The New Geopolitics of Energy
Those who believed that the Venezuelan opposition's gains in the September 2010 midterm elections would chasten President Hugo Chávez have seen their hopes dashed in the past six weeks. Since the end of November, Chávez and his allies -- Chavistas -- rammed through a series of laws that consolidate his control over everything from banks and local governments to the Internet and the National Assembly.
In the waning days of the Chavista-controlled National Assembly, the legislation came fast and furious, including a long-threatened law that forbids organizations and individuals receiving international financial support from defending Venezuelans' political rights and prohibits local organizations from hosting foreigners who express opinions perceived offensive to the government. Other bills effectively established a parallel state on a local scale by creating community-level structures that report directly to the president, and granted the state unlimited discretion over economic policy.
Chávez's new laws decimated the authority and fiscal capacity of local governments by creating a vertical, separate structure for overseeing and managing social programs. The laws bypass municipal governments' fiscal and political authority (established under Chávez's own 1999 constitution) by establishing a new "commune"-level government and setting up a "popular power" chain of command that answers only to the "revolutionary leadership" in Caracas. Recent banking laws have put banks under the government's thumb by officially declaring them public utilities and requiring them to either donate five percent of their profits to a social fund or risk seizure by the state. To add an exclamation mark to the end of the Chavista-dominated legislature, on December 17, 2010, Chávez had the outgoing National Assembly grant him the authority to rule by decree for 18 months. This "enabling law" will allow him to pass laws of his choice on social and economic policy and matters of national security.
Under Chávez's 11-year reign, Venezuela has become deeply politicized, its institutions and laws have been gutted, and its economy has turned into a welter of corruption and inefficiencies. This is not a socialist revolution so much as an anti-institutional revolution that could leave behind a lawless black hole large enough to threaten the entire region. The United States' five-year policy of carefully avoiding conflict with Chávez will be tested in the run-up to the 2012 Venezuelan presidential elections. At the same time, though, the Obama administration will need to avoid falling into the trap of serving the demands of the beleaguered and aggrieved Venezuelan opposition -- and thus playing into Chávez's hands. The vacuum left by Chávez's refusal to accept Obama's choice for U.S. ambassador to Venezuela, after the nominee raised concerns about corruption in the armed forces, makes this task all the more difficult.
Despite the country's negative economic growth, soaring inflation, food shortages, electrical blackouts, and the region's highest murder rate, Chávez has defied expectations. The nation's third consecutive year of double-digit inflation (expected to hit 30 percent in 2011), its three-year recession, and its widespread lawlessness can be traced back to the government's unpredictable economic policies and administrative incompetence, yet the president's popularity still hovers around 40 percent. Even though the opposition won last year's National Assembly elections, the president's United Socialist Party (PSUV) -- a broad coalition of factions and movements aligned with the government -- still received 48.2 percent of the vote.
Of course, much of the ongoing popular support is explained by the deeply discredited government that Chávez inherited when he took office in 1998 -- a corrupt, bloated political system crushed by the weight of declining oil prices. The opposition handed Chávez further ammunition in April 2002, when it was reported that he was asked to step down after the military fired on demonstrators. In the confusion, the man who was selected to assume power -- the head of the Venezuelan Chamber of Commerce, Pedro Carmona -- promptly dissolved the constitution, including the legislature and the Supreme Court, declared himself president, and appointed a group of opposition leaders to his cabinet. As protesters poured into the streets demanding Chávez's return, the military asked the ousted president to come back to restore order -- less than 48 hours after it had asked him to resign. Since then, the government has liberally used the term "coup plotter" to discredit any criticism or opponent, including human rights organizations and the media. It is a policy that has served Chávez well, both in Venezuela and abroad.
Later missteps by the opposition have contributed to its woes. In 2005, opposition parties boycotted the legislative elections, claiming that the system was too open to manipulation and coercion. That decision continues to haunt them. By giving the Chavistas near-complete control over the legislature, the opposition allowed Chávez to rubberstamp his efforts to remake the state before the 2012 presidential elections.
Chávez likes to denounce capitalism, but, in fact, he uses and bends the capitalist system to his so-called socialist goals, granting favorable terms to foreign companies -- including U.S. businesses -- that agree to his extortionist demands. In the hands of a more competent government, Chávez's policies could be sold as a coherent effort to make the country into a semi-elected socialist state. But after years of dependence on easy oil money, the reality is an amalgam of bluster, anti-American and antiglobalization zeitgeist, opportunism and plain old-fashioned patronage. Chávez's rule has resulted not in the expropriation of the means of production for the proletariat but rather the accommodation of capitalism insofar as it meets the fiscal needs of a populist revolution seeking to destroy all the institutions that came before it. Unfortunately, the current government has neither the capacity nor the vision to reorganize them for broad popular benefit.
