Hugo Chávez: Latin America’s Rising Superstar

As the White House’s misguided policies have drawn its capacity for effective hemispheric leadership into question, Latin Americans have begun to boldly rally around one of their own—even though he is a figure of sometimes great controversy.

• On August 7, Venezuelan President Hugo Chávez formally suspended cooperation with the U.S. Drug Enforcement Agency, accusing its agents of espionage.

• Chávez is not alone in his distrust of the Bush administration; much of Latin America is rallying around him and becoming increasingly discontented with Washington’s undiplomatic policies toward the region.

Chávez’s revolutionary social “missions” have brought much needed relief to Venezuela’s poor, but doubts persist as to whether Chávez is tapping his oil wells responsibly.

The North American and Venezuelan media have fairly accused Chávez of bullying the free press, though his behavior is in large part an instinctive reaction to their unprofessional and often unevidenced vendetta against him, revealed most recently by the passage of Representative Connie Mack’s thinly veiled scheme to further contaminate the Venezuelan air waves with Washington’s vitriolic anti-Chávez propaganda.

The Bush administration’s open contempt for Chávez and its underhanded attempts to cut down the democratically-elected leader contradict the republican ideals that the U.S. claims to protect and promote throughout the region and mortally tarnish Washington’s fast disappearing reputation as a constructive hemispheric factor.

On August 7, Venezuelan President Hugo Chávez formally suspended cooperation with the U.S. Drug Enforcement Agency, accusing its agents of espionage. This brash move represents the latest in a series of demonstrations of Latin American discontent, both on the left and on the right, with Washington’s often clumsy intrusion into the region’s affairs. Even the Washington based Inter-American Dialogue, an NGO which is overtly critical of the Chávez presidency, recognizes that the Bush administration has dug itself into a hole in its own backyard. In its July 2005 Latin America and Caribbean Report, the Dialogue concedes that, “Overwhelmingly, Latin Americans are critical of U.S. foreign policy directions and unhappy that Washington has not done more to aid the region’s development.” As the White House’s misguided policies have drawn its capacity for effective hemispheric leadership into question, Latin Americans have begun to boldly rally around one of their own—even though he is a figure of sometimes great controversy.

To the world, Chávez is a man of many faces: bold social reformer, naïve idealist, savvy economic opportunist, irresponsible fiscal rogue, democratic champion, authoritarian leader, Latin America’s savior, Washington’s worst nightmare. Mold these disparate characteristics into one man and the result is Hugo Chávez, Venezuela’s outspoken president and Latin America’s rising star. To attempt to generalize about Chávez’s record or ideology is to grab at smoke. The Venezuelan president seems to be carried by the shifting southern winds, drifting from head of state, to talk show host, to Latin American politico, to people’s reformer and revolutionary, to military loyalist. The only two truly consistent aspects of Chávez’s rule have been his unwavering declaration that he stands for his country’s poor, and his staunch opposition to the White House’s exertion of any form of influence over his country or the region.

Washington’s Dyspepsia Over Chávez
The latter has clearly offended the Bush administration. As a result, Washington has attempted to vend a decidedly biased and hostile story on Chávez to both the North American public and the people of Latin America. Its negative portrayal of the Venezuelan president has been picked up by much of the North American media, where he has been labeled as half of a hemispheric “axis of evil,” partnered with Fidel Castro, and together threatening to contaminate and “destabilize” (as phrased by Secretary of State Condoleezza Rice) a fragile region with hollow promises of socialism and troubling inclinations toward authoritarian rule. To say that Chávez deserves none of the criticism aimed at him from Washington would be an exaggeration, but it is painfully clear that the U.S.’ unrelenting and often baseless offensive against Venezuela’s charismatic and democratically-elected leader is unjustifiably one-sided.

Much of the White House’s severe discomfort with the so-called “firebrand” Venezuelan president stems from its reluctance to loosen its grip on the Western Hemisphere’s developing nations and its desire to rally the region against Fidel Castro. To his credit, and much to the Bush administration’s chagrin, Chávez has dared to reject the inevitability of U.S. control over the fate of his country and that of his neighbors. Moreover, he has done so in a rather inspiring fashion, sharply challenging economic and governing systems that have ill-served Latin American nations for decades and utilizing, for the first time, his country’s oil resources to deliver basic social necessities to his adoring masses. Washington’s stubborn refusal to work constructively with the Venezuelan president is polarizing the hemisphere into pro and anti-Chávez states and is increasingly isolating the uneducable Bush camp from its southern neighbors, threatening its relevance as the region’s prima face leader.

