Prospects for a Post-Chavez Venezuela

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Venezuelans celebrated 200 years of independence with a military parade and a full slate of festivities in Caracas on Tuesday. President Hugo Chavez, who has publicly admitted he is being treated for cancer, managed to return to the country in time for the celebrations but appeared weak. He was unable to attend the military parade and instead began the festivities with a televised address and published regular Twitter updates throughout the day. Chavez underwent two operations while on an extended stay in Cuba. Since returning to Venezuela on July 4, Chavez has alluded to the possibility that he may return to Havana for continued treatment. Although there has been no official word on the nature of Chavez's cancer, STRATFOR sources have said that it is prostate cancer and it may have metastasized.

Chavez has a reputation in the country as a tireless worker and has insisted that he will remain in charge of the government. There is nothing to suggest that the president will be forced to step down any time soon. However, his prognosis is clearly not optimistic, and Venezuela must confront the pressing question of how to fill the void should Chavez's illness force him out of power or prove terminal.

To understand why Chavez's popularity and political strength endure despite the serious challenges facing Venezuela, it is necessary to remember the circumstances that led to his rise to power.

Surging income from the oil-price spikes of the 1970s and early 1980s led to economic instability throughout the next two decades. Caracas moved to rapidly expand government expenditures in order to satisfy the populist demands of an underdeveloped country. This spending brought about a steep rise in corruption and spiraling inflation. Venezuela attempted to correct these imbalances through neoliberal reforms, including eliminating subsidies and raising taxes. The most damaging response to the new policies was the1989 riots - known as the "Caracazo" - which were triggered by a rise in the price of gasoline. The riots left nearly 300 people dead in Caracas.

Shortly thereafter Chavez, a young lieutenant colonel, entered the national spotlight during a failed coup attempt. Well-spoken and charismatic even in defeat, Chavez made an impression at a time when the Venezuelan political system was clearly breaking down. After Chavez was released from prison, he was able to seek leadership of the country again - this time through the elections that brought him to Miraflores in 1999. Chavez appeared at a pivotal time and was able to move on from his mistakes and seek power democratically.

As a leader, he satisfies Venezuela's need for a strong central figure capable of reining in factions competing for power. Most importantly, however, Chavez appeals on a very personal level to swaths of the population who identify with his persona and with policies that place poverty at the forefront of the national agenda.

However, a number of missteps have plagued his administration. Economic distortions and corruption adversely impact Venezuelans on a daily basis. Venezuela's ails include a severe housing shortage, soaring inflation, periodic food scarcity and a failing electrical system. Despite these challenges, Chavez's approval ratings have barely dipped below 50 percent.

Part of the problem facing the Venezuelan opposition, or any other potential Chavez rival, is to find a leader able to fill or challenge the political space Chavez has created for himself. Chavez has crafted an image as a "man of the people" and has access to all the resources of the state. He has created a system and a structure that have prevented anyone else's rise to power. Since the causes of the economic challenges facing the country are deeply entwined with the populist politics of redistribution, it is difficult to articulate a political platform contrary to Chavez without directly recalling the neoliberal reforms that triggered the Caracazo of 1989.

As a result, the outlook for a post-Chavez Venezuela is uncertain. Serious factional divisions within the Chavista elite portend a real threat of violence. To avoid a complete destabilization of the country after Chavez leaves the scene, a number of things must happen. Any successor government must engage in serious negotiations with the stakeholders in the Chavez government. The needs of those who survive on state welfare - as well as the new "boliburguesia" (Chavistas who have become rich thanks to the strictures of the current system) - will have to be accounted for and folded into any transition of power. The proper balance will involve awkward contradictions. The very economic distortions that allow some to get rich may also delay housing projects or create food scarcities. The policies causing economic distortions will have to be carefully unwound to ensure the whole system doesn't collapse.

No individual exists right now with the leadership qualities to match Chavez. No one within the ranks of Chavez's inner circle appears capable of installing pragmatic policies while also inspiring the loyalty of Venezuelans. Certain factions may have the support of the military, but a return to a military dictatorship will inevitably cause bloodshed. Nevertheless, negotiations are ongoing to find common ground between the many interested groups, and a compromise candidate may yet arise.

How quickly Chavez's health deteriorates and whether he will be able to run for the presidency again in 2012, will determine Venezuela's future stability. In the meantime, other candidates will begin to step forward from both the left and the right wings of Venezuelan society, as each prepares for a Venezuela beyond Chavez.

A Stratfor Intelligence Report.
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