Teresita Perez
EDGE Seminar: E297a
December 5, 2002
The history of Venezuela is intimately intertwined with the development of its petroleum industry. As one of the primary producers of oil in the world, this product is determinant for the country, both politically and economically. The current president of Venezuela, Hugo Chávez Frías, has been criticized for opposing the privatization of the oil industry and has been labeled as a communist dictator by the United States for his political agenda. In the following essay, I will present the current situation in Venezuela, placing it in its historical context and addressing issues the new Venezuelan Constitution, the importance of oil, membership in the Organization of Petroleum Exporting Countries (OPEC), and political instability in Venezuela.
First let us place the current situation in a historical perspective by looking at the events that have led to the present situation in Venezuela. Venezuela was under Spanish rule from 1499 until Napoleon I took control of Spain in 1810. This event served as a catalyst towards emancipation from Spain, under the direction of Francisco de Miranda who organized a resistance movement against the Spanish and the royalists. Although independence was declared by 1811, an earthquake destroyed cities held by the patriots and helped to forward the cause of the royalists. It was not until Simón Bolívar and his lieutenants (working from Colombia) intervened that Venezuelan independence was fully secured.
Simón Bolívar was born of a wealthy Creole family in Caracas. When the revolution against Spain broke out in 1810, he enthusiastically joined the rebel army. He has played a central role in Venezuelan history, and is commonly known throughout Latin American simply as "The Liberator" as he led independence wars in the present nations of Venezuela, Colombia, Panama, Ecuador, Peru, and Bolivia. He was a great statesman, writer, and revolutionary general often referred to as the George Washington of South America. Bolívar was influenced by the writings of European rationalists such as John Locke and Jean Jacques Rousseau. He had a vision of continental unity and was an advocate of regional unity amongst South American countries to overthrow what he referred to as imperialist oppressors. He has inspired men to fight and die for liberty.
After a victory of Carabobo by Bolívar and his soldier, in 1821, Venezuelan independence was certain. Venezuela and other territories became part of the federal republic of Greater Colombia under the direction of Bolívar, though Venezuela was resistant to this merge under the leadership of José Antonio Páez. In 1830, separatists gained the upper hand, and thus Venezuela became an independent state. Later, in 1864, a brief liberal regime under Juan Falcón created the decentralized United States of Venezuela. From 1870 to 1935, Venezuela was under the regime of a series of military dictators. During this period oil was also discovered, Venezuela became one of the world’s leading oil exporters, and prospered economically. Most of the money, however, stayed within the small number of white elite while the majority of the nation remained poor.
Dictator Juan Vicente Gómez, who served from 1908 to 1935, managed to force the state into national solvency and material prosperity. During his term, Gómez, established a system of royalties in which foreign companies paid of small percentage of their revenues to the state of Venezuela. During this period the most important investors were the Standard Oil Company and Shell Oil Company. These companies took advantage of a system that did not subject them to many constrains and they did as they pleased within the country. In 1947, a new Constitution, which provided elections by direct popular vote for the first time in Venezuela history, was adopted. The first president elected under this Constitution was overthrown by a military coup, however, and a military dictatorship under Marcos Pérez Jiménez was imposed. Oil production boomed in the 1940s and 50s. This economic boost, enabled President Marcos Pérez Jiménez to reward members of his government with large sums of money and modernize the country, by building roads and encouraging tourism. During his term, Pérez Jiménez abolished the leading parties at the moment (COPEI, Acción Nacional and the Communist Party) and in this way established his sovereignty. Opposition to the Jiménez regime began to grow and a popular revolt, supported by liberal units of the armed forces, broke out in 1958. Pérez Jiménez was impeachment for embezzlement and was forced to leave the country. From this point on, until the 1998 election, politics in Venezuela were dominated by competition between the two predominant parties, the Christian Democratic Party (COPEI) and the Democratic Action party (AD) (both which were dominated by the landed rich white conservatives of the country).
