Venezuela

Venezuelan President Hugo Chavez is pushing through a series of laws that will effectively quell legal means to opposition, a move that Washington must challenge, says CFR’s Joel Hirst.

Venezuela’s stepped-up efforts to develop nuclear power and tighten its bonds with Iran require a firm but deft diplomatic response from the Obama administration, write CFR’s Joel Hirst and Jonathan Pearl.

Venezuela’s National Assembly elections this weekend are a referendum on President Hugo Chávez and a "proxy" for the 2012 presidential elections, says expert Michael McCarthy. They could also bolster opposition movements in countries like Bolivia and Ecuador.

I wrote the following piece on crime in Venezuela for foreignpolicy.com. Mention violence in Latin America today and most people think of Mexico. But if you want to talk about murder, the region’s hot spot is somewhere else entirely: Venezuela.

Allan Brewer-Carias, a former Venezuelan legislator and opponent of President Hugo Chavez, says the referendum that overturned term limits on Chavez will strengthen the country’s authoritarian strain but also signaled disapproval of Chavez’s government.

This Sunday Venezuelan voters will go to the polls to decide whether elected officials, including President Hugo Chávez, can run for re-election indefinitely. Chávez has thrown the full force of the government behind the yes vote, while the opposition and student movement have brought hundreds of thousands into the streets for the “no.” Many inside Venezuela and abroad believe this referendum could be the last straw, breaking Venezuela’s fragile and imperfect democracy if passed. Overlooked by optimists and pessimists alike is the real decider of Venezuela’s political future – the economy. The referendum does matter. Ten years of single strong executive rule have taken a toll on the country’s democratic institutions. The referendum’s passage would open the possibility for Chávez to run again in 2012, and indeed to remain in office for decades to come. But, Chávez would still have to win reelection – and that may now prove to be the most difficult part. High oil prices granted Chávez an extraordinary political honeymoon. Multi-year double digit economic growth, historically low unemployment, and prolific public spending on social programs fueled the adoration of previously excluded sectors of society. Skyrocketing consumption and the halving of poverty levels won the approval of the middle class.  In fact, according to the pollster Latinobarometer, Venezuelans are among the most satisfied with their democracy in the region. Yet this situation is about to change. As international oil prices crash, so too will Venezuela’s economy. Predictions for 2009 and 2010 foresee a deep recession in the making. Unemployment will spike into the double digits. Public debt and deficit levels will surge. Inflation is already the highest in Latin America, and forecast to continue its upward climb. On top of low oil prices, Venezuelan oil production is falling. Outside Energy Information Administration (EIA) and OPEC (of which Venezuela is a member) estimates of 2009 oil production are a third less than Venezuelan government predictions. With oil revenues funding at least half of the $80 billion federal budget, price and output declines mean hard choices. The economic party in the petrostate has come to an end, and Venezuela needs to prepare for the political hangover. How will Chávez deal with the looming economic crisis? He is unlikely to cut back government outlays to balance his budget, especially since social spending and programs are a key part of his allure. Even the mention of raising domestic gasoline prices– currently essentially free – led to unrest and a quick public backtrack. But continuing lavish spending is also untenable for much longer, even with billions of dollars in reserves. It also fuels the inflation that hits Venezuela’s poor – and Chávez’s base - the hardest. Venezuela has gone through this economic cycle of oil boom and bust before. In the most recent iteration - in the late 1980s and early 1990s –a popular president faced low oil prices, cut public spending, unrest ensued, deaths occurred, and a group of military officers - including then Lieutenant Colonel  Hugo Chávez – attempted a coup. This economic downturn mortally wounded the political system, opening up the space for Chávez and his “Bolivarian Revolution.” Will Chávez fare differently? Chávez bases his legitimacy on constant voter affirmation. So far, he has mostly gotten it. He won two presidential elections, two parliamentary elections, and three referendums in the last 10 years. He lost (though closely) a 2007 referendum, and basically tied in the December 2008 regional elections against the opposition. Pollsters now show a dead heat in the upcoming referendum. A win for the no would bolster Venezuelan democracy. But even if the referendum passes, Chávez has to win again in 2012 to stay in office. With the economy headed south, this is an increasingly doubtful proposition. If the past holds any lessons, he should be more worried about 2010 than beyond. In the Venezuelan petrostate, economics trumps politics.

Venezuela is trying to develop new markets for its oil at a time of increasing friction with its main customer, the United States. But a significant short-term shift in oil relations between Venezuela and the United States is unlikely.

With the formation of ALBA, Unasur, IIRSA, and many others, Latin American nations are pushing towards a new era of economic, political, and social integration. But how innovative are these efforts really? Will they differ from the failed attempts of the past? I recently wrote the following article for World Politics Review on the promise and perils of the region’s integration. The Promise and Perils of South American Integration Shannon O’Neil January 12, 2009 World Politics Review In the 21st century so far, regional integration has been one of the most notable elements of South American foreign relations. Picking up speed in recent years, the continent’s heads of state have enthusiastically met in numerous summits, promising increased political, economic, social, and development cooperation. Across the spectrum, governments are expanding current integration frameworks and entering into new agreements. Expectations are no less grand. As Brazil’s President Luis Inacio "Lula" da Silva recently stated, "South America, united, will move the board game of power in the world, not for its own benefit, but for everyone’s." Read the entire article here.

