Adamant: Hardest metal
Sunday, April 27, 2003

Who's to blame in Venezuela?

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, April 24, 2003 By: Matthew Riemer

PINR commentarist Matthew Riemer writes: The current crisis gripping Venezuela is essentially one of socio-economic dimensions. It is social because of the class nature of many of the "ideological" lines that have been drawn between the various "camps"; this is true both in a rhetorical/propagandistic sense and in a more demonstrable sense -- one that examines the different outcomes for the status of Petroleos de Venezuela (PDVSA) following the resolution of the crisis. It is economic in that almost all of the controversy surrounds the economic themes of nationalization, privatization, free-markets, and globalization.

Of course, even to divide the two descriptions -- economic and social -- is sometimes hard to do as they are largely interwoven. Such is the case in the Venezuela of January, 2003.

On the one side there is the government of President Hugo Chavez Frias, former paratrooper and coup conspirer himself. He's supported by a handful of remaining bureaucrats and most of the military, as well as about 30% of the general populace.

Chavez was democratically elected in 1998, but since has lost much of that support due to the unchanged status of Venezuela's overwhelming poor majority and economic reforms that the business sector sees as "risky" if not foolhardy. Some of this lost support may come from those who once voted and backed Chavez but now have become disillusioned with his apparent inability to finally overcome the sizeable opposition movement.

The economy is also in recession, and, as the US Energy Information Administration (EIA) reports, "With both the oil and non-oil sectors of Venezuela's economy contracting in 2002, the country's real gross domestic product (GDP) is expected to fall by 6.7%, to $96 billion, for the year."

The opposition is generally recognized to be an amalgam of the Employers' Federation Fedecamaras, Confederation of Trade Unions (CTV) and the bureaucracy of  PDVSA ... this largely business-led opposition coalition currently enjoys popular support from among the middle class and oil industry, especially from PDVSA workers.

Previously, Chavez was removed from power by these very same elements in a coup on April 11, 2002. His ouster lasted less than 48 hours as widespread protests and loyalists in the military overwhelmed the new government and reinstalled Chavez as president.

The chaos fomenting since this past December is a sign that the same social and political elements are still active in the country. However, when compared with the events of April, this time the efforts and protests have been marked by increased popular support and greater duration.

What do they want?

Chavez' tenure is one marked by inappropriate foreign policy gestures in the eyes of Washington and Venezuela's business community. He's friends with US arch-nemesis Fidel Castro and has visited both Libya and Iraq while publicly opposing both globalization and the US "war on terrorism."

He even tried to have Cuba admitted to the San Jose Accord in 2001, established in 1980 to help struggling Caribbean nations with oil imports. Under the accord, Venezuela and Mexico export oil at a discount to 11 regional nations -- Barbados, Belize, Costa Rica, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, Panama and the Dominican Republic. Mexico's President Vicente Fox rejected Chavez' expansion of the accord.

Furthermore, Chavez wants to retain control of PDVSA and sees its nationalization as vital to that control.

PDVSA, one of the world's largest oil companies, is Venezuela's largest business and employer ... the company was created in the mid-70s when the country's oil industry was nationalized. Again, it is this nationalization that is one of the major concerns of the opposition who desire the privatization of the company and the opening up to investment fueled by such a transition.

Chavez represents the largest hurdle in the attainment of that goal ... this is perhaps the greatest gripe of the opposition forces: Chavez' meddling in the affairs of the oil oligarchy and the threat to free-market expansion within the industry.

The EIA comments on some of this tension: "Over the past few years under President Chavez, cuts in PDVSA's budget (down 28% in 2002), combined with a lack of adequate foreign investment and a policy of strict adherence to OPEC quotas, has crimped the company's ambitious long-term expansion plans."

Chavez' adherence to OPEC quotas helps keep the price of oil advantageous for exporters while limiting the profit of foreign investment in PDVSA, whose investments already cannot exceed 49% of any given PDVSA venture.

