Venezuela’s Bolivarian Revolution

Julia Buxton is senior research fellow in the Department of Peace Studies at the University of Bradford.

 

 

Under President Hugo Chávez, Venezuela has been catapulted on to the international stage, where there has been a sceptical and jaundiced response to his administration and policy initiatives from Western governments, and outright hostility from the United States. The Bush administration has sought to contain the regional influence of Chávez’s left-of-centre government and its nationalist, anti-imperialist, anti-neo-liberal ideals. Chávez has been described by senior US officials as an “authoritarian”, a “demagogue”, and a “supporter of international terrorism”.

 

Chávez has responded by building defensive alliances with new foreign partners, and by vigorously repaying his critics in kind. On his television programme Alo Presidente, he called the US president a “donkey”, and following President Bush on to the podium at a United Nations meeting in 2007, he said he could smell sulphur in the room.

 

Besides the tensions in US–Venezuelan relations, Chávez’s radical anti-poverty initiatives, statist economic-policy orientation and recasting of international relations have been derided by domestic and external critics as fiscally irresponsible, antiquated and damaging to the interests of Venezuela and the country’s poor—the very constituency that Chávez claims to represent.

 

The reality of the “revolutionary” process in Venezuela is more complex. Moderation and continuity with the pre-Chávez regime are characteristics of the Venezuelan government, but these are downplayed in sensationalist accounts of Chávez’s political goals. So is Chávez’s fragility. The Venezuelan president is far more constrained by his grassroots support-base and more responsive to democratic norms than the “authoritarian/demagogue” critique implies. Networks of representation and participation are more embedded and comprehensive than the populist account suggests, and rather than a sweeping top-down model of control, bottom-up pressures drive the administration.

 

While there are legitimate concerns as to fiscal management, criticisms of the Chávez government’s economic strategies are overstated. The basic ambitions of the government are to craft a welfare state, diversify trading partners and maximise the benefits accruing to Venezuela from its oil wealth. This is a contentious agenda in the specific context of the Americas, where the North’s interests and laissez-faire approach to social policy have historically dominated the South.

 

Chávez’s regional influence has been grossly exaggerated. Venezuela is part of a broader trend of support for left, centre-left and social-movement-based organisations. But Venezuela is not at the helm of this shift, which is driven and conditioned by country-specific factors. Venezuela’s “Bolivarian Revolution” cannot be transplanted to other countries, and fears of a “domino effect” are unfounded.

 

Lastly, despite the aggressive rhetoric, US–Venezuelan commercial relations have deepened under Chávez, and the two countries remain locked in economic dependency. Venezuela continues to supply the United States with a strategically important 12–15 per cent of its oil imports, the United States remains the primary market for Venezuela’s heavy crude petroleum mix, and all of Venezuela’s refining facilities are on US territory. 

Origins 

The origins of the Chávez government lie in popular revulsion against the Christian Democratic and Social Democratic parties, COPEI and Accion Democratica (AD), which dominated Venezuelan politics from 1958 onwards. These so-called Punto Fijo parties (after the political pact that framed Venezuela’s transition to democracy in 1958) presided over an economic and political crisis which became acute in the 1980s and catastrophic in the 1990s. Despite an increasingly severe legitimacy problem, the Punto Fijo system prevailed through the use of electoral fraud, occasional recourse to state repression, and AD and COPEI collusion to block party-political competitors.

 

Powerful vested interests preserved the political model. The Roman Catholic Church, the main trade union confederation, representatives of the business sector, and the armed forces were party to the Punto Fijo pact, along with AD and COPEI. By agreeing to support the 1958 transition, these groups were guaranteed state protection of their interests and access to privileges financed by Venezuela’s oil-export revenues. Not to be a member of AD, COPEI or any of their business or union affiliates was to be outside the system of political influence and oil-rent distribution. The clientelist system worked well when the oil economy was booming, as in the 1970s, but when the economy declined, the circle of beneficiaries dwindled, leaving only a powerful elite rump with an interest in preserving a corrupt model of limited democracy.

