Venezuela—a country Divided: The Role of President Hugo Chavez Introduction

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Nicole Powell Powell

Professor Lusignan
1 December 2004

Venezuela—A Country Divided:

The Role of President Hugo Chavez


Venezuela is a late bloomer in regard to having complete independence and in terms of running its own democratic government. Right now, the Venezuelan people are in the midst of the same debate that has historically plagued countries all over the world; the country is torn between class lines and is another classic example of the haves versus the have-nots. Caracas is the capital and the Andes region is home to two-thirds of the population. Mestizos make up 67% of the population, with 21% descending from white Europeans (primarily Spanish and Portuguese), blacks are 10%, and Amerinds are 2%. Unfortunately, the middle class has declined by as much as 25% since the mid-1980s and roughly one million people have slipped into the lower middle class or poverty (Venezuela Background). Under the stresses of economic decay, government corruption, and increasing poverty, the government structure has struggled through an increased number of political party groups, increased military involvement, and a high turnover rate of political leaders.

The country's leadership has stemmed from Spanish descendants and those of the ruling class since Venezuela broke away from Spain and became an independent nation in 1830. For the majority of Venezuela's history, the government has been under the control of the upper and middle class citizens. However, for the first time in its history, Venezuela is under the leadership of a president, Hugo Chavez, who is in favor of immense social reform for the poor. The current state of Venezuela is bitterly divided in an all-out class war, where most of Chavez's support comes from the poor and the opposition’s support comes from the middle and upper class (Wilpert 175). On April 11, 2002, Chavez was forced out of office by a military coup. In support of this tumultuous political tactic, along with the upper class, were the both the Venezuelan and U.S. media, and the U.S. government; examining their interests is the key to understanding why these groups are against Chavez and what hand they played in helping an undisciplined regime coordinate the coup. Furthermore, a look at the country's economic structure, its historical political leadership, Chavez's political stances, and the role of the media will help us to understand what has led Venezuela to this point of extreme division and political chaos.


Venezuela is one of the top ten producers of oil in the world and has become dependent on the country's primary export product. Although Venezuela possesses a lot of power due to its oil production for the international market, the Venezuelan economy is drastically affected by the world market's demand and price. A common theme in Venezuelan economic development has been the call to “sow the petroleum,” meaning to use the revenues and comparative advantages that petroleum brings to support government programs and other sectors of the economy. Since oil became the nation's number one export in 1925, until international petroleum prices plummeted in 1986 (a period during most of which Venezuela was the world's leading exporter), the nation was blessed by nearly steady economic growth (Ellner 7). Any decline in global commodity prices, as in the 1990s, places the government under stress because Venezuela does not receive sufficient revenue to make progress before prices drop. The government often resorts to borrowing money to prolong or speed up progress, and in borrowing money becomes even more dependent on its exports to generate the funds to pay the country's debts (Ellner 2). Due to the instability of relying on its exports, Venezuelans have developed an unhealthy system of capitalizing on the here and now for personal progress and not waiting for the unsure future. Both the pattern of success and lack thereof, of the ability of the government to provide public services is in direct correlation with the world market's demand and price for Venezuela's oil.

Political History

In 1958, the first popularly elected president to complete his term, Romulo Betancourt, implemented a crude form of democracy that guaranteed economic distribution to all classes. From 1958 until the end of Andres Perez's first term in 1978, Venezuela's economic performance was characterized by steady growth. Oil rents provided a stable flow of income, which was distributed by the state to promote national development and to meet the extensive welfare obligations established in the 1961 constitution. The strategy of achieving modernity through the "sowing" of oil revenues was underpinned by a tradition of state intervention. This approach allowed for major improvements in social indicators after democratization in 1958. The expanded public sector generated employment, while low rates of inflation facilitated real income growth. This economic scenario created a favorable economic environment that supported the centrist parties in charge, Accion Democratica (AD) and Comite de Organizacion Poiltica Electoral Independiente (COPEI). With rent distribution holding out the possibility for all the benefit materially, class cleavages were muted and not subject to politicization, despite the efforts of the revolutionary left. Petroleum was responsible for more than half of government revenues in every administration, reaching a high of 75% during the boom years of the mid-1970s when Perez was president and AD controlled Congress. Because petroleum exports were so central to the economy and because their profits accrued to the state, the government always took in funds equivalent to at least 20% of the national output (Crisp 157). In 1973, Venezuela significantly prospered as the Organization of Petroleum-Exporting Countries (OPEC) and turmoil in the Middle East combined to increase the oil price tenfold. These changes coincided with the nationalization of the Venezuelan oil industry in 1976, increasing central government revenues by 170 percent. A public spending increase of 96.9 % between 1973 and 1978 allowed for excellent public services and extensive job opportunities; which in turn led to a reduction in poverty (Ellner 115).

