay marriage (Uruguay did so last week), gay life in Venezuela is a mellow thing, especially in the capital.

So, for instance, check out Puto Bar, which is Chacao’s answer to a hipster dive with great music, cheap drinks and a fun mixed, en ambiente scene where there’s usually even more action outside among the smoking area than inside with the night’s live set.  There were quite a few boys with some assets worth, ahem, expropriating, faster than you can say ‘Mister Danger.’ Continue reading Gettin’ Raucous in Caracas →

Brazil, Venezuela

Chávez’s radical antics provide space for progressive Latin American left

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In a piece for The National Interest today, I stepped back from the immediate issues surrounding Sunday’s presidential election and the fallout, increasingly tense, with challenger Henrique Capriles canceling a march today against potential fraud in the election and with president-elect Nicolás Maduro very much using the threat of state violence to shut down the opposition’s mobilization for a full recount.brazilVenezuela Flag Icon

It’s a piece I’d been hoping to write for some time, and I wish I’d published it sooner, but it’s still relevant given how much the late Hugo Chávez (pictured above in happier times with the late Argentine president Néstor Kirchner and former Brazilian president Luiz Inácio Lula da Silva) looms not only over Venezuela, but over all of Latin America.  I’ve written that his radical, anti-American antics have allowed other more moderate leftists in Latin America room to develop a truly progressive, social democratic movement for the first time ever, really.  Chávez, at home, transformed Venezuelan politics from a right-left contest to a battle between a more business-friendly, democratic left, as personified by Capriles, and a more socialist, militant leftism, as personified by Maduro.

I argue that Lula da Silva, in particular, has been incredibly canny in triangulating himself between the U.S. center of gravity and chavismo, exquisitely playing one against the other:

But the tidy duality of a moderate lulista left and a radical chavista left obscures the complex, often symbiotic relationship between the two forces. In particular, Lula da Silva was always incredibly cunning in using Chávez as a foil in hemispheric politics. Lula da Silva made three failed presidential bids prior to his election in 2002, fully four years after Chávez took power. By the time Lula da Silva took office, Chávez had arguably done more than anyone else in Latin America to make Lula da Silva seem moderate in contrast.

It’s certain that Lula’s vast social reforms would seem more radical—and may have met more domestic and international disapproval—if not for Chávez’s ad hoc expropriations and anticapitalist fulminations from Caracas. By giving Chávez his full support, he guaranteed especially kind treatment of Brazilian private interests in Venezuela, and his fervent support for Maduro in a taped endorsement earlier this month was provided in no small part to ensure kindness from a Maduro administration. Brazilian officials have already started casting aspersions on the Capriles camp, which has called for a full recount of the vote. But Lula da Silva’s support for Chávez also gently reminded U.S. diplomats that they had an interest in boosting the Brazilian model as a counterweight to the Venezuelan model throughout the region.

 

Venezuela

Venezuela’s economy is tumbling despite oil prices over $100/barrel

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I wrote a piece for The New Republic earlier today about the state of the Venezuelan economy and the difficult issues that await the next president, which for now looks like it will be Nicolás Maduro following Sunday’s landmark presidential election.Venezuela Flag Icon

I argued that although some of the economic reforms that Maduro could implement are relatively simple, he may well lack the charisma, the political capital (both within and outside the chavista camp) and the funds to pull Venezuela back from the brink of two devaluations in 2013, the threat of even higher double-digit inflation, increasing reliance on imports for basic staples, a crumbling oil infrastructure, an atrophied private sector and difficulty accessing international — and even Chinese — finance:

It’s now up to Maduro to sort all of this out in the background of a legitimacy crisis. Economically speaking, there are several options that could help. Venezuela could claw back some of its oil revenues by reducing subsidies to Cuba and the rest of the Caribbean basin. He could reverse the trend of ad hoc expropriations under Chávez that left the public sector bloated with bureaucrats, the private sector fearful, and the non-oil industry atrophied. He could direct more capital to be re-invested into PDVSA, the state-owned oil company, to boost oil production that’s fallen by up to a third in the past 15 years, and to develop refining capacity, especially in light of the ultra heavy crude oil that’s increasingly being drilled from the interior’s Orinoco Belt. Venezuelans believe cheap gas is virtually a constitutionally protected right, and an attempt to eliminate it pursuant to an IMF loan package in 1989 is widely seen as the catalyst for the deadly Caracazo riots later that year, but Maduro could gingerly begin to reduce the domestic subsidy that keeps Venezuela’s gasoline the cheapest in the world at about six cents per gallon.