Chávez: Man on a Mission
Instead of subscribing to Washington-backed neoliberal economics, Chávez has capitalized on Venezuela’s weight as the world’s fifth largest oil supplier. He has devoted his nation’s petroleum profits to promoting “endogenous development,” financing goal-oriented social projects, or “missions,” and founding scores of small-scale workers’ cooperatives in agriculture and other micro-sectors. Chávez’s original economic model, which he calls “21st Century Socialism,” is not designed after communism, but rather on a “social, humanist, egalitarian economy.” His plan aims to provide jobs and to foster community development, hardly disreputable causes in a region that has historically been damned to widespread poverty and deplorable living standards.

Importantly, Chávez has refused to allow his promises to ring empty. For example, according to the Christian Science Monitor, Venezuela’s state oil company, Petroleos de Venezuela (PdVSA), spent more than $3.7 billion last year on social and agricultural projects, including housing, free medical clinics, schools and literacy programs. Under Chávez, Venezuela spends $25 million a month alone on purchasing food at subsidized prices for low income families, including 150,000 people in extreme poverty who, as a result, now have access to adequate nutrition at no cost. In addition, since implementing the Barrio Adentro, or Inside the Neighborhood, program in 2003, more than 60 percent of Venezuelans have received free healthcare at one of the 300 medical clinics set up with the assistance of thousands of Cuban doctors; Venezuela’s former Minister of Information Andres Izarra reported that the mission has saved 2,575 lives. Today, Venezuela claims one of the lowest infant mortality rates in Latin America and subsidized prescription drugs are available at prices 30 to 40 percent cheaper than on the open market.

Chávez has also made great strides toward improving the quality and accessibility of public education. He has used Venezuela’s oil wealth to build 3,000 new volunteer-based schools in rural communities and urban centers and has eliminated fees for public school attendance. Impressively, Chávez successfully coordinated his political and economic agendas, supporting increased funding for education with the codification of the right to learn under the nation’s new constitution. Since Chávez came into office, more than 1.2 million adults have learned to read and the nation now boasts a literacy rate of 93.4 percent, one of the hemisphere’s highest.

Chávez has audaciously challenged the Washington Consensus’ neoliberal school of thought that has been applied without interruption to Latin American nations for several decades with devastatingly destructive results for many of the region’s marginalized inhabitants. His expansionist policies have fostered both economic growth in the short term and established the necessary foundations for future development. Chávez’s social missions have helped engender a healthier, better educated population which, in turn, has created a much brighter outlook for Venezuela’s future workforce.

Banking on Oil
Some argue, however, that Chávez’s bold reforms will come at significant long term economic cost. Despite the fact that Venezuela has recently capitalized on soaring oil earnings to fuel robust growth and fund Chávez’s wide swath of social programs, many economists worry that the country’s expansion is threatened by the Chávez administration’s disregard of structural vulnerabilities and potentially disruptive reformist policies.

Most commonly cited is the likelihood that Venezuela’s petroleum-led growth is unsustainable. According to several independent oil analysts, beneath its recent price surge-driven profits, the state oil corporation, PdVSA, is limping. Production levels at key wells are said to be dropping at rates of up to 25 percent annually, and since 1997, the number of exploratory rigs has been nearly cut in half. Although Chávez maintains that efforts to keep such setbacks from translating into significant production cuts have succeeded – he maintains that production levels have dropped by only 200,000 barrels per day (bpd), to 3.1 million bpd – some industry experts maintain that such optimistic claims can be deceptive. Venezuela’s virulently anti-Chávez national daily newspaper, El Nacional, reported on May 15 that, “An extensive survey of oil industry engineers, geologists, geophysicists and experts indicates that corrective measures have not been taken and the decline in Venezuelan oil production is nearing 1,000,000 bpd. This drop… creates an alarming situation with the foreseeable consequence of diminishing crude oil extraction.”

Considering that oil profits make up 52 percent of the government’s revenue, critics reasonably argue that this potential shortage could prove to be a significant drag on Venezuela’s economy. It must be said that Chávez has done little to protect against such a supply shock, perhaps concluding that what is needed right now is to use the country’s oil wealth to satisfy the basic needs of his core constituency—the poor. In fact, his confrontational stance toward foreign oil companies – characterized by his plans to drastically increase royalties on exploration and refining projects and to guarantee a 51 percent stake for PdVSA in all new ventures – could discourage some foreign oil producers from expanding investments in Venezuela. Given these structural weaknesses, doubts persist as to how much longer the strength of petroleum prices alone will be able to carry Venezuela’s economy.