In 1958, a treaty called "Punto Fijo" was adopted. This treaty re-established COPEI, Acción Democrática and the Communist Party (which had been disbanded and brought together on multiple occasions) as legitimate parties. This measure was aimed to provide more stability to the political scene. Elections held that year returned democratic rule to Venezuela, and Rómulo Bentacourt was elected president. As the first Venezuelan president to serve a full term, he enjoyed popular support and his programs seemed to mark the beginning of economic and political stability. He adopted a moderate program of gradual economic reform, joined OPEC and adopted a new Constitution in 1961. During his term, the conditions for the nationalization of the oil industry were drafted as the importance of the petroleum industry became more and more prevalent and it stopped making sense to simply raise the tax on foreign corporations. It was around this time that the country reached a peak in economic prosperity and political stability though the left-wing groups challenged Bentacourt’s administration.
Carlos Andrés Pérez, of the Democratic Action party won the presidential election in 1973. Under his direction, Venezuela joined the economic association of Latin American nations known as the Andean Group. In 1976, Venezuela nationalized its foreign-owned oil and iron companies (up to that point, these industries had been dependent on private foreign companies). A decrease in world oil prices during the 1980s shocked the Venezuelan economy and massively increased its foreign debt. Inflation, unemployment and corruption plagued the country throughout most of the decade. Andrés Pérez endured two attempted military coups in 1992, but was removed on charges of corruption in 1994. Rafael Caldera Rodríguez became president that same year. Venezuela’s economy sagged and its budget deficit grew as oil prices fell in the late 1990s. In December of 1998, Hugo Chávez Frías, a former army colonel that had participated in the failed coups against Pérez, became president after running as an independent candidate.
Chavez was born in Sabaneta, Venezuela in 1954. His parents were both schoolteachers and after he finished high school, they decided to send him to Venezuela’s Military Academy where he received a degree in Military Arts and Sciences. In 1982, he founded the Bolivarian Revolutionary Movement (MVR). On February 4th 1992 he led an unsuccessful military coup against President Carlos Andres Perez Jimenez that earned him two years in prison, but that launched him onto the political scene. While in prison, Chávez broadcasted a call for insurrection on November 27th 1992 when a second unsuccessful coup was attempted. More than 230 people died in the violence, but Chávez was pardoned for any charges against him when Caldera became president. After he was released, he started to organize his left-wing populist coalition MVR, which would lead him to power four years later.
Hugo Chávez campaigned as the "scourge of the oligarchy and the champion of the poor". He was seen as a choice between communism and capitalism, and offered hope for political stability. Known for his charisma, Chávez appealed to the public because of his humble background, his political agenda and his ideology. He also identified himself with the ideology of Simón Bolívar calling for unity among Latin American nations and a change to the structure of Venezuela. He promised the Venezuelan people: to tackle political corruption, make educational and health programs readily available to all sectors of the population, carry out an agrarian reform, address the gender and race inequity and above all to address the fundamental problem of poverty. The country has a population of approximately 24.5 million, and approximately 80 percent of them live at or below the 2000 poverty line of $1,986 per capita. There are abundant natural resources, and per capita gross domestic product (GDP) was $4,980 but income is distributed unevenly. There is an unemployment rate of 15%, though 50% of the population works in the informal sector.
In the 1998 presidential election, Chávez came out victorious with an astounding 56% of the votes –the largest majority in 4 decades with a voter turnout of 82%. He was the first president to be elected from an independent party and so his election resulted in the collapse of the two-party system that had for so long protected the interest of the elite for the past forty years (mainly part of the Acción Democrática party).
In what Chávez calls his "peaceful revolution", the country has undergone several drastic changes. These changes have been the cause for much criticism, especially from the U.S. whose interests are not being accommodated with Chávez’s progressive policies. One of the changes he has effectuated is the adoption of a new Constitution (the 26th in Venezuelan history), which has partially restructured the government.
Just four months after his election, he called for a referendum of 131 members, to draft a new Constitution; upon approval of his request, elections to the assembly were held in July 1999. Just six months later, the final draft of Venezuela’s new Constitution was released to the public. The adoption of the new Constitution was put to vote to the general public and was approved with 71.2% of the general vote on December 1999.