Venezuela

Cabello comments indicate cracks in the chavista high guard?

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One key piece of data that I missed last night is the response of National Assembly leader Diosdado Cabello (pictured above), who tweeted the following last night:Venezuela Flag Icon

Profunda autocrítica nos obligan estos resultados, es contradictorio que sectores del Pueblo pobre voten por sus explotadores de siempre.

Deep self-criticism obliges us to note these results, and it’s contradictory that sectors of the poorest people have voted for their exploiters.

Cabello is the behind-the-scenes pragmatic bulldog of chavismo and he’s clearly the most relevant political leader within chavismo after the newly declared president-elect Nicolás Maduro.  Given the narrow victory that Maduro won, he may well now be chavismo‘s most relevant political leader.

That makes his rather subdued statement an important touchstone for where Venezuela’s ruling part is headed, and it’s somewhat more subtle than the full-speed-ahead, at-full-volume victory speech that Maduro delivered Sunday night.

Some background: he served as the governor of Miranda state from 2004 to 2008 — opposition candidate Henrique Capriles got his start in national politics in 2008 when he ousted Cabello by a seven-point margin to become the governor of Miranda.

Cabello has since 2012 been the president of Venezuela’s Asamblea Nacional (National Assembly), where the Partido Socialista Unido de Venezuela (PSUV, or United Socialist Party of Venezuela) and its allies control 96 seats to just 65 for the opposition.

If Maduro’s victory is not overturned following an audit of the election results, the next electoral test for chavismo will come in December 2015, when Venezuela holds its next scheduled parliamentary elections, and it seems fairly possible that Cabello and the PSUV could lose their majority.

Venezuela

A primer on PDVSA — and the interaction of oil and politics in Venezuela

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CARACAS, Venezuela — You’d think in Caracas that the governing party were the PDVSA, not the PSUV.Venezuela Flag Icon

But the state-owned oil company, Petróleos de Venezuela, S.A., functions as much as any other organ in Venezuela in service of the government, formerly headed by Hugo Chávez and now, Nicolás Maduro.

Indeed, a stroll through Caracas finds the PDVSA brand saturates the city — much more than the nominal governing party, the Partido Socialista Unido de Venezuela (United Socialist Party of Venezuela). Here’s a PDVSA-branded hopscotch:

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PDVSA (pronounce it ‘pay-duh-vay-suh’) was founded in 1976 when then-president Carlos Andrés Pérez nationalized the oil industry at the height of an oil boom the likes of which Venezuela had never seen. Venezuela’s oil industry began in 1914 when the first oil well was drilled in Mene Grande, in western Zulia.  It began exporting petroleum by 1918, and that soon eclipsed an economy once based largely on cacao and coffee — though cacao production was dwindling in the early 20th century, Venezuela exported more coffee than any country in the world other than neighboring Brazil.

Venezuela was the world’s leading oil exporter by the end of the 1920s — Caracas was known as ‘the gas station south of Florida.’ We think of the Organization of Petroleum-Exporting Countries (OPEC) as a largely Middle Eastern cartel today, but it was founded in large part in 1960 on the initiative of Venezuelan energy minister Juan Pablo Pérez Alfonso, who helped create it after reaching out to his ministerial counterparts in Saudi Arabia.

Through the next 40 years, Venezuela’s fortunes rose and fell with global oil price, but PDVSA remained relatively at arm’s length from the government — it paid income taxes and royalties to the government, as well as dividends (because it’s entirely state-owned).

This continued even after Chávez was elected — until 2002, that is, when Chávez attempted to take control of PDVSA, leading to a rebellion/coup attempt and a general strike among PDVSA employees later that year. Chávez, as it turns out, simply fired most of the offenders, and over the past 11 years, PDVSA has become essentially an arm of the government, which itself increasingly became an organ of chavismo.