Starting in 1980, a sustained decline in oil prices and a hike in international borrowing costs undermined political and economic stability in Venezuela and presaged twenty years of recession. The political landscape, developed under the two traditional party groups of AD and COPEI remained relatively calm until the late 1980s. By 1988, after thirty years of successive AD and COPEI governments, annual inflation was 40.3%, general poverty was 38.5%, unemployment was reaching double figures, and real salary levels had decline precipitously (Ellner 85). What had been a steady continuation of Betancourt's process during the sixties, seventies, and early eighties, through former Presidents Rafael Caldera, Luis Herrera Campins, and Jaime Lusinchi, ended with the reelection of Andres Perez in 1989. Perez served as president from 1973-1978, but his second term witnessed a sharp rise in class tension due to the economic environment of the 1990s; in addition, his reforms eroded living standards and widened the already large gulf between rich and poor (Ellner 113).

The country also faced constant political turmoil rooted from two failed military coups against Perez and in 1993, after being reelected to another term, he was ousted from office for corruption. Both AD and COPEI were defeated in the 1993 presidential elections, thus breaking a pattern dating back to 1958. President Caldera, who had until recently been COPEI's undisputed leader, formed a broad coalition that for the first time allowed leftist parties to share power. After sliding into a recession in 1993, the economy contracted by another 3.3% in 1994. By failing to achieve stability, the heterodox efforts of the Caldera government, which were designed to protect the poor from the costs of adjustment, exposed precisely those groups to the substantial costs of non-adjustment. As a result, poverty spread so as to afflict up to 80% of the population. As inflation resumed its upward trend in late 1995 and reached 8.1% per month in January 1996, the social and political situation seemed to reach the limits of sustainability (Weyland 218).

Hugo Chavez

In 1998, Venezuela entered new territory by choosing the democratically elected President Hugo Chavez. The economic downturn benefited the presidential election campaign of Chavez, a former military officer who had led one of the failed coups against the Perez government in 1992. Chavez's populist campaign called for large wage increases, a moratorium on repayment of the foreign debt, a crackdown on corruption, and an overhaul of the political structure long dominated by the AD and COPEI. Chavez was immensely popular and received 56% of the vote when he won the presidential election on December 6, 1998. Although Chavez received support from the lower class, there was deep resentment developing among the middle class. The growing unpopularity of Chavez among the middle classes probably has to do with the worsening economic situation, one-sided media coverage of the government, and class resentment towards a president who takes pride in his indigenous background, who speaks like a member of the lower classes, and who shows contempt for the upper classes (Wilpert 167). Chavez has both contributed to the resentment he receives and has been victimized and erroneously portrayed by his opposition. His Bolivarian Movement and new economic policies have decidedly pit the poor versus the wealthy and irritated his opposition so much that a military coup ousted Chavez from office for a short time, thus leading to even more economic breakdown. Meanwhile, both the Venezuelan media, owned by the opposition, and U.S. government, serving to protect its interests have attacked Chavez.

