Jerry Haar
Venezuela:
poised for recovery or continuing decay?
t has been eighteen months since the Summit of the
Americas, at which 34 heads of state committed to establish a Free Trade Area of the
Americas (FIAA) by the year 2005. Since that time trade liberalization, macroeconomic
reform, and commercial expansion have continued, for the most part unabated.
Unquestionably, the greatest advances have been made among the nations of South
America, with one glaring exception: Venezuela. This is ironic and unfortunate, after all:
How can a nation of 94 million people, geographically well-located; blessed with the largest
oil reserves in the world outside the Persian Gulf; the largest supplier of oil to the United
States; and endowed with vast agricultural, livestock, mineral and other natural resources
have squandered and mismanaged its wealth, to the point of becoming a basket case rather
than a showcase?
Since 1959, Venezuela has taken the gift of democracy and the blessing of petroleum,
abusing the former and misusing the latter, and crafted a paternalistic state in which business,
political, and labor elites are dedicated principally to the advancement of their own immediate
self-interest. Until 1994, two main political parties (AD and Copei) ruled the country,
controlling the congress, the judiciary and state-owned companies; accountability to the
electorate was minimal. Both parties viewed the State as a giant "pińata", in which
petroleum-generated revenues were parceled out to expand the role of the State and the
bureaucracy, buy political support and other favors, subsidize the poor and the middle class,
and fuel an ever larger system of waste, corruption and inefficiency. The decision and
actions were based on politics and patronage rather than economics and merit.
The public, for its part, had become used to and expected such largess. President Carlos
Andrés Pérez's neoliberal reforms, with their accompanying austerity measures, were
greeted with riots and two coup attempts; he himself was impeached on corruption charges
in 1993. The public could not abide having to make economic sacrifices while the president,
his cronies, bankers, industrialists, and judges were profiting from a corrupt political
system.
Rejecting the present and embracing the past, the electorate chose former President Rafael Caldera
(1969-1974), head of a coalition of 17 minor parties, as president in 1993. For the Venezuelan
people, Caldera represented personal honesty, integrity, and morality in government; the
candidate pledged to root out corruption at all levels and bring peace and prosperity to all
Venezuelans. There were great hopes that Caldera, the elder statesman, could indeed
accomplish these tasks.
Three years later, the results have been "less than successful". Those not employed as
diplomats would say an absolute disaster. Those not employed in the diplomatic
service would say an absolute disaster. Caldera rejected out of hand the neoliberal
economic reforms of his Pérez--reforms which every nation in the hemisphere with the
exception of Cuba has adopted years before. In a little more than twenty-four months, the
octogenarian president has gone through nine economic plans, each a failure; compromised the
central bank's independence; instituted foreign exchange and price controls as well as a
Consumer Protection Law which punishes merchants for selling goods at other than authorized
prices; created an enforcement agency Institute for the Defense of Education of the Consumer
(in fact, "price police") to impound businesses violating price laws; restricted
press freedoms; and pursued an array of other discredited economic policies which
have pushed unemployment up to 15%, and the Bolívar down from 106 to the dollar to nearly
500; led to a soaring crime rate; and caused widespread bankruptcy. In essence, whereas the rest
of the hemisphere is moving forward, economically and politically, Rafael Caldera's Venezuela
has taken a quantum leap backward to populist, statist, and socialist policies which retard
economic growth, and undermine freedom and liberty. Due to these policies, the middle class
has shrunk by over one-third; and the poor are poorer than at any time in recent history. (The
share of household income spent for food has climbed from 28% during Caldera's last
presidency to 72% today.)
Although the Venezuelan situation is bleak, it is not hopeless. Late last month,
Venezuela signed a preliminary agreement for a $1.4 billion standby loan with the IMF--the
very organization President Caldera lambasted in his campaign two years ago. Although less
than the three-year loan package Venezuela was hoping for, it nonetheless opens the door for
$1.9 billion in complementary loans from the World Bank and inter-American Development
Bank to bolster the social security system and assist the poor. Additionally, there have been
other recent measures which bring a tad of optimism to the picture. Foreign exchange and
interest rate controls and some price controls have been lifted, foreign participation in the oil
and petrochemical sectors has been expanded, and a timetable for further privatization of some
government-owned assets has been announced. Moreover, a new Planning Minister, Teodoro
Petkoff, is bringing soundness, coherence and credibility to the government's new measures,
winging accolades from local business leaders, foreign investors and international lenders.
Although radical reform measures, namely the privatization and capitalization through
public vouchers of PDVSA, Venezuela's national oil company, would wipe out over night all
foreign and domestic debt, pension-off two-thirds of the bureaucrats, and fund and facilitate the
privatization of the bankrupt social security system, and rebuild the nations infrastructure, such
policy actions remain politically unpalatable. (Yet Bolivia has successful implemented this
model of privatization in electricity, airlines, and telephones.)
In the meantime, one can only hope that incremental progress will continue and that Venezuela will
join the other South American nations such as Argentina, Brazil, Peru and Chile that made the
hard choices and instituted neoliberal policies and programs aimed at bringing the fruits of
democratic capitalism to their citizenry.
For Venezuela, the turnaround will be all the more harder, for it requires a change in
the political culture of the nation. "Partidocracia", the benevolent and paternalistic
State, and the industry of corruption are fixtures of Venezuela's current history, not its past one.
Admittedly, however, the Liberator saw vestiges of these infirmities even then when, on his
deathbed, he uttered: "America is ungovernable. Those who have served the revolution have
plowed the sea. " How ironic also that the "llanero" (plainsman), whom Venezuelans
revere to mythic proportions in verse, art, literature, and music (Florentino in Antonio Esteve's
brilliant Cantata Criolla) expected nothing and sought nothing from the State: he
was the apotheosis of rugged individualism, libertarianism, personal integrity and
self-reliance.
True political change will require nothing less than a transformation of the attitudes and
values of the Venezuelan people, not merely the substitution of governing "caciques",
their party cronies, bureaucrats, and parasitic beneficiaries of public funds.
If the Caldera-Petkoff team can institute the programs and replicate the economic
successes of Menem, Fujimori, and Cardoso, and if the Venezuelan people can psychologically
cut the umbilical cord to the paternalistic Sate and embrace individual initiative, market
capitalism, and self- reliance, Venezuela could well become the shining star of South America
and the faithful realization of Simón Bolívar's dream.
Jerry Haar: Visiting Scholar, Harvard University and Senior
Research Associate North-South Center, University of Miami
Translation by Carlos Armando Figueredo>/a>
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