So PDVSA employees today wear red, the color of chavismo, and over the past decade, PDVSA has been a direct contributor of funds to social programs, bypassing the formal channels of government — and also incurring its own liabilities (indeed, the IMF’s estimate of Venezuela’s public debt of around 51% includes PDVSA debts as well).

Whatever the benefits to deploying that capital for social welfare programs (and I’m not arguing for or against), it means there’s simply less capital to maintain production or develop new avenues for refining oil.

Rafael Ramírez, a loyal chavista, was appointed minister of energy and petroleum in 2002 and PDVSA’s president in 2004. If Maduro wins the election, it’s expected that Ramírez will stay in place — and so will continuity in oil policy under the Maduro administration. If Maduro replaces Ramírez, however, it could be an indication that he wants to shake up some of his predecessor’s policies.

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Oil proceeds represent around 95% of Venezuela’s exports, around 20% of its GDP and over 50% of the government budget. So what happens in the oil industry matters for what happens with Venezuela’s government and its economy. Continue reading A primer on PDVSA — and the interaction of oil and politics in Venezuela →

Venezuela

Photo essay: Political graffiti and street art in Caracas

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CARACAS, Venezuela — Apropos of nothing, I wanted to collect some of the more interesting shots of political graffiti I’ve captured this week in Caracas.Venezuela Flag Icon

Most of the graffiti, of course, promotes the late president Hugo Chávez and his successor, acting president Nicolás Maduro, and not opposition challenger Henrique Capriles.

I’ll say one thing, though, and this goes well beyond street art: if any of my friends want to run for politics, I’ll send them to Caracas to talk to the chavistas because, while Capriles has a rapidly deteriorating economy, an aggressive campaign, and a defensive and lackluster Maduro all working in his favor, Maduro remains the favorite because the chavistas certainly know how to win votes.

Of course, standard political campaign banners abound throughout the city:

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But even five weeks after his death, Chávez’s presence dominates the city, even on its sidewalks and on its buildings:

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In fact, even the ‘libertador’ himself, Simón Bolívar has more street cred than Maduro:

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Here’s a commemoration of the 2011 bicentennial of the Venezuelan Declaration of Independence:

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But that’s not to say that Maduro isn’t a common enough presence (both in favor and against):

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Venezuela

What’s the deal with Venezuelan presidential candidates and jumpsuits?

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CARACAS, Venezuela — I almost went to tonight’s press conference at the headquarters of opposition candidate Henrique Capriles, which is sort of ridiculously named Comando Simón Bolívar, that he called at 7 p.m. Caracas time (7:30 p.m. EST) to talk about, presumably, serious issues in the election, and sober-minded issues revolving around Venezuelan democracy.

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I didn’t, because of my low proficiency in understanding spoken Spanish (I’m unfortunately one of those people who can read, and even speak, foreign languages much easier than I can comprehend them).

But there he is… clad in an Adidas jumpsuit in the three colors of the Venezuelan flag. In 24 hours, he could conceivably be the president of a country of nearly 30 million people, and he’s not in a suit. I realize there are perhaps anti-Western interpretations at play here (Chinese political leaders have chosen Western suits and ties, not always without controversy, instead of traditional Chinese style, and Iranian president Mahmoud Ahmadinejad (and many Iranians) famously eschews neckties as a symbol of the ‘decadent’ West.

Now, I hate to pick on Capriles. He’s fit, and he certain cuts a sharper figure in a jumpsuit than either Hugo Chávez or Nicolás Maduro, who, frankly looked pretty tacky when he showed up to pay his respects to Chávez (though not the funeral) in a jumpsuit:

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But really, it’s election eve. I’m honesty curious about how this started. Is it just Chávez’s influence in yet another aspect of Venezuelan political life? Retired Cuban president Fidel Castro appears often in jumpsuits, but he’s retired, and only made the sartorial switch while he was recuperating after health problems.

Tweeter mseguias suggests, I think correctly, that it makes candidates more approachable and it appeals to poorer voters and young people. But I don’t recall ever seeing former Brazilian president Luiz Inácio Lula da Silva in a jumpsuit. Or former Chilean president Michelle Bachelet. Or Mexican president Enrique Peña Nieto. Or Colombian president Juan Manuel Santos. Or Peruvian president Ollanta Humala.