 

By 1998, popular antagonism towards the Puntofijistas was profound and the electorate turned to a political outsider, former lieutenant-colonel Hugo Chávez Frías, and to his Patriotic Pole alliance in presidential, congressional and regional elections held in December that year. The success of the chavistas marked the first time since 1958 that the government in Venezuela was not controlled by AD or COPEI. The Punto Fijo legacy to the incoming and inexperienced Chávez administration was one of mass poverty (with over 67 per cent of the population classified as living in poverty in 1998); searing inequalities in land ownership, welfare and socio-economic opportunity; institutional paralysis; politicisation of the state; crime and insecurity; a culture of corruption and impunity; and widespread anti-party sentiment. 

 

Bolivarianism

Chávez’s appeal was premised on three key factors. First, his promise of a “Bolivarian Revolution” that would sweep away the Punto Fijo state and allow a new, Fifth Republic to be born. The term “Bolivarianism” was derived from Simón Bolívar, the nineteenth-century liberator of the Andean region of South America from Spanish colonial rule. Bolívar was a national hero in Venezuela, and by tapping into his historical legacy Chávez mobilised national pride and a sense of national destiny that he claimed had been perverted by the Puntofijistas.

 

In the chavista narrative, the potential of the Venezuelan nation had been squandered by the Punto Fijo “oligarchy”. The aim of the chavistas was to reclaim Bolívar’s heritage and reconnect government to the sovereign people—el pueblo. This idea of direct democracy galvanised popular support, particularly after decades of political control by the AD and COPEI leadership. Central to the Bolivarian proposal was a commitment to constitutional change. Replacing the constitution of 1961 was seen as essential for sweeping change to the country’s institutions and for the deepening of democracy and the rooting out of corruption. It was a widely popular platform amid national frustration at AD and COPEI’s failure to modernise the political system.

 

Along with the commitment to participatory democracy, the Bolivarian Revolution included a social agenda that would provide justice for all through state provision of welfare, cultural, sporting and housing opportunities. Priority would be given to those living in extreme poverty. For the chavistas, participatory democracy based on routine citizen engagement in community politics would be possible only if there was investment in social capital; the political, social and economic aspects of the revolution were interlinked.

 

On the economic front, the chavistas stressed the need to strengthen the international oil price and improve the benefits accruing to Venezuela from its national oil industry. Diversification was sought away from dependence on oil-export revenues, with the chavistas looking to improve non-oil revenue streams through increased income and corporate taxes. Stress was placed on enhancing small and medium-sized enterprises and the co-operative movement, in order to raise employment and generate food sovereignty. The ambition was to break down the oligopolistic structure of the Venezuelan economy, which concentrated agricultural and industrial wealth in the hands of a small elite. Another key goal was the integration of Venezuela’s topographically diverse national territory, with the chavistas promising substantial investment in infrastructure, transport, and national energy and river networks.

 

A final crucial aspect of the Bolivarian Revolution related to foreign policy. The chavistas proposed to build a multipolar world order based on blocks of power that would dilute the unipolar dominance of the United States. Regional integration with other South American countries was a key aim, in line with Bolívar’s vision of a continent united against the might of the colossus to the north. There was stress on diversifying Venezuela’s commercial dependence on the United States, on strengthening ties with other oil-producing states, and on democratising multinational institutions such as the United Nations and the International Monetary Fund (IMF). This vision was underpinned by a commitment to the principle of the sovereignty and equality of nation-states. The Bolivarian proposal was an ambitious wish-list that few expected the government would be in a position to implement. 

 

Outsider Status

The second factor in Chávez’s popularity was his status as a political outsider with no ties to the Punto Fijo system and as a respected “strong man” who would not compromise on reform. Chávez had initially come to prominence through leading a failed coup in February 1992. His willingness to take action against an unpopular and corrupt AD government and to accept responsibility for the collapse of the coup struck a deep chord in Venezuela, where the political elite never accepted culpability for policy failure and always closed ranks to defend its interests. Chávez was imprisoned, and on his release formed the “Fifth Republican Movement” to contest power democratically. Members of the movement and their alliance partners in the Patriotic Pole were, like Chávez, all political outsiders with no ties to AD or COPEI. Chávez’s status as an outsider was reinforced by his lower-middle-class background and his mixed-race ethnicity. He was the personification of political change in a country that had historically been dominated by a white, wealthy elite. He tapped directly into the exclusion felt by (typically black and indigenous) poor people, and through his use of colloquial Spanish formed a powerful connection with those who had been politically and economically marginalised.