Under the new Constitution changes were made to the country’s name, soldiers’ political status, the presidential position, and the bicameral system among many other things. The country was renamed the "Bolivarian Republic of Venezuela" to honor the memory of Simón Bolívar. Also soldiers were given the right to vote even though the previous Constitution had explicitly noted the importance of a separation between the political and military spheres. Furthermore, the President’s term has been extended from 5 to 6 years, and is now allowed to run for a second term. The President also now has the power to appoint the Vice President, decide the size and composition of the cabinet and make appointments to it with the involvement of the National Assembly. Legislation can be initiated by the executive branch, the legislative branch (either a committee of the National Assembly or three members of the latter), the judicial branch, the citizen branch (ombudsman, public prosecutor, and controller general) or a public petition signed by no fewer than 0.1% of registered voters. It must be kept in mind, however, that the President can ask the National Assembly to reconsider portions of laws he finds objectionable, but a simple majority of the Assembly can override these objections. The Constitution dissolved the bicameral legislative branch (with 230 members), and replaced it with a unicameral unit with 165 members that serve 5-year staggered terms, this branch still acts as a check and balance to the executive branch and the members continue to be democratically elected into power. Furthermore, the Constitution guarantees 3 seats to the indigenous people of Venezuela, which will yield power to a sector of the population that has been vastly underrepresented in the political arena. Part of the controversy that lies behind this Constitutional change is that it challenges the power structure the elite has established and taken advantage of for the past 40 years. The fact that it explicitly addresses gender and racial inequality and aims to ameliorate the status of women and indigenous people is a huge step in addressing the social inequity that has addressed Venezuelan society for centuries. The preamble of the Constitution depicts what principles are being embraced:
"The people of Venezuela, exercising their powers of creation and invoking the protection of God, the historic example of our Liberator Simón Bolívar and the heroism and sacrifice of our aboriginal ancestors and the forerunners and founders of a free and sovereign nation; to the supreme end of reshaping the Republic to establish a democratic, participatory and self-reliant, multiethnic and multicultural society in a just, federal and decentralized State that embodies the values of freedom, independence, peace, solidarity, the common good, the nation's territorial integrity, comity and the rule of law for this and future generations; guarantees the right to life, work, learning, education, social justice and equality, without discrimination or subordination of any kind; promotes peaceful cooperation among nations and furthers and strengthens Latin American integration in accordance with the principle of nonintervention and national self-determination of the people, the universal and indivisible guarantee of human rights, the democratization of imitational society, nuclear disarmament, ecological balance and environmental resources as the common and inalienable heritage of humanity; exercising their innate power through their representatives comprising the National Constituent Assembly, by their freely cast vote and in a democratic"
One of the main critiques against the changes made to the Constitution is that it yields too much power to the Executive branch and as a result Chávez has been labeled as a dictator. Nonetheless, many others believe this new Constitution is aimed at creating more equity within the country and help him implement the promises he had made during his campaign and concern lies within the elite because it threatens the power structure that has so far allowed them to stay in power and oppress the poor. The Constitution voted on and approved by the overwhelming majority of the Venezuelan public and, furthermore, general elections were held for public offices once it was approved. During the transitional period Chávez remained in control and he chose a 21-member cabinet to head the Senate. The elections were originally planned for May 28, 2000, but were postponed by the court until July 30 of that year as to allow more time to prepare. This time Chàvez won the presidential vote with a 59.7% margin, despite the fact that both establishment parties (COPEI and AD) threw their support behind the challenger, the governor of Zulia, Francisco Arias Cardenas (he carried 38% of the votes). Also opposition candidates won 10 of Venezuela’s 23 governor seats. The whole adoption and change was fully democratic and, though radical, has no authoritarian elements.
More international concern than his governmental restructure has grown around Chávez’s plans for the oil industry. The oil industry of great interest, nationally and internationally, because petroleum dominates the Venezuelan economy, Venezuela is the third largest supplier of imported oil to the United States and the fourth largest oil producer in the world. In the year 2000, oil accounted for 30 percent of GDP, 50 percent of government revenues, and 75 percent of exports, and more than half of government operating revenues. Before Chávez rose to power, President Caldera was trying to privatize the nationally owned Petroleos Venezolanos S.A. (PDVSA), sell it and leave OPEC. The oil situation was one of increasingly decreasing prices (reaching a low of $12.12 per barrel of crude oil), usurpation of oil quotas, overproduction in the market and low fiscal income. But Chávez’s policies are diametrically opposed to Caldera’s in that he aims to utilize OPEC as a tool to raise oil prices and in this way increase the money flowing into Venezuela.