I may be wrong about this, of course, but it seems like a particularly Venezuelan phenomenon.

We should probably be happy that Chávez’s red beret didn’t take off, I suppose.

Venezuela

Capriles campaign optimistic with 48 hours to go — but can it win?

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CARACAS, Venezuela — The national headquarters of Henrique Capriles on Friday morning buzzed with optimism, with less than 48 hours to go before polls open in a race that many have judged hopeless for the opposition.Venezuela Flag Icon

In the wake of a rally in downtown Caracas last Sunday that brought hundreds of thousands of supporters to rally behind Capriles (without having to bus in massive numbers of supporters from across the country, as the chavista candidate Nicolás Maduro did in a similar rally on Thursday), and in the wake of a widely ridiculed comment by Maduro that a little bird told him that the spirit of Hugo Chávez blessed his campaign, Capriles campaign advisers are optimistic that their candidate has the momentum going into Sunday’s election, especially as voters realize the extent of Venezuela’s rapidly tumbling economy in recent months.

But Maduro, who is hoping to win a full term in his own right after the 14-year rule of his predecessor, Chávez, has everything else — the implicit support of the structure of the entire government, the armed forces, the state-owned oil company, plenty of resources, and significantly stronger media presence.

Though election law prohibits the publication of polls in the week prior to the election, polls are rumored to show Capriles closing a gap with Maduro — one such poll allegedly shows Maduro with a narrowing 55% to 45% lead, and Capriles’s internal polls show a massive swing as well. But whittling down Maduro’s lead and winning the election are two different things.

Leopoldo López, the former mayor of Chacao (one of five municipalities, and generally the ritziest, within Caracas) from 2000 to 2008, is one of the rising stars of the opposition. Chávez’s government barred López from running for office until 2014, a move that brought the censure of the Inter-American Court of Human Rights. In 2009, he founded Voluntad Popular, a centrist party that’s a member of the broad opposition coalition, the Mesa de la Unidad Democrática (MUD, Democratic Unity Roundtable).

‘I’m excited about change, I’m excited about the real possibility of winning, I’m excited about Venezuela opening a new cycle,’ Lopez said on Friday morning at Capriles headquarters. ‘The worries? What the government could do to put a stain on what will happen. This is not a regular election. This is not Bush-Clinton, this is not Candidate A versus Candidate B. This is a race against a state. I doubt there are other democracies where there are [such] clear differences in terms of the abuse of power. In this case, this is PDVSA, the state oil company, and the other powers of the state, against the people. But we have great faith the people will make the difference.’

The executive director of the MUD, Ramón Guillermo Aveledo (pictured above, with Caracas mayor Antonio Ledezma and other top MUD officials at his right, rejected outlandish charges made in recent days at a press conference earlier today at Capriles headquarters as well.

Here’s the arithmetic. Continue reading Capriles campaign optimistic with 48 hours to go — but can it win? →

United States, Venezuela

A conversation with Ambassador Patrick Duddy

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CARACAS, Venezuela — For what it’s worth, here’s some more of the conversation from last Friday with Patrick Duddy, who served as the U.S. ambassador to Venezuela from 2007 until 2010 and who kindly gave me nearly a half-hour of time to discuss current U.S.-Venezuelan relations.

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The late president Hugo Chávez ejected Duddy from the country on September 11, 2008, though Duddy returned a few months later, and I was curious as to his view of U.S.-Venezuelan relations especially because he served under both U.S. presidents George W. Bush and Barack Obama.

Obama’s appointee to succeed Duddy, Larry Palmer, was rejected out of hand by Chávez in 2011, and the post continues to remain vacant.  Palmer now serves as ambassador to Barbados and the Eastern Caribbean.

Duddy, a veteran U.S. diplomat, has served throughout Latin America, including Brazil, Paraguay, Chile and Bolivia.

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On the policy differences between the administrations of George W. Bush and Barack Obama on Venezuela:

It would be easier to underscore the commonalities between the Bush and Obama administrations. I served as ambassador from 2007 to September of 2008 for President Bush, and then as you know, I was expelled on Sept. 11, 2008, spent some months out of the country, [and] returned the next summer as President Obama’s ambassador…

Both administrations, while I was ambassador had a pretty clear message which was we thought… both sides would benefit from a more productive relationship.

