Venezuela’s Future after Chavez

This month will witness two important presidential elections in Latin America. Paraguayans will go to the polls to decide their head of state, and in two weeks time, on April 21, Venezuelans will be asked to determine who will succeed the late Hugo Chavez.

The untimely death of Chavez has cast a long shadow on the forthcoming election due to his charismatic personality.
 
Whilst Chavez is dead, his presence is ever-present in the election campaign that began this week with his vice president, Nicolas Maduro, portraying himself as both the loyal torch carrier of Bolivarian Socialism as well as Chavez’s political heir and son.
 
Henrique Capriles, the main challenger who lost the presidential election held last October, has also placed Chavez at the center of his campaign, claiming that Mr. Maduro is not worthy of filling the vacuum left by the departure of the late president.
 
The legacy of Chavez and the challenges facing Venezuela can be gathered under 10 categories, the first of which relates to his firebrand version of socialism. Chavez did not enter the Venezuelan political stage as a democrat and nor did he leave it as one. He first attempted, but failed, to take over the country through a coup d’état whilst only a lieutenant colonel. In the aftermath of this episode, he fled to Havana, where he became closely acquainted with Fidel Castro, who quickly became his ideological mentor. It was through the influence of Castro that Chavez came to elaborate upon his understanding of the Bolivarian Revolution, interpreting Simon Bolívar’s ideas from a socialist perspective.
 
Chavez was, however, a late convert to socialism, which incidentally has also been argued to have been the case with his mentor, Fidel Castro. Firmly believing the US to be implicated in a failed coup attempt to topple him in 2002, Chavez greatly intensified his anti-Americanism and began to vociferously call for rolling back what he considered the imperial reach of the United States. It seems likely that, for the short term at least, Caracas will not waver from this rhetorical ideological path.
 
Secondly, there is the issue of social welfare. Over the 14-year period in which Chavez held the reins of power, the situation of the poor has improved considerably. Social security programs were generous, targeting the needy and catering for their most pressing needs. Heading this list was health. Poor Venezuelans simply could not afford to pay for healthcare and had to forego expensive operations. This was immediately targeted and eliminated with the arrival of Cuban doctors and medical staff.
 
The social conscience of Chavez continues to be celebrated by the poor working-class of Venezuela and will remain a cherished achievement for years to come. Apart from health, critical infrastructure was also high on the list to help the poor and the needy. Housing was allocated a lion’s share as well as transportation to both improve people’s lives and to make the economy more competitive. Low-income social housing in fact remained high on Chavez’s personal agenda as he pledged in his last presidential campaign to build 3 million new homes by 2018.
 
Such generous social programs owed much more to resources than to heartfelt sentiment. In January 1999 -- a month before Chavez took office -- the price of a barrel of oil was $17 but had increased substantially to almost $150 a barrel in July 2008. Given the related increases in the trade balance, Caracas was able to be overly generous both domestically as well as regionally. Cubans as well as Bolivians benefitted from the international dimension of Chavez’s Bolivarian Revolution.
 
Third is the regional assistance and organizations. Endeavoring to dismantle what he viewed as American imperial hegemony in South America, Chavez poured personal energy and national finances into creating new regional organizations. Venezuela’s oil (funded) diplomacy desired them to become the engines of closer cooperation and collaboration, effectively limiting the influence of the US. Venezuela under Chavez offered Latin America a new grouping named ALBA (Bolivarian Alliance for the Peoples of Our America). Member countries all benefitted handsomely from their generous benefactor in improving their transportation networks, energy grids and medical systems.
 
Chavez’s socialist standards
 
Socialist and socially progressive like-minded countries were to cooperate more closely and project a common front in regional and international affairs. Needless to say, such undertakings were financed by the oil wealth of Caracas. With the passing of Chavez, eyes are now reverting to another anti-status quo leader of Latin America, Evo Morales of Bolivia, whose country benefitted from the generosity of Venezuela’s subsidized oil and social assistance programs. In the final analysis though, the yearning for a multi-polar world remained simply that: a yearning. It will continue in the same vein.
 
Fourth is the pressing problem of violent crime. Despite the lessening of social inequalities amidst massive injections of oil revenue accrued from exports, one of the most pressing issues facing Venezuelan society is crime, especially violent crime. Armed robbery, carjacking and kidnapping are frequent, and this is coupled with a murder rate that is one of the world’s highest, having tripled in the previous decade. Both presidential candidates have addressed this issue in their campaigns as Venezuela ranks as one of the most dangerous countries in the western hemisphere.
 
Fifth is the state-run economy. Chavez accepted the socialist standard that the state must control the economy. Due to this allegiance, massive nationalizations have taken place over the past decade whereby the commanding heights of various sectors, including steel, finance, telecommunications and mining, came under state control, the prize of which undoubtedly was the energy sector. Containing certain elements of a Soviet flavor, agricultural reforms, namely collectivization, also followed with large, private farms being handed over to collectives to manage. Unfortunately, the results were not the expected increase in agricultural production, but rather a fall.
 
The policy of nationalization has left a legacy of unfulfilled goals and aims. For example, oil production under state-owned oil company PDVSA has remained the same for a decade or so. Chavez fervently wanted to control this company after it helped organize a general strike in 2002 to force him from power. After nationalizing it, he quickly exacted revenge by sacking 40 percent of the workers to ensure full control of the company and vital energy sector. Other nationalized industries, whilst providing mass employment, have proven to be unproductive, which left the government to pursue a prices policy to ensure that staple goods remained available at affordable prices. Needless to say, firms preferred to stockpile, which led to several incidences of shortages. The new administration will need to address this issue sooner, rather than later.
 