Bolivarian Movement

Born on July 24, 1783 in Caracas, Simon Bolivar died in Colombia before he was fifty, on December 17, 1830. The principal leader of the Latin American rebellions against the Spanish empire, Bolivar fought for the liberation of Venezuela and Colombia, as well as Ecuador, Peru, and Upper Peru (Bolivia). He fought backwards and forwards across Venezuela, up and down Colombia, and then made an inspired march down the Andes into Ecuador and Peru. Not since the battles of the first generation of conquistadors in the 16th century had a single general covered so much ground with such far-reaching results (Gott 101). Successive presidents and generals, the corrupt, the idle and the patriotic, have all bowed down in obedient homage to Simon Bolivar, a national hero in Venezuela, who both led the struggle for and achieved independence in the Andean region in 1819. At the end of the twentieth century, Hugo Chavez has proved to be no exception, and has erected the example and the thoughts of Bolivar by renaming the country in the new constitution as the “Bolivarian Republic of Venezuela” and by using Bolivar’s ideals to form the basis of his foreign policy (Gott 98).

In April 1999, a referendum endorsed the convocation of a Constituent Assembly and in December the new constitution, otherwise known as the Bolivarian Constitution, was approved by 71% of voters (EIU). The Bolivarian Constitution ushered in several key institutional changes, including the replacement of the old Supreme Court with the Tribunal Supremeo de Justicia (Supreme Justice Tribunal) and the old electoral authorities with the Consejo Nacional Electoral. The Consejo Moral Republicano (Moral Republican Council) was created, incorporating the former offices of the comptroller-general and the attorney general as well as a new post of the people's defender. The 1999 constitution sought to expand the participatory nature of democracy in Venezuela. However, the new institutions introduced in 1999 quickly became politicized while power has become increasingly centralized in the hands of the executive. The Chavez administration has frequently bypassed its own constitution and weakened mechanisms designed to act as checks and balances on the executive (EIU).

The example of Bolivar's career has been particular service to Chavez in his examination of a possible role for Venezuela in the affairs of the rest of the continent and internationally. The concept of Bolivarianism, with which Chavez defines his foreign policy, leans on inspiration from Bolivar, who sought to integrate Latin American countries to counter-balance the power of the U.S. Most Latin American politicians have long recognized that their nations states are to weak to operate on their own. This has been the common view in the continent for several decades, and had provided the basic political push behind the drive towards economic integration. Chavez now aims to re-ignite the Bolivarian dream, to seek the political unification of Latin America on a new basis: the internal integration of each country (Gott 99).

Within the region the government has also extend its influence through economic integration. In July 2004 Chavez signed agreements on the development of common energy projects with his Colombian counterpart, Alvaro Uribe, and with the Argentinian president, Nestor Kirchner, and Venezuela was accepted as an associate member of the Mercado Comun del Sur (Mercosur) (EIU). The entry of Venezuela into Mercosur is more valuable diplomatically, at this moment, than its membership in the OAS, where the U.S. would like to isolate Venezuela with the Democratic Charter (Guerrero). Venezuela's admission to the Common Market of the South represents a historical milestone in the political and economic integration of Latin America and promises to make Mercosur into an important counter-weight to U.S power. Chavez summed up this new institutional reality in a phrase with strategic content: “We want to see in our ships, in our pipes, in our medicines, and in other goods the words, ‘Made in Argentina’ or Made in Brazil’ instead of ‘Made in the U.S.A.’ (Guerrero).

Chavez’s Economic Policies

With his Bolivarian ideology driving the administration, Chavez has created equal factions of both strong support and opposition. Chavez's programs have alienated much of the upper and upper-middle class while retaining the enthusiastic support of poorer Venezuelans. Much of the middle class opposes Chavez because they do not benefit from all the social reforms aimed at the poor, mainly education and healthcare. The middle-class relies on private education and healthcare and was hit hard by rising inflation rates because they buy more imported goods based on the dollar value (Wilpert 180). Two policies, in particular, have set the stage for heated debate and animosity between the "chavistas" and their opponents: the land reform law and oil reform law.

The land reform law is designed to put an end to "latifundos," the estates that are not used for agricultural purposes, but which take up large areas of agriculturally useful land. Idle agricultural land of over 5,000 hectares would be required to be put into production or, if the owner refuses, would be made available for redistribution to landless peasants who commit themselves to cultivate the land. Opposition has argued that this law violates the right to private property, even though the redistributed land would be compensated for at market rates (Wilpert 179).