Chávez acknowledges the magnitude of power and potential profit Venezuela has and that his social plans depend on an increase in the GDP. As a result, Chávez has set out to cut Venezuela’s oil production to force up prices and pushed for other OPEC members to do the same. Venezuela has been with OPEC since it was founded in Baghdad on September 14, 1960. Its current members are Saudi Arabia, Kuwait, Iran, Iraq, Algeria, Indonesia, Lybia, Nigeria, Qatar, the United Arab Emirates Members and Venezuela. Throughout his first year Chávez visited 8 of the other country members and they have thus far been receptive to his message of unity and fight for fair pricing on oil.
Chávez has also met on several occasions with Russian president Vladimir Putin to work out a plan for a "New World Order". Although Russia is not part of OPEC it is the world’s third largest oil producer and Chávez wants to create a partnership toward fixing for fair oil price by having both countries cut back production. Putin and Chavez are both committed to stabilizing the oil market price and graining control of oil prices. Russian Ambassador Alexei Ermakov said that Russia is committed to curtailing production.
Furthermore, President Hugo Chávez is trying to bring in foreign investment capital by working with Chinese tech companies. From October 10-13, 1999, at the invitation of Chinese President Jiang Zemin, Venezuelan President Chavez paid a state memorandum of understanding on mutual investment protection; a memorandum of understanding on provision of 30 million US$ of credit loans to Venezuela by the Bank of China. Chávez has also met with the head of the Communist Party, Vice-President Huang Ju, to discuss investments on technology that will be utilized for the piping and refinement of oil as there is more focus on increasing production of refined oil (as opposed to crude oil) which is sold at a higher price. So far the markets have proven that OPEC is "doing something right", at least in the goals that President Hugo Chávez has set -oil prices broke the $30/barrel mark on November of 2002 and are currently in the upper 20s.
In his quest to provide Venezuela with national health care, Chávez has also signed a treaty on October 30, 2000 with Cuba. This treaty aims to improve Venezuela’s medical system. In exchange for 53,000 barrels of oil per day, Cuba is committed to sending health specialists, athletic coaches and medical services to Venezuela. Chávez emphasizes the necessity of union in Latin America and so the preferential financial terms, which Chávez has given to Cuba seems to be emblematic of this unity and not based on commercial motives.
Because such a large percentage of the GDP comes from oil sales, and as a result his social programs and the standard of living on the Venezuelan population are fundamentally dependent on it Chávez has set out to purge the oil industry of corrupt board members. When Venezuela nationalized its oil industry in the 1970s, the management at the local operations of Royal Dutch/Shell and other foreign companies that eventually became Petroleos de Venezuela remained. These directors had envisioned to convert PVDSA into a world-class multinational corporation and thus were replaced by Chávez supporters who shared the view that the strategic industry of Venezuela should respond first to priorities set by the government and not always pure business objectives. Chávez endeavored to wrest control of the company from these former oil tycoons though the removal of these high executives was not received and actually sparked a strike among oil workers union on April 4th, 2002. Strikes are not unusual in this sector in Venezuela and so this demonstration was not perceived as indicative of a greater threat to the national security. Nevertheless, on April 11, there is a There was a coup d’etat to topple his government. A rally against Chavez draws 50,000 people. Street protests turn into clashes between opposition groups and police, the military and Chavez supporters, leaving at least 10 people dead and more than 100 injured.
During Chávez’s removal, businessman and Fedecameras leader (conservative political group made up mostly of businessmen) Pedro Carmona took power. He moved instantaneously to reverse Chávez’s Bolivarian policies and consolidate the oligarchy. He dissolved parliament and the Supreme Court, dismissed all mayors and governors, and stopped the shipment of oil to Cuba. He also openly announced that he aimed to privatize PDVSA. On April 12 the military's top commanders resign in the early hours in order to press Chávez to step down but it is unclear whether Chávez ever actually resigned. The following day, pro-Chavez elements in the military held a demonstration against Carmona, and 100,000 people gathered in front of the presidential palace to protest the coup. Carmona resigned and was taken into custody. On April 14, Chávez returned to the presidential palace, during early morning hours, triumphantly to a crowd of 400,000 waiting outside.