On Maduro and potential U.S. relations in a Maduro administration: Continue reading A conversation with Ambassador Patrick Duddy →

United States, Venezuela

Growing U.S.-Venezuelan commercial ties won’t lead to diplomatic thaw if Maduro wins

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CARACAS, Venezuela — I reported earlier today in Deutsche Welle on the state of U.S.-Venezuelan bilateral relations, which aren’t exactly gangbusters, if you’ve been paying attention for the past 14 years.

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The bottom line is: don’t expect acting president Nicolás Maduro, if he wins, to transform the chilly relationship between the United States and Venezuela.

To me, however, the more interesting factor is the commercial ties between the two countries, already strong throughout the reign of the late president Hugo Chávez, but now growing ever faster as Venezuela’s economy sputters and becomes increasingly import-dependent:

Venezuela’s obvious top export is oil – and the United States is its top customer, and that’s been true during both the Bush and Obama administrations, even when relations were at their worst. The United States purchases up to 900,000 barrels of oil a day from Venezuela – it officially funds around 40 percent of Venezuela’s export receipts. Given the complex financial arrangements between China and Venezuela and Venezuela’s subsidies to Cuba and to the rest of Central America and the Caribbean, US demand for oil has directly funded Chávez’s government, despite the rhetoric against the supposedly evil, imperialist gringo empire.

But precisely because of Venezuela’s dependence on the oil industry, the other sectors of its economy have atrophied, especially under the business climate during the Chávez era, when domestic and foreign businesses alike were subjected to ad hoc expropriation. That’s made Venezuela increasingly reliant on imports of staples, such as food and even fresh produce. Venezuela is even starting to import refined oil products, in part due to a gasoline subsidy that keeps gas prices at the lowest level worldwide.

Obviously, U.S. policymakers would prefer that Henrique Capriles, the opposition candidate, wins the election. But given the incumbent advantages of the Maduro campaign, who has inherited the political infrastructure of his predecessor, Maduro’s election seems much likelier. If the Venezuelan economy does continue its downward spiral in the months and years to come, Maduro could well use anti-American rhetoric to deflect criticism from the failures of economic policy.

That means bilateral relations might get worse before they get better.

It’s uncertain whether that growing dependence would improve ties with the US – it’s easy to envision a fall in gas prices or a financial crisis result in even more brinksmanship in a Maduro administration as a distraction from harder budget choices.

Photo credit to Kevin Lees — Caracas, Venezuela, April 2013.

Venezuela

Venezuela marks coup anniversary in leadup to election

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CARACAS, Venezuela — On April 11, 2002, a large band of opposition supporters marched on Miraflores — the presidential palace — were met by chavista supporters, and exchanged gunfire meters from where Hugo Chávez and his advisers were sitting. A handful of protestors died and ultimately, in the following hours, Hugo Chávez left power for 47 hours. Right-wing businessman Pedro Cardona shortly took occupation of Miraflores, though his suspension of the National Assembly and failure to secure the support of Venezuela’s army slowly isolated him, and the Venezuelan army itself restored Chávez to power on April 14.Venezuela Flag Icon

On April 11, 2013, exactly 11 years later, Chávez’s supporters, having freshly mourned their fallen leader last month, will mark the final day of the snap presidential campaign in a massive rally for his successor, acting president Nicolás Maduro, throughout Caracas.

I don’t want to spend too much time rehashing what’s now become history, legend, and political fodder. It’s famously difficult to know just exactly what happened back in 2002, whether it was technically a full golpe (a coup d’etat) or not, the full role of the army in both pushing Chávez (briefly) from power and restoring him, who opened gunfire on whose orders, or even how many people died. But it came in a particularly tense year of transition, and it’s generally accepted that the coup — much like the general strike later that year — came as a result of Chávez’s ultimately successful attempt to assert control over the state-owned oil company, Petroleós de Venezuela, S.A. (PDVSA).