However, another stream of analysis maintains that foreign oil companies will most likely absorb all of Chávez’s arrows, as there is still a great deal of money to be made from Venezuelan oil. The odds that many of the 32 foreign oil companies currently operating in Venezuela will back out after having invested so heavily in the country are highly unlikely. Shell Oil Co.’s new president for Venezuelan relations, Sean Rooney, told Business Week that “We’ve been in Venezuela for 90 years, and we’ll be here another 90 years.” Even ExxonMobil, which initially protested the changes, is now finalizing a new agreement with Venezuelan authorities.

Chávez has found room to maneuver with overseas investors in the common expectation that crude oil prices will not fade by much in the near future. According to the U.S. government’s Energy Information Administration (EIA), monthly average oil prices are projected to remain above $55 per barrel for the rest of 2005 and 2006, and average $59 for the third quarter of this year, nearly $15 per barrel more than last year’s level. The EIA notes that “several factors are contributing to the expectation of continued high crude oil prices,” namely the fact that “worldwide petroleum demand growth is projected to remain robust during 2005 and 2006.”

This is good news for Chávez, whose brilliant diplomatic move to liberally distribute crude to his neighbors has helped along his emergence as a Latin American hero. At the July Summit of Caribbean States, the Venezuelan president encouraged regional economic growth through his PetroCaribe program, which generously offers Venezuelan oil on discounted terms to Caribbean nations in exchange for local products. Chávez’s efforts have brought widespread praise and important political backing. Thirteen of the fifteen Caribbean Community nations already have signed on to Venezuela’s oil initiative and Chávez is expected to launch a similar plan in South America. Dominican President Leonel Fernandez told Associated Press reporter Mark Stevenson that rising energy prices pose “a terrible threat to economic growth” in financially struggling nations and hailed the Venezuelan plan as a possible solution. Even Colombia, a staunch U.S. ally and historic Venezuelan adversary, praised Chávez’s ambitious proposal for regional cooperation. Referring to PetroCaribe, Colombian President Álvaro Uribe said he could “envision Venezuela playing a great leadership role.”

Raiding the Bank
Just as the health of Venezuela’s petroleum industry has been put to question, so too has the prudence of Chávez’s grabs at the central bank. According to the president and his economic advisors, the central bank’s near $30 billion in reserves far surpasses the $18-20 billion needed to back the bolivar, and as such, the excess reserves should be redirected to help fund the “Bolivarian revolution.” Accordingly, Chávez has proposed a law that would free up $5 billion of the bank’s reserves to be funneled into the National Development Fund, Fonden, which the president personally controls. While it may be that Venezuela’s central bank reserve levels are currently inflated, and though it is undeniable that such redirected funds could help Venezuela’s desperately poor, the nature of this transfer could undermine the legitimacy of the central bank and could set a dangerous precedent for the president’s unilateral control of national funds. Given that not all Venezuelan presidents have been as honest as Chávez appears to be, such fiscal practices may threaten long-term economic stability and growth. Many economists, including the bank’s own former economic research chief Jose Guerra, maintain that such developments may prove to be economically disastrous in the future; they threaten to diminish Venezuela’s ability to service its foreign debt and may scare away potential foreign investors.

However, according to Mark Weisbrot, co-director of the Washington-based Center for Economic and Policy Research, the removal of a mere $5 billion from Venezuela’s excessive reserves will do little to harm the nation’s economic stability or compromise its ability to service its remarkably small foreign debt. Nor will Chávez’s move undercut the institution’s authority. Weisbrot told COHA that “the idea that the central bank has to be independent of the government is an idea that a lot of economists like, but if you look at that carefully, there is no obvious justification for it.” Critics maintain that if a country allows any one branch of government, be it executive or legislative, to monitor the central bank, the elected officials could make misinformed and economically injurious decisions. But Weisbrot claims that this is a flawed line of reasoning: “Saying that you can’t trust the people to make the right decision is an anti-democracy argument.”

Chávez: Elected, but How Democratic?
Even though he is hardly the knave that the country’s middle class opposition has characterized him to be, when it comes to democracy Chávez cannot claim to be an unchallengeable apostle. While he was democratically elected, Chávez’s tendency to centralize power and minimize and trivialize the political opposition arrayed against him suggests that the president’s populist revolution is in danger of taking on a somewhat more authoritarian cast. In some cases his confrontational manner and slights of democratic principles have been disconcerting, though to be fair, the singular determination of the anti-Chávez middle class mobocracy to oust the president has at times instigated his unsavory behavior.

In December of last year, for example, citing concerns that many of Venezuela’s Supreme Court justices had demonstrated an unjustified bias against him, Chávez summarily added twelve friendly seats to its formerly 20-justice bench. The president has also placed more than one third of Venezuela’s regional governments and a significant number of administrative positions and development projects in the hands of loyal military officials. Latin American armed forces have a long and well deserved reputation of obstructing the development of democratic governance; the degree to which Venezuela’s army has infiltrated Chávez’s ranks and its integral role in many of his missions raises legitimate, albeit preliminary, concerns. Even though the army remains loyal to the Chávez vision, Latin American history does not convey the creedal belief that the military is a rock upon which democracy can build its church.

