Venezuela: The True Scope of Chávez’s Legacy

By Andrés Serbin and Andrei Serbin Pont*

Hugo Chávez / Photo credit: ¡Que comunismo! / Foter / CC BY-NC-SA

Hugo Chávez / Photo credit: ¡Que comunismo! / Foter / CC BY-NC-SA

Chávez’s legacy for Venezuela goes well beyond the Bolivarian government he left in Nicolás Maduro’s hands.  Three conflicts overshadow the country’s future and contribute to many uncertainties:

  • The first, and most urgent, is the standoff between the two main factions of the ruling PSUV over how to overcome the current economic crisis, characterized by the IMF as “difficult and probably unsustainable.”  The pragmatists focus on making currency controls more flexible, and the ideologues are oriented toward increasing state control over the economy.
  • The internal party conflict between President Maduro and his supporters, committed to building the “socialismo del siglo XXI,” on the one hand, and the pragmatic sector of the governmental party (pragmatic in the sense of ensuring their businesses operate without interruption) led by the President of the General Assembly, former army officer Diosdado Cabello, with the support of high ranking military and businessmen who benefited from the “revolutionary” process through legal and illegal business.
  • The conflict between the PSUV, wielding the power of the government, and the opposition, which it accuses of being an “enemy of the revolution” linked to the “external enemies” (basically the United States) who want to derail the revolutionary process.

The dire state of the economy is aggravating each of these conflicts.  By the end of September, according to government data, inflation rates hit 4.4 percent per month, and rose to 38.7 percent in 2013 so far.  The opposition estimates an annual inflation rate of 49.4 percent—the highest since 1997.  According to the 2012 UN Economic Commission for Latin America and the Caribbean (ECLAC) report, an increasing number of Venezuelans are living under the poverty line – with a 29.9 percent increase in the poverty rate last year – with income no longer enough to fulfill basic needs.  Shortages of food and other necessities are severe; the depreciation of the Bolívar has accelerated in the currency black market, and the Central Bank is printing paper currency in an attempt to cope with the financial deficit.  Within this context, the struggle between the pragmatic and the ideological fronts of the PSUV only contributes to the chaos.

Caracas’s international relations are also a factor in the internal tensions and are fueling concerns within the armed forces, according to NGOs and others with good contacts in the military.  The economic crisis has affected the government’s ability to continue its “petro diplomacy” – diminishing its influence – and the opposition has continued persistent accusations of inadequate management of the relationship with Guyana and the claim over the Essequibo, contested territory along their common border.  In addition, a recent incident involving a maritime exploration ship of Panamanian flag with a U.S. crew detained by the Venezuelan Navy in waters under dispute with Guyana aggravated the current national and international political scenario.  The government usually resorts to nationalist appeals, but criticism of its handling of these problems is likely to grow.

The core issue in all of these situations continues to be the potential scenario of a social outbreak driven by the shortages, rising inflation, the broad sense of insecurity, and perceptions of blatant corruption in government.  These frustrations appear to cut across all sectors of Venezuelan society regardless of ideological identity.  Given the historical reluctance of the armed forces to intervene (particularly since the experience of the “Caracazo” of 1989), most observers still wonder when and if a social explosion will move them to action.  The economic and social crises, the internal tensions in the government, and the polarization with the opposition, along with the possibilities of an international incident, may add up to enough to move the military, perhaps with the support of several state governors, to act, but determining that breaking point – the Venezuela analyst’s greatest challenge – remains elusive.

* Andrés Serbin and Andrei Serbin Pontare members of the analysis team of the Coordinadora Regional de Investigaciones Económicas y Sociales (CRIES), a Latin-American think tank.

Argentina’s Mid-term Elections: The Beginning of the End for Cristina?