The quintessential film on the subject, despite its pro-Chávez leanings, is a documentary, The Revolution Will Not Be Televised, shot by an Irish film crew that just happened to be in Miraflores working on a piece about Chávez when the April 11 events rapidly spun out of control.

Another account — one that I think gets closer to the heart of the matter, despite the fact that it’s written by someone who has decidedly anti-Chávez sentiments, comes from Francisco Toro, one of the authors of the Caracas Chronicles blog, which posits that both Chávez and his opponents, having played brinksmanship games for months, finally went too far, leaving the Venezuelan army in the middle to keep both sides from escalating the bloodshed that day.

Though it’s eleven years later, and there haven’t been any coup or near-coup attempts since, it’s not without some irony that the anniversary hangs over Venezuela tensely three days before voters decide whether to reward chavismo with another six years in office or to turn to opposition alternative Henrique Capriles.

There’s been some discussion in the Venezuelan media over whether the armed forces are being deployed to help get out the vote for the governing Partido Socialista Unido de Venezuela (PSUV, or United Socialist Party of Venezuela), though military officials have backtracked from that claim in recent days. Capriles in an interview with El Universal earlier this week forcefully argued that Maduro and the PSUV should respect the election results, and cautioned that the armed forces would be responsible to ensure a peaceful transition. Though Chávez managed to commingle politics into every aspect of the state — from PDVSA to the central bank to state government — the military has retained relatively more of a patina of independence from politics than other state institutions.

Polls, which are not quite accurate in Venezuela, gave Maduro an edge in the leadup to the election, but that doesn’t mean Capriles is hopeless — he won a tough reelection as the governor of Miranda state in an otherwise dismal set of regional elections in December 2012 after placing just 11% behind Chávez in the October 2012 election — a better showing than any of Chávez’s rivals stretching back to 1998. Maduro is no Chávez, and since the 2012 presidential election, Venezuela’s economy has only gotten worse, and there’s been no appreciable improvement in the standard of living, some of the continent’s worst crime and power shortages throughout the country.

Because everyone assumes that Maduro will somehow find enough votes to win the election, no one really knows how easily Maduro and the chavistas would transfer power. Continue reading Venezuela marks coup anniversary in leadup to election →

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Not a banana republic, but an avocado economy

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CARACAS, Venezuela — Since the end of the Bretton Woods system, or at least since the end of the ‘currency snake’ in Europe that preceded formal monetary union, it’s become difficult not to think about currency in terms other than a floating price determined on the free market.Venezuela Flag Icon

Sure, China still sets its own currency, and the renminbi may well be undervalued, but that matters less to China because its whole macroeconomic game is exporting. Manufacturers from a factory in Guangdong province assemble their goods, sell them to the United States, and promptly turn over their dollars to the Chinese government, which then exchanges them for renminbi. That’s how China ended up with such a glut of dollars in the early 2000s, and that’s why relatively fewer exports could mean fewer dollars, which could be one of the few market pressures to cause U.S. bond yields to rise after five years of historically low borrowing costs for the U.S. government.

Of crude oil and curses

But in Venezuela, there’s one major export — oil — and that revenue is in the hands of the government. In one sense, economics in Venezuela or in any other petrostate is pretty facile: when the oil price goes up, the country has a boom; when the oil price goes down, the country goes bust. That’s why the oil crisis 1970s and early 1980s were such a great time for Venezuela but such a bad time for the United States, why the cheap-oil era of the 1990s was so bad for Venezuela and, conversely great for the United States. It’s why Hugo Chávez was riding so high in the early 2000s, and why the brief drop in oil prices with the global financial crisis in 2008 and 2009 was bad for Venezuela as well as everyone else.

Unlike China, which had a $231 billion trade surplus in 2012, however, Venezuela’s trade surplus masks its growing dependence on imports, and so the key market for dollars is among those who import those goods (and for Venezuelans who want to take business trips — or shopping trips — to Miami).