The oil reform law, passed in 2002, was developed to restructure the oil industry, which is notorious for being a state within a state and has become increasingly inefficient over the past 20 years. This is especially alarming to the government because the ever-declining share of oil profits is what supports the government and its social reform programs. The new law limits foreign companies to 50% joint ventures and it doubles the fixed royalties that companies have to pay per barrel of extracted oil to the state. Chavez wants to restructure the oil industry, so as to make it more efficient and provide greater revenues to the government. Petroleos de Venezuela, S.A. (PDVSA) is Latin America's largest corporation, but also one of its most inefficient, according to a recent ranking by the business magazine America Economia. Interests within the opposition contradict Chavez and are intent on privatizing PDVSA. White-collar employees and PDVSA managers and administrative workers went on strike for fear of losing their jobs to reorganization (Wilpert 179). An example of a private business owner using his power to attack Chavez and causing havoc for the entire country took place during the December oil strike in 2001. The former president of PDVSA, Luis Giusti, took part and blocked the ports with several of his own tankers. Giusti also used his ownership over INTESA, the main data processing company that PDVSA subcontracts, to cause some of the severest damage to Venezuela's oil industry.

Economic Decline

The military coup that displaced Chavez only lasted two days, from April 11-13 2002, but the negative effects of these unstable events have lasted much longer. The immediate catalyst for action was an attempt by Chavez to discharge the executive directors of PDVSA, a move interpreted widely as cronyism, but one that must be understood in the context of the struggle between the oil company and the government for control over oil policy (Ellner 50). The attempt to remove Chavez evoked comparisons to the fall of President Salvador Allende of Chile in 1973, in which the U.S. played an important role. The U.S. denied involvement in the coup attempt, but suspicions abounded. Stratfor, a respected think tank in on military and intelligence affairs, claimed that Washington had two parallel operations in support of the coup (Hellinger 51).

Massive capital flight has been occurring, especially in wake of the coup. Capital flight has led to a constant devaluation of local currency and since Venezuela imports about 80% of its goods, this means that the imported goods become more and more expensive, making inflation a serious problem. Capital flight, inflation, and general economic uncertainty have all contributed to a lack of investment and a slight increase in unemployment (from 14.2% in Feb 2001 to 15% in Feb. 2002). Other consequences have included the appearance of a large fiscal deficit for the government, up to $8 billion in 2002, and a continuing drop of oil prices.

Media Coverage

Even with his high popularity rating, Chavez is always depicted as a fascist or dictator and receives only negative coverage through the local media outlets. It is no surprise, that the upper class, Chavez's main opposition, owns most of the Venezuelan media. Chavez's opponents relied heavily on the mass media, much of which did not hide its antagonism to the government and even played an important role in the attempted overthrow of Chavez in the attempted overthrow of Chavez in April 2002 (Ellner 215). Five main privately owned channels—Venevision, Radio Caracs Television (RCTV), Globovision and CMT—and nine of the 10 major national newspapers, including el Universal, El Nacional, Tal Cual, El Impulso, El Nuevo Pais, and El Mundo, have taken over the role of the traditional political parties. In fact, the editor of Tal Cual, Teodoro Petkoff, is an openly keen opponent of Chavez. Venezuela's "hate media" controls 95% of the airwaves and has a near-monopoly over newsprint. They give the opposition support, rarely report government statements, and never mention its large majority (despite the ballot box) (Lemoine 154). All investigations, interviews and commentaries pursue the same objective: to undermine the legitimacy of the government and to destroy the president's popular support.

The Venezuelan media has increasingly performed anti-Chavez acts that have reached beyond the boundaries of biased reporting and journalism. United in the Venezuelan Press Bloc (BPV), the media as a whole finally showed its hand when it joined in the first general strike on December 10 2001; it then played a crucial role in the coup against Chavez in April 2002. Never even in Latin American history has the media been so directly involved in a political coup. In Caracas, on April 11, 2002, just a few hours before the temporary overthrow of Chavez, Vice-Admiral Victor Ramirez Perez congratulated journalist Ibeyiste Pacheco live on Venevision television, "We had a deadly weapon: the media. And now that I have the opportunity, let me congratulate you." During this same time, in a live interview from Madrid, another journalist, Patricia Poleo, was also well informed about the likely future development of "spontaneous events." She announced on the Spanish channel TVE: "I believe the next president is going to be Pedro Carmona." Chavez was still in the presidential palace, refusing to step down (Lemoine 151).