More controversial has been the government’s affront to the voice of the opposition in both the public and private spheres. The issue is undoubtedly multi-sided. Without question, the vast majority of Venezuela’s media is controlled by staunch opponents of the president, who at times have repeatedly crossed the line of journalistic integrity in the manner of a rabid crowd intent on defaming Chávez’s standing no matter at what price. Unfortunately, Chávez’s response to this full diapason assault has been arguably as lamentable. In March, the government granted itself the right to heavily fine and/or revoke the broadcasting licenses of programs that spread information vaguely considered to be “contrary to national security.” In addition, a law waiting for Chávez’s signature promises to apply harsh penalties for speech infringements, increasing the sentence for defamation to a full year of imprisonment and eliminating the presumption of innocence.

The personal sphere has been opened to Chávez’s probes as well. To “cause panic” by spreading “false information” via phone or email would carry a sentence of up to five years; and protestors caught banging pots and pans in the presence of a government official could be slapped with three months of jail time. Supporters of Chávez rightfully argue that the national media’s instinct to strike at the President’s jugular has placed him in a difficult situation. Nevertheless, it appears that in this case Chávez has lost his grace under fire; his readiness to compromise the right of free speech in order to protect his political image could eclipse his own good intentions. Chávez may have gone too far, yet it would be unreasonable to argue that he should resign himself to falling on the spear the opposition is readying for him.

Washington’s Senseless Hypocrisy
Washington has consistently sought to put pressure on Chávez, maintaining that his anti-democratic tendencies threaten Venezuela’s open society. At the June meeting of the Organization of American States in Fort Lauderdale, both President Bush and Secretary of State Condoleezza Rice employed high flying rhetoric as they backhandedly criticized Chávez, lamenting the spread of “false ideologies” in the region and the vulnerability of weak democracies. Roger Noriega, U.S. assistant secretary of state for Western Hemisphere affairs who recently announced his resignation, has been more direct, stating that Venezuela does “not paint a promising picture” and insinuating that Chávez had a hand in the overthrow of Bolivia’s President Carlos Mesa.

However, in Latin America, and Venezuela in particular, the U.S. can make no claim to the moral high ground. Washington’s policy line toward Venezuela is laden with hypocrisy and double speak. For starters, Washington has had no qualms about cozying up to other oil rich states, such as Saudi Arabia, whose governments are far more authoritarian than Chávez’s. What is more, Washington has proclaimed its commitment to democracy while actively supporting efforts to oust Venezuela’s democratically-elected president. U.S. agencies such as USAID and the execrable and stealthy National Endowment for Democracy have contributed millions of dollars to back grassroots and professional bodies in Venezuela, many of which are lethally opposed to Chávez. In fact, in the hours following Chávez’s brief overthrow in April of 2002, several leaders of such organizations, including Maria Corina Machado of the now widely recognized anti-Chávez organization Súmate, found themselves in the presidential palace and their signatures and national identification numbers on the decree that dissolved Venezuela’s Supreme Court, National Assembly and Constitution. Rather than garnering disfavor from the supposedly democratically-oriented Bush administration, the coup was embraced by Washington and Machado’s efforts were sufficient to secure her private meetings with both Rice and the president when she found herself in Washington.

Washington’s most recent tactics to isolate its Venezuelan adversary have been decidedly less covert. Legislation sponsored by Florida Republican Representative Connie Mack and recently passed by Congress will allow the U.S. broadcast time on Venezuelan television and radio networks to promote the “positive ideals of freedom, security, and prosperity.” Clearly, what resonates with the Bush administration is not whether Venezuela is ruled democratically or under authoritarianism, but how Washington can topple its popular leader and return the oil-rich nation to its back pocket.

At its current pace, U.S. policy stands to do just the opposite. Washington’s botched coup, thinly veiled espionage and empty rhetoric has done little to dampen Chávez’s soaring popularity. In fact, they have further isolated the U.S. from the region and have given Chávez more examples to cite as he expounds his anti-American litany to his adoring public. If Washington hopes to maintain any semblance of relevance in the region, it must abandon its underhanded and mal-intentioned efforts to “spread democracy” in Venezuela and elsewhere and learn to live with a Chávez whose democratic bona fides merit more praise than those of many of Bush’s political allies across the globe.

This analysis was prepared by COHA Research Fellow Sarah E. Schaffer and COHA Research Associate Teddy Chestnut.

August 13, 2005The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 223-4975, fax (202) 223-4979, or email [email protected].