For lots of reasons,there are disincentives for homegrown production in Venezuela. Many of those reasons have to do with the behavioral economics aspects of the ‘resources curse’ and the petrostate, but they also include the uncertain business climate under the last 14 years. Why start a farm in 2003 when the Chávez government might decide to expropriate it on live television in 2008?  So the country is increasingly importing even those products, such as fresh produce, that it could arguably grow for itself more efficiently. It’s even started importing refined oil products rather than develop the capital to clean the ultra heavy crude that comes out of the ground in Venezuela. A similar dynamic exists in Puerto Rico, where the U.S. government intervened in the 1950s with subsidies for industry during ‘Operation Bootstrap,’ thereby decimating the boricua agricultural sector to this day — produce in tropical San Juan is imported from Florida, Texas and California.

Of dollars and devaluations

Today, the official rate of the Venezuelan currency, the bolívar, is 6.3 per U.S. dollar.

But no one actually pays that, especially these days.

There’s a black market rate, rumored to be up to four times the official rates, a tourist rate that’s discounted a little from the going black market rate, and even a couple of weeks ago, when the Venezuelan government auctioned off dollars through a new system called SICAD (Sistema Complementario de Administración de Divisas) to currency-starved importers, they didn’t release the price for which the dollars sold, but it’s rumored to be something like between 10 and 15, which is quite a devaluation from the 6.3 rate.

It’s still technically illegal for local media to report any black market rates for the bolívar, of course — through March, at least, you could follow the price through a plucky Twitter account, which slyly presented the daily price for ‘fresh avocados.’ That account — and another one, for ‘fresh lettuce,’ shut down after Venezuelans, their businesses starved for vital dollars, lost their bolívares in a twisted online scam.

The new SICAD dollar auction comes after a formal devaluation in February, which lowered the rate from 4.3 bolívares to 6.3.

It’s fairly common for people to talk about two devaluations, in fact — the first formal devaluation of the official exchange rate from 4.3 to 6.3, and the second informal devaluation, whereby Venezuelans may have been buying dollars from the government for as high a price as 15 bolívares.

(Oh, by the way — the actual price of an avocado? I bought a huge one today for 60 bolívares. A tube of imported toothpaste manufactured in the United States, which is subsidized, costs just 20 bolívares. Another example of the distortions in a heavily-subsidized economy that depends on imports for many of its staples.) Continue reading Not a banana republic, but an avocado economy →

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Maduro campaign active on penultimate campaign day in Caracas

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CARACAS, Venezuela — One morning spent traipsing through Sabana Grande and Altamira is all you need to know who has the greater resources in Venezuela’s snap presidential campaign.Venezuela Flag Icon

It’s clear that election activity is very much in full swing. In the heart of cosmopolitan Caracas — and even in the eastern districts that are wealthier and which you’d expect to be very much behind opposition candidate Henrique Capriles — the more pronounced street presence belongs to the chavistas and their candidate, acting president Nicolás Maduro, the hand-picked candidate of his late predecessor, Hugo Chávez (pictured below in effigy in Altamira earlier today), notwithstanding a massive rally last Sunday on the Avenida Bolívar in support of Capriles.

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It’s astonishing the extent to which the Maduro campaign is really just a rehash of the October 2012 Chávez campaign — at one booth on the Sabana Grande, a Maduro volunteer handed me a poster of el comandante himself with a pamphlet describing Chávez’s 2012 campaign plan for the next term. While it’s a function of facility, there’s also certainly no electoral downside for Maduro in making Chávez very much his 2013 running mate.

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Capriles signs are few and far between, but they do exist and they are around, though I certainly didn’t see much in the way of boisterous caravans of Capriles supporters in the way that red-shirted chavistas paraded throughout the city today:

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I didn’t see much in the way of anti-chavista or anti-Maduro graffiti, though it’s very much in favor of Maduro — and in opposition to Capriles. Here’s one building with the words ‘un gran cobero,’ a slur that roughly translates to ‘big liar’ in Venezuelan slang, against Capriles that Chávez was known to use in the 2012 campaign:

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I’ve never been to a country with such a basketcase economy (more on that later), Maduro has less personal commitment and charisma than Chávez had, Capriles has run a much more aggressive campaign, and polls even showed the race tightening last week. So there’s really no way to extrapolate a Maduro victory just because the government has more resources to use to bring carloads of supporters out or to print more posters to hand out. But if one morning and afternoon stroll is worth anything (and it’s anecdotal, nothing more), Maduro has the upper hand — the key, of course, is whether the ground game on Sunday will turn out as effectively.