By Santiago Anria and Federico Fuchs *

Cristina Fernández mural Photo credit: CateIncBA / Foter / CC BY-NC-ND

Cristina Fernández mural Photo credit: CateIncBA / Foter / CC BY-NC-ND

Rising inflation, loss of confidence by the private sector, and lack of access to international credit markets make victory in Argentina’s mid-term elections on October 27 especially important for President Cristina Fernández – or else she will face the prospect of two years as a lame duck.  Her governing Front for Victory (FPV) faction of the Justicialist Party (PJ) seeks to protect its legislative majority.  (Half the seats of the lower chamber and a third of those in the upper chamber are at stake.)  Based on the results of the Open, Simultaneous and Obligatory Primaries (PASO) held on August 11, the FPV appears likely to lose some seats but still maintain a slight majority, considering that a number of the seats in dispute in the lower chamber correspond to districts in which it fared poorly in the 2009 elections.  Before her unexpected surgery last week, Fernández had been central to the electoral campaign, hand-picking and endorsing Lomas de Zamora Mayor Martín Insaurralde as the first deputy on the FPV’s list.  According to some surveys, previous adjustments to her communications strategy increased her approval ratings, and with her recovery from surgery expected to take a month, there is speculation that the FPV may win some additional “sympathy” votes.

The PASO primaries showed that the FPV lost in key electoral districts, including the city of Buenos Aires, and the provinces of Buenos Aires, Córdoba and Mendoza, but that it continues to be the only political force with national reach.  The opposition remains fragmented, but Sergio Massa, a former government ally and current mayor of Tigre (elected on the FPV ticket), has emerged as the key opponent in Buenos Aires province and as a likely presidential candidate for the 2015 elections.  He may challenge Daniel Scioli, who is the current governor of Buenos Aires and is, at least until now, backed by Fernández as her potential successor despite resistance from some factions within the FPV).  Massa’s Frente Renovador still has limited territorial reach, but he enjoys the support of the mainstream media, a branch of the General Confederation of Labor (CGT), the Church and, perhaps most importantly, a prominent group of mayors in Buenos Aires province.  He is trying to capture a more centrist vote, promising the “end of confrontational politics” and focusing on what he claims are the “real issues” affecting Argentines – corruption, citizen security and crime prevention, and inflation.

The results of the upcoming elections will define the options for the Fernández administration.  If the FPV fails to keep a solid majority in Congress, the issue of constitutional reform that would allow for reelection will be off the table, and Fernández will not be able to run for a third term.  In policy terms, negative results will increase pressure for economic adjustment and pro-business policies. Fernández and her predecessor, deceased husband Néstor Kirchner, have both proven their capacity to revamp their administrations after electoral defeat by defying such pressures and raising the stakes. But with defeat in the polls, and with a diminished force in Congress, it will be harder for her to maintain party discipline as the prospects for 2015 grow bleaker.  A lot also depends on how the opposition fares: a clear winner among them (most likely Massa) will become a clear challenger for 2015 and probably put even greater limits on any government strategy, whereas a still atomized opposition may give Fernández more leeway. The task ahead for the FPV will be to define and support a presidential candidate that can continue the Kirchnerista project. Performing well in the congressional elections will give Fernández more room to define this, or to at least block non-desired candidates.  We may be witnessing the beginning of the end for Cristina, but it is not clear whether any of the opposition candidates can force her to steer the Kirchnerista project in a new direction.  Not even the most plausible contender in the opposition (Massa) or the most likely successor in the FPV (Scioli) seems to have any meaningful change to offer. If both of them represent anything, it is Peronism’s ability to adapt in adverse times to stay in power. But that is nothing new in the history of Peronism.

* Santiago Anria and Federico Fuchs are graduate students in the Department of Political Science at the University of North Carolina at Chapel Hill.

ALBA’s Future: Continuity or Break Down?