If PDVSA were to become fully privatized, OPEC quotas may very well become a thing of the past with foreign investors then providing a majority of the company's capital. This scenario would allow for more Venezuelan oil to be controlled by outsiders and a climate more favorable to importers.

Whatever the workers who are involved with the various strikes and lockouts believe, this is the real heart of the matter. In fact, many see the business elite and union bosses as simply using the workers, who are willing to join them in hopes of higher pay or a better work environment, for temporary gain. Considering that the bulk of Venezuelan workers have remained in relative poverty for decades with little upward growth, even in the oil boom years of the '70s, such claims seem to be at least worth considering.

In a recent Washington Post editorial, Mark Weisbrot, having just returned from Venezuela, said "this is clearly an oil strike, not a general strike, as it is often described. At the state-owned oil company, PDVSA, which controls the industry, management is leading the strike because it is at odds with the Chavez government."

The opposition is also calling for Chavez' immediate resignation, which would be ideal, or a more convincing referendum to expel him from office. A referendum as laid down by the constitution on Chavez' Presidency is due in August

The role of the US

Washington's approval of the original coup in April, along with their current silence now, is not being interpreted as a sign of disinterest but instead as support for the opposition forces. Enough so that in mid-December, several US Representatives sent a letter to President George W. Bush asking that the administration become more vocal in support of the democratic process in Venezuela ... a process they feel the US is undermining by not becoming more directly involved in the endorsement of the protocol set forth by the Venezuelan constitution.

The letter also obliquely references the National Endowment for Democracy (NED), who many believe ... and not without some considerable documentation ... played an indirect yet supportive role in the April coup: "The role of the United States government in the April 11 coup is not clear. We know that some United States officials met with the coup leaders in the months before the coup. Groups involved with the coup also received financing from the United States government. At the same time, the Bush administration openly expressed its hostility toward the government of President Chavez."

Moreover, considering the aforementioned penchant of Chavez to do things that rub Washington the wrong way, it's generally assumed that there's no love lost for his government in the corridors of the White House and State Department. Those sentiments are unlikely to change anytime soon given the fact that Venezuela is an important exporter of oil to the US, that those exports are now dwindling to a trickle, and the fact of the war with Iraq.

Conclusion

As the economic situation continues to deteriorate and tensions build, both sides face the accusation of ruining Venezuela by absolutely resisting the demands of the other, yet the battle has grown so bitter neither side can now dream of capitulation.

Chavez argues that the weight of his country's woes are on the opposition's shoulders because they are the ones who have instigated the lockouts and shut down the oil industry bringing the economy to its knees. He says they'll just have to wait until the time set forth by the Constitution for a referendum vote on his Presidency. In this respect, Chavez has the advantage of showing an outward display of respect for the rule of law ... a sign that surprisingly has gained him little praise in the democracies of the world.

The opposition blames Chavez for current ills by not giving into their demands. For them, a few months are too long to wait for the referendum -- they want it now.

In the end, both sides may lose, causing a considerably destabilized Venezuela -- an outcome the US and Europe are eager to avoid -- one where social and racial lines are distinctly drawn as an increasingly polarized society is unable to peacefully solve its problems. Such an environment will become extremely vulnerable to authoritarian rule.

Matthew Riemer drafted this report; Erich Marquardt contributed. Power and Interest News Report (PINR) is an analysis-based publication that seeks to, as objectively as possible, provide insight into various conflicts, regions and points of interest around the globe. Email him at: content@pinr.com

Our editorial statement reads: VHeadline.com Venezuela is a wholly independent e-publication promoting democracy in its fullest expression and the inalienable right of all Venezuelans to self-determination and the pursuit of sovereign independence without interference. We seek to shed light on nefarious practices and the corruption which for decades has strangled this South American nation's development and progress. Our declared editorial bias is pro-democracy and pro-Venezuela ... which some may wrongly interpret as anti-American. Roy S. Carson, Editor/Publisher Editor@VHeadline.com

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