By the end of 2010, the Venezuelan government had nationalized more than 400 industries and properties ranging from communications and steel to electricity and glassmaking. The bulk of these takeovers came in 2009, when the Chávez government brought more than 140 properties under state control. Economic inefficiencies have mounted with each nationalization. What guides the Venezuelan government's nationalization decisions is not economic, or even ideological, logic but the political need to cover up and obscure policy mistakes. The government cloaks its nationalizations with rank class hatred -- citing hoarding or corruption -- but many decisions are personally motivated. When food failed to make it to market in 2010, the president blamed businesses and subsequently nationalized food factories and warehouses. Later, he ordered the nationalization of the holdings of the Spanish agribusiness Agroislena after a Spanish judge requested the extradition of Arturo Cubillas, an alleged supporter of the Spanish Basque terrorist group ETA who was working in Venezuela's Ministry of Agriculture.
Although popular as a rallying point against accused bourgeois hoarders, the lurching policies of the government have failed to address the fundamental economic flaws in the illogical system Chávez has created. The overall effect of expanding control of the state over the economy has been the growing disjuncture and inefficiency in access to goods and services. Market signals have been replaced by government bureaucracy and, when that fails, revenge. Neither is a prescription for smooth market efficiency.
A large part of the Chávez government's modus operandi has been to undermine the international normative structure for human rights and the defense of democracy. In the last 11 years, Chávez and his government have challenged the crown jewel of the hemispheric human rights system -- the Inter-American Commission for Human Rights. This is the organization that first held governments responsible for disappearances in the 1970s and fought to roll back the amnesties military officers granted themselves before stepping down in the 1980s. The Chávez administration has met every Venezuela-related statement by the commission with disdain and has dismissed the body as an instrument of the U.S. government, despite the fact that it has bucked the interest and policy of the United States numerous times -- such as when it campaigned against former Peruvian President Alberto Fujimori and criticized human rights conditions in Honduras after the June 2009 coup.
Last November, the Venezuelan government announced plans to establish a separate organization dedicated to human rights to be affiliated with the Union of South American Nations. It would be easy to dismiss the idea as just another proposal for a Venezuela-sponsored union that would in all likelihood fail to materialize -- a victim of the anti-institutional bent of the Chavistas. But the effect of the proposal is to undermine the legitimacy of existing institutions while failing to create viable alternatives.
The Chávez government's deconstruction of the state has also affected the police, armed forces, and national guard. The politicization of the police forces and army has led to declining professionalism and a corresponding spike in corruption and violent crime. Murders per capita have climbed from a rate of 49 per 100,000 citizens in 2006 to 75 per 100,000 in 2010, placing Venezuela higher than even its neighbor Colombia, which is engaged in a civil war. To buy the military's loyalty, Chávez has let it carve up the country into fiefdoms. As a result, the military has grown more involved in narcotics trafficking, either directly or by turning a blind eye to such activity. Venezuela is now a major overflight route for drugs bound from Colombia to West Africa and eventually Europe. It has done this by increasingly allying with the Colombian guerrilla organization and cocaine trafficker FARC (the Revolutionary Armed Forces of Colombia).
The conventional wisdom in Washington and European capitals has been to leave Chávez alone. The logic was that as oil prices fell and his economic policies began to unravel, Chávez would destroy himself. Unfortunately, that simple policy is not working. U.S. diplomatic efforts must instead rally other countries to mobilize and support specific benchmarks relating to the cooperation of governments around basic international norms, such as renouncing support for nonstate or terrorist groups, recognizing procedures for property claims, and institutionalizing respect for human rights and internationally accepted standards of electoral integrity.
One way to start would be to establish a multinational commission that would work with the Colombian and Venezuelan governments to conduct joint investigations into collaboration between the Venezuelan government and FARC and to share information. Fortunately, the diplomatic foundation for this policy was already established with Colombian President Juan Manuel Santos' trip to Caracas in November 2010, which secured Chávez's promise to investigate the charges.
In the economic realm, countries and multilateral institutions should work with Venezuela to ensure that companies and shareholders are adequately compensated after the inevitable flurry of nationalizations that will occur in the coming months. Use of international arbitration boards will go a long way toward reducing opportunities for extortion and protecting Venezuelan consumers from erratic seizures and the resulting inefficiencies.
Finally, there is the issue of democracy and human rights. The future of democracy in Venezuela rests on reaffirming the integrity of electoral institutions. To this end, regional governments and multilateral institutions must work with the Venezuelan government to allow comprehensive election monitoring in the run-up to the 2012 presidential election. This would generate a public, multilateral coalition to defend democracy and human rights. Failing to do so, or simply hoping for the long-awaited collapse of the current government, only extends the time Chávez and his allies have to turn their troubled country into a failed state.