By Marcela Torres

ALBA Emblem | public domain

ALBA Emblem | public domain

The death of Hugo Chávez last March and the increasingly severe economic dislocations inside Venezuela have raised serious questions about the sustainability of the Bolivarian Alliance for the Peoples of the Americas (or ALBA).  Born out of an agreement between the Venezuelan and Cuban governments in 2004, the alliance was intended as a response to the U.S. goal of a Free Trade Area of the Americas (FTAA), as well as a vehicle for Chávez to project his Bolivarian vision for Latin American solidarity around a socialist project.  The regional bloc won its first symbolic battle at the Fourth Summit of the Americas in 2005, where Argentina, Brazil, Uruguay, and Paraguay definitively halted negotiations led by U.S. allies to create a single hemispheric free trade area (excluding Cuba, of course).  Over time, ALBA and its oil-based extension, Petrocaribe, have had a significant impact on economies in the region, providing crucial underpinning for presidents who signed on to Chávez’s vision for ideological or pragmatic reasons.  Among the greatest beneficiaries have been the Castro government in Cuba and the Ortega government in Nicaragua, which have received petroleum in exchange for food, in the case of Nicaragua, and doctors and teachers, in the case of Cuba. Ecuador and Bolivia, along with several states in the greater Caribbean, have also become key players in the ALBA network.

Venezuela’s leadership of ALBA, frequently described as “petro diplomacy,” has repeatedly come under fire from the country’s political opposition and from government critics in other ALBA-friendly nations.  The critiques in Venezuela rarely acknowledge the degree to which petro diplomacy has been a recurring feature of that country’s foreign policy, most notably during the governments of Carlos Andrés Pérez in the 1970s and 1980s.  Critics inside Venezuela and beyond frequently accused Chávez of building dependent clientelistic networks with countries desperate for energy resources. However, ALBA activities have transcended ideological divides, a fact demonstrated by Misión Milagro in Colombia, where Cuban doctors indirectly supported by Venezuela provide medical services in conflict zones.  If Chavez’s oil and charisma initially defined ALBA’s possibilities, the alliance has also fostered economic ties and investments among member countries, independent from Venezuela.

Though the election of Nicolás Maduro as Chávez’s successor might appear to guarantee political continuity, lacking Chávez’s charisma, Maduro might not be able to continue Chávez’s level of oil-fueled investment in ALBA.  Public spending in Venezuela continues to increase dramatically, with the fiscal deficit at 9-12 percent, inflation exceeding 40 percent, and the scarcity of dollars contributing to shortages of basic consumer goods.  To sustain its financial backing for ALBA, Maduro will have to stabilize the economy at home lest he lose the  popular legitimacy — no simple challenge.  Following the Twelfth Presidential Summit of ALBA in July, the presidents of Ecuador, Bolivia and Nicaragua joined Maduro in reaffirming their shared commitment to a socialist project in the region and a desire to maintain the international exchanges initiated by Chávez, suggesting that the alliance will not disappear at least in rhetoric in the medium term.  It is possible, however, that Maduro’s leadership will be challenged.  After the airplane in which Bolivian President Evo Morales was traveling was not allowed to land in France and Portugal this summer,  he proposed creating an ALBA army and convening another anti-imperialist summit.  Recently re-elected Rafael Correa of Ecuador has also hinted he might want to lead ALBA.  Without Venezuelan oil and sweeteners like Petrocaribe, it’s hard to see how ALBA will amount to more than a platform for personalistic agendas.

 

Argentina Foreign Policy – National Pride or Domestic Consumption?

Photo by Jonathan Huston

The stridency of Argentina’s foreign policy over the past two years suggests an effort by President Cristina Fernández de Kirchner to capitalize on elements of authentic nationalism and harness them into a durable political tool at home.  Buenos Aires has dialed up the pressure on the Falklands-Malvinas dispute with the United Kingdom by seeking regional support and calling for a boycott.  The nationalization of the holdings of Spain-based oil giant Repsol has also soured relations with several European states.  Recently, the Argentine government has assailed the impounding of an historical frigate, the Libertad, in Ghana by agents of an investment fund that owns defaulted Argentine sovereign debt, labeling them “vultures.”  Argentina has ramped up criticism of U.S. restrictions on its agricultural exports, as the two countries trade accusations in the World Trade Organization.