Sunday’s regional elections in Venezuela saw a record turnout of 65% of eligible voters. This is high both by Venezuela’s standards (45% of voters came out for the 2004 regional elections) and by global standards (about 62% of voters came out during the U.S. presidential election this year). In the short-term, President Hugo Chavez and the opposition ended in a draw, as the opposition gained control over the mayorship of Caracas and 4 states (including the 2 most populous), but the PSUV (Chavez’s party) maintained control of 17 states. In the long-term, though, this is an important victory for the opposition. Even though they won only 5 of the 22 territories, they will govern nearly half of Venezuela’s population. This grants the opposition a better platform to share their concerns with the general population and to build a political base for future elections. It also means Chavez will also have to tolerate - and even cooperate with - opposition regional governments in order to keep the trappings of democracy. For a few more thoughts on the subject, I talked to PBS’s World Focus last night:

In late September Venezuelan President Chavez traveled to China. This is what I had to say about this for PBS’s new show WorldFocus.

This opinion piece I wrote for the Washington Post lays out many of the findings and recommendations of the Council on Foreign Relations sponsored Independent Task Force on U.S.-Latin America Relations, for which I served as Director. The report has gotten some great feedback so far, and I hope will help jumpstart a new conversation within the next Administration and Congress with regard to the region.

Francisco R. Rodriguez, an expert on Venezuelan affairs, says the show of force by Venezuelan President Hugo Chavez after the Colombian incursion into Ecuador is an attempt to bolster his declining popularity at home.

John M. Walsh of the Washington Office on Latin America says the failure of Venezuelan President Hugo Chavez’s major reform proposals at the polls was a surprise, and represents a “heavy defeat.”

This Sunday Venezuelans will vote on a referendum comprising 69 changes to the existing Constitution. Many of these push the country further toward Chavez’s 21st Century Socialism, expanding pensions for the elderly and reducing the workday to six hours. Others strengthen the power of the President and Chavez in particular, extending the Presidential term and allowing unlimited reelection, giving the President the power to appoint many more government officials, and limiting some civil liberties during states of emergency. The polls show varying results, with some proclaiming a majority in support of the changes and others showing a majority against the proposals. What will really matter is turnout. Here, the "yes" vote has an advantage, since the government is already canvassing the media and will undoubtedly use state resources to encourage supporters to get to the polls. This mobilization will matter. In addition, Chavez has played again the international anti-imperialist card in the lead up to the referendum. Chavez’s recent international outbursts,  first with the King of Spain and more recently with Colombian President Uribe, deflect from the growing domestic discontent and confusion. His evocation of former Spanish Prime Minister Jose Maria Aznar, who along with President George W. Bush tacitly supported the 2002 coup attempt against his government, seems designed to rally supporters before the upcoming vote, implicitly reminding voters of the turmoil brought on by political polarization. If that isn’t enough, the violence in recent weeks toward the opposition may scare some "no" voters away on Sunday. Finally, the opposition has not been able to rally around one position, “ unlike more successful "no" campaigns, such as that leading up to Chile’s 1988 referendum. Some, notably those loyal to the old Accion Democratica political party are calling for a boycott. Others, including former Presidential candidate Manuel Rosales and his followers, are rallying for the no vote. And few seemed to have reached out to Chavez’s former defense minister, General Raul Isaias Baduel, who has criticized the proposals as effectively realizing a constitutional "coup." Whether the opposition can galvanize the uneasiness with these reform proposals, which encompasses not just the traditional opposition but student movements and many moderate Chavez supporters, will be answered on Sunday.

The one area of real triumph for market-oriented reforms in Latin America was inflation. Unlike the uneven record on poverty, inequality, and economic volatility, structural adjustment and austerity programs of the early 1990s ended high and hyper inflation. These programs brought the Latin American average from 235% per year in the early 1990s to less than 8% by the turn of the century. Low and steady inflation has been a crucial element for attracting both foreign and domestic investment, increasing economic production, and encouraging the economic growth of the last several years. But heterdox economic policies - reminiscent of Sarney’s Brazil, Alfonsin’s Argentina, and Garcia’s Peru (the first time around) - have reemerged. In both Argentina and Venezuela, the Kirchner and Chavez governments are using wage and price controls on basic goods as key parts of economic policy. Venezuela has gone a step further to reintroduce public control and management of "key" industries, including telecommunications, oil, and now perhaps steel and the banking sector. These policies are bringing back worries of inflation and leading to shortages in basic goods. Venezuela’s inflation for 2006 topped 17%, the highest in Latin America. Most expect it to surpass 20% this year. Argentina too has seen increasing inflation, from a negative rate in the late 1990s to 10% last year. As worrisome, Kirchner fired the head of the national statistics agency, INDEC, briefly replacing her with a more malleable political appointee until public clamor forced the promotion of a INDEC senior employee. Shortages in these economies are as important, and hamper both consumer-led and manufacturing-led growth. A recent Wall Street journal article argues that Chavez’s threat to nationalize the steel and banking industries has as much to do with the issue of shortages as with nationalism. News articles, as well as personal conversations, show that shortages and economic bottlenecks are again appearing in Argentina. These mismatches are hampering growth, not to mention the quality of life of individuals within the country. Poverty, inequality, and equal opportunity are key issues for the future of Latin American nations. Government programs to directly improve the health care, education, and resources of the poor are important and laudable. But, these governments should not overlook the dire effects of inflation on poverty and inequality. Inflation hits the poor the hardest. They are the ones least likely to receive compensatory pay raises, and are those unable to hedge their savings in indexed accounts or abroad. High inflation will wipe out any benefits of direct assistance programs, leaving individuals certainly no better off and most likely in a much worse situation. This means that as governments are designing programs for the poor, they need to include measures to keep inflation low, be that independent monetary policy, controlled deficits, and better financial regulation. Only with this combination will governments be able to truly help those at the bottom of the pyramid.