The media, in obvious disgust, of Chavez's return to power on April 13, 2001 took their antagonism a step further and did not broadcast the event. The only way Venezuelans could get information was through CNN broadcasts in spanish, which were only available on cable or on internet sites of the Madrid daily El Pais and the BBC in London. CNN was amazed that the local press said nothing. It was 20 hours before the state channel Venezuelan de Television came back on the air with the help of militants from the community media and from soldiers from the presidential guard. The only newspaper published the next day was the Ultimas Noticias, which did carry a story on the president's return to office. The only local televised event on the incident occurred the next day when Globovision rebroadcast the information that had been transmitted by the international agencies (Lemoine 158).

Recently, Chavez has responded to the biased practices of the media by introducing a radio and television bill aimed at protecting children by curbing violent and sexually explicit content in the media. Critics argue that its vague wording will allow the government to suspend transmission or, ultimately, withdraw a license for content, which is “contrary to the security of the nation.” An Organization of American States (OAS) panel said the law being debated in Venezuela's legislature is marked by vague language, which could be used to impose "indirect restrictions on freedom of expression" (Proposed Venezuelan Media Law). Among other provisions, the law would ban "rude" and "vulgar" language; prohibit images and sounds related to alcohol and drug consumption, gambling and sex; and ban "psychological" or physical violence, all between 7 a.m. to 7 p.m.; similar restrictions would apply to early morning and evening newscasts. The law could allow heavy fines on television and radio stations or allow the government to shut them down if they fail to prove they did everything they could to prevent the violence from being shown on television. In addition, the proposed bill establishes 18-day jail sentences for anyone who broadcasts "false" or "imprecise" information and fails to correct such errors (Proposed Venezuelan Media Law).

U.S. Interests’

United States and Venezuelan commercial ties are close; the U.S. is Venezuela's most important trading partner, representing about half of both imports and exports. Venezuela is the U.S.'s third largest export market in Latin America, purchasing machinery, transportation equipment, agricultural commodities, and auto parts. Venezuela's opening of its petroleum sector to foreign investment in 1996 created extensive trade and investment opportunities for U.S. companies. Nevertheless, the U.S.'s foreign policy attitude towards Venezuela has become strained due to its oil policies and foreign affair relationships.

Oil is at the top of the policy changes list that the U.S. has become increasingly uncomfortable with since Chavez's reign as president. The U.S. imports 52% of the oil it uses, and as the top oil-importing nation, energy security is inextricably linked with the political and economic security of its suppliers (U.S. 2002). Its Latin American neighbor, Venezuela, is the U.S.'s third largest supplier and has been highlighted as a risky factor because of its political instability. Oil currently accounts for close to 40% of total U.S. energy consumption and according to the Energy Information Administration (EIA), U.S. demand is expected to rise from an annual average of 19.7 million barrels per day (bpd) in 2002 to over 26 million bpd in 2020 (U.S. 2002 9). Venezuela and OPEC are going to play a huge role in the U.S.’s expanding consumption of oil (U.S. 2002 9). With its reliance on oil falling under the control of the Venezuelan government, the U.S. has high stakes invested in the decisions and policies that are made in regard to how its oil market operates. In 2000, the House of Representatives’ Committee on International Relations held a series of hearings about the impact of the price fixing schemes by OPEC, of which Venezuela is a founding member, on American homeowners and businesses. The Honorable Benjamin Gilman (NY), a Representative and Chairman of the committee, noted that a review of the profits of the major oil companies were up some $7 billion over the past year and that OPEC nations’ revenues have doubled over the past two years. Gillman then continued to discuss the impact of high prices,
Oil prices today are higher than at any time since the Iraqi invasion of Kuwait. Continued high prices for gasoline and other fuels are now beginning to stunt our own economic growth and to curtail global growth prospects as well. In addition, they are stoking the flames of inflation, inducing bankers to raise their rates and curtail lending (U.S. 2000 2).
More recently, in 2002, the U.S. maintained a comfortable 75% market share of all imports of oil and gas field machinery in Venezuela. However, this share was reduced to 55% by the end of 2003, when brands from Brazil, Spain, Argentina, and China gained market share due to commercial agreements signed between Venezuela and these countries (Venezuela Investment Climate).