The United States has been accused to intervening and aiding in carrying out the coup. In the previous year the United States had funneled close to $900,000 through such organizations as the Endowment for Democracy to anti-Chavista groups. Mexico’s paper El Proceso reported that the goal of the coup leaders was the privatization of PDVSA, to turn it over to a company linked to President Bush and the Spanish company Repsol. Another key player is the Assistant Secretary of State for Latin America Otto Reich, a right-wing Cuban exile and former Mobil Oil lobbyist, who was Reagan’s ambassador to Venezuela and received Venezuelan coup leaders, including Carmona, at the White House less than a year before it took place. There are also allegations that the CIA of had knowledge of the coup plans, and possibly helped the ultraconservative civilians and military officials who unsuccessfully tried to gain power over the interim government. Furthermore the Bush Administration and major U.S. media rush to embrace Carmona. The lead editorial for the New York Times, the day after, was written in praise of the coup. "Venezuelan democracy is no longer threatened by a would-be dictator," the editorial says, because "the military intervened and handed power to a respected business leader."
Currently, the country continues to experience political unrest. On November 25th, 2002 a protest, led by the mayor of Caracas, Manuel Peña, and supported by the conservative oligarchy was held. The catalyst for this demonstration was the removal of the chief of police in Caracas, Henry Vivas. Vivas was ousted by Chávez because he had been unable to suppress a six-week strike in the city and so Chávez deployed the National Guard to keep order and removed Vivas from office. Mayor Peña has asked Chávez to resign to the presidency, saying he has the support of over 2 million Venezuelans against him but Chávez has not declared a state of alert and oil production continues at 100% though the national. Chávez’s supports have commented that this is part of an on-going movement from the elite, the U.S. and other powers to remove him and stop his "peaceful revolution".
The United State has plenty of reasons to want control over Venezuela and to be opposed to Chávez’s government. Chávez aims to keep a high price on oil in the world market, is opposed to the privatization of PDVSA, is actively seeking to establish deep relationships with Cuba and Arab nations, is fairly consistent in criticizing unilateral intervention on the part of the U.S. or other external powers in Latin America (including U.S. intervention in Colombia). Chávez maybe regarded as a nationalist, who embraces a pan-Latin American ideology, tinged with an anti-Americanism. His nationalism must be understood through a Bolivarian paradigm, which calls for regional integration. His revolution is not just political or economical but one that is concerned with a fundamental problem which has plagued Latin American for centuries: cultural identity. He has openly addressed issues of racial disparity, and calls for equality to attack poverty. Thus Chávez cannot be dismissed as a communist dictator as the U.S. has tried to pass him for, because a wide majority voted him into office, and because he supports a mixed.
Despite the political turmoil and opposition groups Chávez has had to face, his government is in the process of building 135,000 homes, and 2,000 schools, which will reach 1,500,000 additional children. He also (with the help of Cuba’s medical staff) aims to expand health care services so that they are available nation-wide wants to carry out an agrarian reform. Only the future will tell if President Chávez is actually removed from office or if political upheaval will continue until he finishes his presidential term in 2006. Although I believe that desperate times call for desperate measures and that Venezuela needs the drastic changes that Chávez has brought about to begin tackling its social inequity.
Bibliography
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BBC News. Venezuelan president demands longer term August 6, 1999
<http://news.bbc.co.uk/1/hi/world/americas/413207.stm>
Kort, Jonathan Rosemberg. BBC News. "Chávez: By the People and for the People" <http://news.bbc.co.uk/1/hi/world/americas/998002.stm> 1999
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Forero, Juan. "Chávez Foes Plan to Extend Strike in Venezuela". December 5, 2002.
Tamayo, Juan O. The Miami Herald. "Venezuela’s Chavez: Castro clone or a patriot?" August 9,1999
Aharonian, Aram Ruben. Proceso. "Back, by Popular Demand? How Venezuela's Hugo Chávez Got a Second Chance". Mexico City, May 1, 2002.
Assigned the people he wanted to top positions within PDVSA
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Talbot, Karen. "Coup-making in Venezuela: Bush and Oil Factors". NY Transfer News. July 27, 2002.
Books
Ortega, Montiel. Convenio Petrolero Cubano Venezolano. Caracas, 2001.
Randall, Laura. The Political Economy of Venezuelan Oil. Praeger Publisher. 1987
Meneses, Belén. Chavez: El Unificador. Industrial Gráfica. March, 2001.
Ponce, Guillermo. Chavez: La Batalla del Petrolero. Editorial Fuentes. 2000.
Guerra, Jorge. La Robolución Chavista. Impresora Venezuela. 2001.
Kelly, Janet and Romero, Carlos. The United States and Venezuela. Routedge Inc. New York, 2002