The conventional wisdom in Washington has been that President Fernández de Kirchner is picking fights abroad to distract attention from economic and political problems at home.  Following its record $100 billion default in 2001, Argentina remains locked out of most international financial markets despite deals to discount and reschedule much of that debt.  Inflation is high and capital flight is so serious that the government has imposed strict controls on sending dollars out of the country – a measure unpopular with the middle and upper classes.  These problems have taken a toll on the president’s popularity, as have intimations that she might change the Constitution to permit her to run for a third term.

The view from Washington misses a couple key points.  Many of these nationalist moves have been wildly popular – above all the Repsol decision.  To attribute them to President Fernández de Kirchner alone ignores deep feelings in Argentina that the country deserves greater respect than it gets, as well as the fact that since the peso crisis, rejection of the sort of “carnal relations” that President Carlos Menem had with Washington (in his own words) in the 1990s has grown strong.  The current foreign policy orientation harkens to a much longer tradition, from Peronism and beyond.  There is little chance that issues such as the Malvinas or the Libertad are going to make Argentines forget about everyday economic challenges.  Rather, they are a manifestation of an Argentine narrative in which the country is denied its rightful place in international politics and trade – and in which it is being held unfairly in the penalty box for the peso crisis.  The United States support for the billionaire investors and hedge fund managers who bought deeply discounted bonds but are demanding full payment, and Washington’s subsequent vote against loans Buenos Aires needs from international financial institutions, are playing into nationalist themes.  Fernández de Kirchner’s foreign policy rhetoric taps into resentment; she is hardly responsible for creating it.

Brazil’s Protest: If You Get QE3, We Get Tariffs

Photo by “SqueakyMarmot” | Flickr | Creative Commons

For two years Brazilian voices have complained that U.S. policies of near-zero interest rates and “quantitative easing” have been damaging its economy.  Lax monetary policies in the U.S. and Japan are blamed for the high valuation of the Brazilian real, which further suppresses Brazil’s  languishing manufacturing sector.  Tensions escalated following the September 2012 announcement of the U.S. Federal Reserve’s third round of quantitative easing.  Now the debate has spilled over into discussions about Brazilian restrictions on trade.  As Finance Minister Guido Mantega warns of a “currency exchange war,” Brazil is increasing tariffs on U.S. goods and foresees the imposition of taxes on inflows of foreign capital, which further inflate the Real.  Writing in Folha de São Paulo, Luiz Carlos Bresser-Pereira argues that Brazil is acting in self-defense.  The tariffs Brazil is contemplating are by his account not protectionist but simply an effort to compensate for the unfair advantage that the U.S. seeks to achieve through its monetary policy.

The tension is spreading beyond Brazil, as currency appreciation is portrayed as a drag on manufacturing in much of South America.   In an interview with CNN, Chilean President Sebastián Piñera criticized “QE3,” asserting that “printing money” would not solve U.S. economic woes.  So far, Andean countries are responding by purchasing dollars and cautiously reducing interest rates, but the Brazilians, in particular, present protectionist measures as counter-cyclical tools of their own, necessitated by American attempts to “drive down” the dollar.

The Brazilian and South American claims may be overdrawn somewhat; many experts believe that overvaluation is primarily a consequence of Chinese demand for South American commodities and the decision by most Latin American countries to maintain high interest rates in order to forestall inflation.  But U.S. policies meant to boost job growth are indeed having unintended consequences in the hemisphere.  There has been little thought in the United States of the external implications of Fed policy—beyond a belief that a reinvigorated U.S. economy would be good news for everyone.  Brazil has been the first, and most vocal, challenger of a stance that always frowns on tariffs while presenting monetary policy as a purely domestic matter.  It is a bit much for Brazilians to expect that U.S. monetary policy should be crafted with an eye to its impact on the region, particularly when conventional fiscal policy measures are thwarted by Congressional dysfunction, but Washington should not be surprised when efforts to tamp down its currency – not unlike Chinese policies that Washington condemns  – are seen abroad as aggressive threats to competition.