The reason that the U.S. had developed a good relationship with Venezuela is because the U.S. and the country's power base, historically AD and COPEI, who controlled the oil, always worked out mutually beneficial deals. In short, the U.S. has formed an alliance with the upper class, the same people who now oppose Chavez. An aspect of the oil reform law, that which would limit foreign companies to 50% joint ventures and increase the fixed royalties that companies have to pay per barrel of extracted oil to the state, does not bode well with the U.S. In addition to the difference in oil policy, the U.S. has perceived Chavez’s foreign relations as very anti-American.

Particular sources of tension with the U.S. also stem from Chavez's open criticism of the U.S.’s foreign policies. One example is of the planned Free-Trade Area of the Americas (FTAA), which Chavez regards as a tool for deepening U.S. economic hegemony within the region. Chavez has also communicated vocal opposition to the U.S.'s conduct of the war on terrorism, and his advocacy of the sovereign rights of states and his development of trading ties and relations with countries, such as Iran, Iraq, Libya and Cuba, have been signaled out as anti-American by Washington (EIU). Two of Chavez’s closest relationships are with enemies of the U.S.: Diego Serna and Fidel Castro. The U.S. was especially perturbed to witness a meeting in September 2001 between Chavez and Diego Serna because he is a member of the leftist Revolutionary Armed Forces of Colombia (FARC), a group labeled as a terrorist organization by the U.S, following the tragic events of September 11, 2001. Chavez has always had great respect for Castro and has publicly endorsed his support for the aging leader of Cuba. He angered the U.S. further when he advocated for an end to Cuba's isolation and extended a hand to the victim of an illegal 40-year blockade by selling them oil (Pilger 144).

The political history and economic structure of Venezuela, in addition to political actors, such as the local media, Chavez himself, and the U.S. government, have each contributed to the instability of the economy and pitted the rich against the poor. It is clear that whatever political transformations take place, Venezuela's aspirations and national goals will rest on the successful management of the country's principal international comparative advantage in petroleum products. Prior to the decline in oil prices in the second half of 2001, there was evidence of a modest reversal in the deterioration of the economy and of social conditions. A survey in March 2001 showed that over 900,000 Venezuelans had escaped extreme poverty during the previous year, equivalent to a drop of four percentage points (Venezuela al Dia, July 2001). However, this improvement took place in the context of success in oil policy and higher prices (Ellner 222).

Venezuela finds itself at an interesting crossroad; if it continues the path of extreme division and political anarchy, the country could easily break out in civil war and bring an end to all foreign investment. The only way these two parts of the country will come together and avoid bloodshed is if some kind of agreement can be found as to the nature of the opposition and of the Chavez government. The President's administration has pursued a rather unclear and shifting course in its economic policy because the new president has focused most of his energies on a thorough overhaul of Venezuela's political-institutional system. This "revolution" has focused on removing the established political elite, especially the traditionally predominant parties AD and COPEI, and strengthening presidential powers (Garcia-Guadilla 183). Having the country in mayhem would serve the U.S. interest of gaining control of Venezuela’s oil market because foreign investors would no longer be a threat.

It is unfortunate that the mass media, which serves as the primary means of providing accurate information, has become a political party and somewhat of a force in Venezuela. As a result, the openly biased media has been held responsible for adding to the politicized atmosphere and has been sanctioned by the Chavez government. Still, with all the forces working against him, Chavez has the power to bring Venezuela together. His background and charismatic leadership have won the hearts of the masses, but he must broaden his focus to incorporate fair policies and to create a dialogue with the business community in order to develop Venezuela into both an economically and politically healthy country.

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