Sixth is regional economic performance. Despite being the fifth largest economy in Latin America, Venezuela has lagged behind its neighbors -- in relative terms. A country with such a trade surplus would have been expected to have performed much better domestically in terms of productivity, investment and competition. Quite the reverse was noted by the Global Competitiveness Report for 2012-13 issued by the World Economic Forum (WEF), which placed Venezuela 126th out of 144 countries. Remarkably, the country was regionally the worst performer in terms of gross domestic product (GDP) per capita growth.
 
The oil sector, due to delivering handsomely in terms of financial revenue, transformed the economy into one dependent on the energy sector. Oil accounts for 95 percent of the total export revenue, which at times has comprised half the government budget. It was due to PDVSA that the expansive social welfare and regional aid programs could be paid for.
 
Recently, Morgan Stanley calculated that the fiscal deficit, which hovered around 9 percent in 2012, may have already reached 12 percent. Such a deficit needs to be financed one way or another. According to what the oil minister declared six months ago, this was managed through international borrowing, primarily from China. He further acknowledged that up to a third of the 650,000 or so barrels of oil exported to China every day made up for servicing the debt, which according to Bloomberg has reached more than $42 billion borrowed from the China Development Bank.
 
Seventh is the military sphere. Under Chavez, military relations with Russia were greatly expanded a decade ago with increasing arms procurements, which were in effect surplus to requirement.
 
Furthermore, joint naval exercises with the Russian Northern Fleet were undertaken, challenging US influence in Latin America. Chavez’s opposition to Washington extended to providing defense and technical assistance to Iran and Syria, as well as promoting greater economic relations with Beijing. With the passing of Chavez, Caracas will play a much diminished role in military-political affairs.
 
Eighth is contemporary policies. Having won the presidential election for an unprecedented fourth time, Chavez had proposed some alterations to his policies. He acknowledged that his declared aims and goals were not being achieved, falling far short of expectations. To counter this, he proposed new methods with which to ensure that his promises to the poor would be kept.
 
Unfulfilled promises in economy
 
Realizing that industry was performing below par and public spending was at already very high levels, which according to some estimates increased by almost a third in the year before the last election date, he agreed on his sickbed to devalue the national currency by up to a third in February.
 
2012, however, was not a bad year for the Venezuelan economy on the whole, as the World Bank considered it to have grown by a respectable 5 percent; though given that the election cycle had ended, it also predicted that growth for 2013 would remain below 2 percent, perhaps even falling into recession. Such predicaments do not bode well for Venezuelans, who are already burdened with inflation running at more than 22 percent a year.
 
Ninth is unfulfilled promises. Plans for the Venezuela-Argentina Gas Line and a pipeline to Cuba as well as a South American Development Bank never got off the ground, despite their regional appeal. Chavez’s great shortcoming was his inability to hold off populist tendencies. Announcing policies live on television certainly captured the attention of millions of voters but also drew attention to the fact that such policies were short-term solutions which suffered from not having been well thought out. Acting President Maduro would do well to not replicate such actions.
 
Lastly are charges of authoritarianism. Despite all his social improvements, the main failure of Chavez lay in his unwillingness to strengthen political institutions and his reluctance to limit presidential power, leading to charges of authoritarianism. Whilst it is true that he changed and transformed his natural charisma and media-generated image into one of an authoritarian strongman, the degree of criticism has at times been quite unfair. It is fair to judge him as a populist Latin American and Caribbean leader following the genre of previous authoritarian presidents. That certainly would ring true.
 
Furthermore, as Human Rights Watch (HRW) observed, it was the systematic undermining of the rights to free expression and workers’ freedom of association as well as the weakening of Venezuela’s democratic system of checks and balances under Chavez that contributed to the worsening human rights. For example, three years ago the National Assembly granted Chavez sweeping powers to rule by decree on a wide range of topics for 18 months, and within a year he had issued over 20 legislative decrees. It was the deprival of judicial checks on government actions that tarnished his reputation.
 
On many an occasion, Chavez was vilified in the Western press, portrayed as a brutal dictator. Given the fact that Paraguay is also to hold presidential elections a week after Venezuela, it would be unfair, however, to associate Chavez with the likes of the dictator of Asuncion, Gen. Alfredo Stroessner.
 
Therefore, in terms of a legacy, no one can deny that the Venezuelan poor have improved their lot considerably in the last 14 years. This is a commendable attribute for which to remember Hugo Chavez. Neither the lives of farmers nor the workers can be compared to what they were in the early 1990s. Nevertheless, when one considers the economic progress achieved by Colombia and Brazil in the same time period, all realized with less financial resources available, then Chavez’s accomplishment is stymied somewhat. One can be forgiven for thinking that a great opportunity was squandered, that much more could have been done with the resources available.
 
While it was hoped that a Chavez victory in 1998 would cull the two-party system that was heavily reliant on oil subsidies to maintain financial and political stability, his victory effectively changed the political system by reducing the parties to one, though in terms of the economy, the subsidy disease that was bequeathed to him was not killed off but instead flourished under him.
 
Next week’s presidential election will result in Maduro being given the right to rule until 2019. The current price for a barrel of oil stands at $110, which is predicted to remain constant for the next year. If over the next six years Venezuela does not take advantage of its oil revenues to restructure and diversify its economy, it will remain the Latin American state that squandered its golden opportunity to reform and lead.