Venezuela's Future Up in the Air

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Venezuela's recent presidential election campaign exposed deep political rifts in a country where President Hugo Chavez had grown accustomed to landslide victories. Although the opposition movement failed to strike a decisive blow to his hold on power in the October vote, nearly half the electorate embraced its narrative of a country in deep trouble. Economic mismanagement by the Chavez administration has brought growing criminal violence, inflation and a lack of food security, leading many to question the wisdom of his leftist ‘chavismo' movement.

A newly formed coalition representing approximately 30 opposition parties, the Mesa de la Unidad Democratica, mounted the most concerted effort to unseat Chavez since he took office in 1999. Led by Henrique Capriles, the energetic governor of Miranda state, the opposition made important strides, narrowing Chavez's lead from 26 percentage points in 2006 to 11 in the 7 October poll, claiming 44% of the vote versus Chavez's 55%.

During his election campaign, Capriles targeted popular concerns over the economy and discontent with the chavista movement, focusing on government mismanagement, corruption and inflation. An explosion at the largest oil refinery in the country in August, which left 41 people dead, gave Capriles further ammunition with which to castigate the government. He also promised to place limits on shipments of cheap oil destined for allied leftist governments such as Cuba, and to improve government efficiency while preserving many social programmes.

After the vote, he dismissed complaints that electoral fraud had taken place in favour of Chavez and announced that he would run again for the governorship of Miranda state in regional elections on 16 December. His decision suggested that he and the wider opposition coalition are waiting for internal divisions within the government and popular discontent over its policies to become more pronounced in the coming months and years.

Economic mismanagement

The key goal of Chavez's reign has been to lift Venezuela's masses out of poverty. Since 2003, up to 20 million Venezuelans are thought to have benefited from his misiones - a series of tightly controlled social programmes that seek to provide goods and services to the poor, from health and education, to kitchenware and flat-screen televisions (most of them are made in China and sold to Venezuela through bilateral agreements).

After decades of negligence by previous governments, Venezuela's poor are unquestionably better off under Chavez. The country is now considered the 'least unequal' in Latin America, with urban poverty falling from 48% to 28% since he came to power. However, high public spending, which was increased in the run-up to the elections, has led to spiralling public debt, and it is the poor who are most likely to feel the impact.

Even though Venezuela possesses the second-largest oil reserves in the world, and despite global oil prices exceeding $100 per barrel, revenue from the state-owned oil company PDVSA has not been sufficient to balance the government's books. A large amount of government spending goes through off-budget mechanisms such as a national development fund known as 'Fonden', which is in charge of most state investment. These mechanisms make it difficult to measure the size of the hole in Venezuela's public accounts. Bank of America Merrill Lynch estimated in 2011 that the total public deficit would almost double from 4.2% in 2011 to 8% of GDP in 2012; a July 2012 report by Barclays suggested the deficit would rise from 12.9% of GDP to 19.5% this year.

A series of laws has been passed to accommodate for this increase in public spending beyond the official budget. PDVSA has also been transferring large amounts of its income to Fonden and issuing debt in domestic markets to balance its budget. Meanwhile, transfers of dollars directly to social projects have depleted foreign-exchange reserves, which have fallen by 40% since January 2009 and hit a five-year low during 2012.

Most local and foreign economists agree that the situation is unsustainable, and that Caracas will be forced to curb spending if it is to meet its interest payments.

Meanwhile, inflation has become a severe problem. Though price-control measures brought it down to 11.5% during the first nine months of 2012 (compared to 26.1% in 2011, more than three times the South American average of 7.8%), during the 12 months from September 2011 prices grew by 19.98%, and the government's own inflation target for the year climbed to 22%, one of the highest in the world.

Intended to tame inflation, food-price controls originally imposed by Chavez in 2003 have been tightened this year and have had a devastating impact on food production. Producers of 14 basic foodstuffs have been forced to absorb the costs of the scheme: they saw labour and transport costs rise by up to 200% between January and August 2012, but their ability to raise their sale prices was tightly limited. To ignore the controls might result in the expropriation of their land, but to accept them would risk bankruptcy. So while Chavez claimed during his re-election campaign that food production had increased by 70% during his 13 years in office, there was in fact an agricultural-production crisis going on. The production of food, drinks and tobacco fell by 9.4% in the second quarter of 2012, the fifth consecutive quarter of contraction; food production per capita in Venezuela is thought to have fallen by 32% in the last ten years.