Photo credit to Kevin Lees.

Venezuela

Does Venezuela need its own Margaret Thatcher?

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Though the snap Venezuelan presidential election — just six days away — will likely have huge implications for the country’s economic policy, and though most economic commentators would agree that Venezuela is in dire need of economic reform, neither candidate seems especially keen on discussing those reforms in a campaign that’s been heavy on personality and emotions.Venezuela Flag Icon

But the negative aspects of legacy of chavismo — a growing public sector and nationalized industries, ever-expanding army of bureaucrats, widespread power outages, crumbling infrastructure — sound an awful lot like much of the problems that the United Kingdom faced in the late 1970s.

Is Venezuela entering its own ‘winter of discontent?’  And if so, does it need a Margaret Thatcher?

When it comes to South America, Thatcher is most well-known for the Falklands War against Argentina in 1982 (see Thatcher pictured above during that war).

But one Venezuelan blogger has already argued that Romuló Betancourt, the first democratically elected president of Venezuela in 1958, was its ‘Thatcher.’  Betancourt’s major contribution was normalizing democratic elections and peaceful transfers of power, an institution that has so far continued in Venezuela without interruption, even throughout the chavismo era.  Economically, the Betancourt government’s most notable achievement was land reform that boosted rural peasants.

Perhaps the better example of Thatcherite economics in Venezuela is the second term of Betancourt’s successor (and one-time interior minister) Carlos Andrés Pérez (pictured below).  Despite presiding over the largesse of the oil bonanza that to the rest of the world was an oil crisis, Pérez (or ‘CAP’) returned to office with high hopes that he could unlock another era of plenty on a relatively populist campaign built on empty promises.

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Upon election, he rapidly sought a $4.5 billion loan from the International Monetary Fund, in return for crushing reforms that included a tax overhaul, a reduction in tariffs and custom duties and privatizations of state-owned companies.  But those reforms (the ‘paquete‘ or the ‘package’) most controversially caused the price of gasoline prices to rise (and the secondary price of public transportation) due to the elimination in Venezuela’s famous gasoline subsidy — to this day, Venezuelan gas prices are the lowest in the world, and Venezuelans believe cheap gas is practically a birthright.

The reforms led directly to the Caracazo riots in Caracas on February 27, 1989 — as Francisco Toro and Juan Cristobal Nagel write in their wonderful compilation of 10 years of blogging about chavismo (from an opposition viewpoint), the Caracazo marked an incredible rupture in Venezuelan life:

Until then, Venezuelans had seen themselves as different, more civilized, more democratic, better than their Latin American neighbors.  Thirty-one years of unbroken, stable, petrostate-funded democracy had made us terribly cocky.  In a sense, the riots market Venezuela’s re-entry into Latin America.  The country was no longer exceptional: just another hard-up Latin American country struggling to put its democracy on a stable footing.

Those riots ultimately led to the dismantling of Venezuela’s two-party system, CAP’s impeachment in 1993, and two coup attempts in 1992 — one in February 1992 by a little-known lieutenant colonel named Hugo Chávez, who would of course take power by democratic means just six years later in a landslide election victory.

So if Thatcherite policies ultimately paved the way for chavismo, could chavismo pave the way for a countervailing turn back to neoliberal reforms?  Fast-forward two decades, and the country with the world’s largest proven reserves of petroleum finds itself with a budget deficit last year that equalled 17% of GDP and a public debt burden that’s now equal to 50% of GDP.  So if he wins the presidential election, Chávez’s anointed successor Nicolás Maduro will have far fewer economic tools at his disposal than Chávez did to achieve his goals.

Opposition candidate Henrique Capriles certainly isn’t going around the country advocating the elimination of gasoline subsidies, but Capriles seems far likelier than Maduro to enact the kind of policy reforms that could balance Venezuelan finances back toward a more stable equilibrium.

But say what you will about the positive aspects of chavismo in reducing poverty in Venezuela and giving voice to a largely forgotten underclass excluded from the country’s oil wealth for a half-century, Venezuelan finances are hardly in great shape, and the winner of Sunday’s election will face significant financial pressures — all the more so if oil prices fall over the next six years.