Despite Chavez's efforts, according to the Food and Agricultural Organization of the United Nations, the 12-month food inflation rate stood at 21.7% in July, more than double the average for Latin America and the Caribbean. Food imports have risen sharply as a result, though Caracas has denied suggestions that these account for 70% of all food consumed in the country.

Enduring popularity

Though Chavez's margin of victory in the election was significantly smaller than in 2006, he still won in 22 of Venezuela's 24 states. His strict control of a state media empire has enabled him to build a strong cult of personality. According to Venezuelan NGO Citizen Control, approximately 100 hours of his speeches were televised nationally between January and October.

But his flamboyant style has kept other members of his party, the Partido Socialista Unido de Venezuela (PSUV), away from the limelight. It is plagued by frequent infighting between high-ranking figures, while at a regional level at least ten of the 17 state governors loyal to Chavez face corruption allegations or have serious differences with their colleagues. Although Chavez's personal appeal appears not to have been undermined by the population's doubts about his fellow PSUV politicians, the future prospects of the 'chavismo' movement without him are poor.

The most prominent party member after Chavez, newly appointed vice president Nicolas Maduro, will also keep his previous post as foreign minister. However, he is considered much less charismatic. A March poll by Datanalisis, one of the most reliable polling firms in Venezuela, suggested that none of the key 'chavistas' would fare very well if they were to run in a presidential election against Capriles.

Chavez seems to be aware of the fragility of his movement, especially given the health problems that he has suffered. As recently as February 2012, he underwent surgery in Cuba for a cancer in the pelvic area, followed by radiotherapy. During his victory speech, the president referred to his government's broken promises and pledged to 'work harder, demand more from my team' in order to 'make the administration more efficient in the next six years'. Government inefficiency is a key source of popular discontent; Chavez has taken new measures this year to address this.

Fragile security apparatus

In a Venezuela without Chavez as its leader, not only would his political allies be thrown into disarray, but so too would the armed groups operating in poor neighbourhoods and the official government militias, all of which swear allegiance to Chavez and his 'Bolivarian revolution'.

In the 23 de Enero slum in Caracas, ten armed groups with varying levels of loyalty to the Chavez regime are thought to be active. Though claiming to defend the Bolivarian revolution in Venezuela with their weapons, they use them instead to set up checkpoints to enforce control over the local population. They have been linked to attacks against symbols representing the opposition, such as the privately owned Globovision television station.

Meanwhile, the Bolivarian militias are of particular concern, since they serve essentially as bodyguards for Chavez who, with a failed 2002 military coup in mind, protects himself from internal as well as external threats. All 125,000 members of the Bolivarian militias are affiliated to the PSUV, and were formally incorporated into the armed forces in 2009. (There are 115,000 personnel in the traditional military services.)

Apart from receiving guidance in the principles of socialism, Marxism and 'revolutionary ethics', the militias also receive military training and arms. To this end, Venezuela purchased 100,000 AK-103 rifles from Russia in 2005 and is now close to completing work on a factory in which up to 25,000 rifles could be produced indigenously each year.

But Venezuela's refusal to release data on the spiralling number of weapons in circulation in the country, which according to estimates by the Venezuelan Observatory on Violence number 5-6 million, has raised concerns that the government has little control over the situation. The murder rate stood at 67 per 100,000 inhabitants in 2011, double that of 2001 and one of the highest in Latin America. This increase in the number of homicides, along with reports of weapons belonging to a task force loyal to the defence ministry ending up in crime scenes in Venezuela, gives credence to such suspicions.

The growth in criminal violence, accompanied by declining food security and rising inflation, is likely to increase the public's impatience with the 'chavismo' movement regardless of Chavez's charismatic leadership. An increasing number of people blame flagship government policies, such as fiscal expansion and military build-up, for the fact that they cannot find the food they want at the local supermarket or walk the streets safely. Despite the positive impact for many Venezuelans of his oil-funded social programmes, he will leave a questionable legacy for his successors.

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