 

Control of Oil

The third important factor bolstering support for Chávez was his strident opposition to the part-privatisation of the national oil company, Petroleos de Venezuela (PDVSA). This had progressed during the so-called apertura or opening in the 1990s. It was opposed by the chavistas on a number of grounds. They criticised it as illegal, saying it contravened nationalisation legislation from the 1970s and a constitutional provision that reserved majority stakes in oil ventures to the PDVSA.

 

Contracts awarded during the apertura were seen to benefit disproportionately private-sector operators, at the expense of Venezuela’s national interest. Taxes and royalties on exploration and production activities were charged at a minimal rate and companies were given a guaranteed price for each barrel they pumped and sold back to PDVSA. When the price per barrel collapsed to under $9 in 1998, PDVSA was producing oil at a loss, some of the contracts having been fixed at over $20 per barrel. The information-technology division of PDVSA, one of the world’s leading oil companies, was sold to the US defence contractor SAIC for a mere $1,000.

 

The apertura was seen as a pillaging of Venezuela’s resources by foreign private companies, working in collaboration with senior PDVSA officials, including PDVSA president Luis Giusti. It was not just the apertura that was rejected by the chavistas, but the entire direction of oil policy under Giusti. During the 1990s, Venezuela became a notorious quota buster within the Organisation of Petroleum Exporting Countries (OPEC), a strategy that depreciated prices. This, combined with PDVSA’s strategy of maximising output instead of conserving resource levels, was seen to devalue Venezuela’s wealth and development potential.

 

Chávez’s hostility to the privatisation of PDVSA fed into a broader critique of neo-liberalism, but there was no hint at first of the radical anti-poverty agenda that was to emerge. Nor did Chávez engage in the firebrand oratory that came to characterise his criticism of the United States, the IMF and the neo-liberal policy agenda. On the contrary, he advocated a moderate “Third Way” model of socialism, and cited British prime minister Tony Blair as an influence. Despite claims by critics that Chávez intended to “Cubanise” Venezuela and impose a communist model, the principal influences over the incoming government were the legacies of Puntofijismo and Bolivarianism. There was certainly no dogmatic political programme and Chávez was a remarkably eclectic thinker, whose ideas were loose and subject to the waxing and waning of his interests at a given point in time. Chávez summed up Bolivarianism, his chief ideological reference point, in the following terms: “The fight for justice, the fight for equality and the fight for liberty, some call ‘socialism’, others, ‘Christianity’; we call it ‘Bolivarianism’.” 

Goals 

The goals of the Chávez government shifted dramatically over the course of Chávez’s tenure. The administration became progressively more radical, its ambitions more expansive and controversial. Having started by advocating a Blairite model in 1998, by 2005 Chávez was proposing to create “twenty-first-century socialism” in Venezuela. Three factors were crucial in catalysing this transformation: the actions of the domestic opposition; US foreign policy towards Venezuela; and the rise in the international price of oil.

 

The Domestic Opposition

When the Chávez administration took power in February 1999, its primary focus was constitutional change. Despite the government’s commitment to addressing inequality, there was only one social-policy initiative of note. This was the so-called “Plan Bolívar”, a programme of infrastructure renewal administered by the armed forces. With the price of Venezuelan oil at less than $9 per barrel, the administration had limited room for fiscal manoeuvre. In economic policy, there was continuity with the centrist course of Chávez’s predecessor, Rafael Caldera, and some of the Caldera finance team were retained. There were no substantive foreign-policy initiatives, and relations with the Clinton administration in the United States were amicable.

 

The process of constitutional change, which was supported by the electorate in a series of elections and referendums convened in 1999 and 2000, confronted the interests of the Puntofijistas. Legislation introduced in line with the new constitutional provisions ended state subsidies for religious education. Measures were introduced to redistribute land, overhaul the trade union structure, lay the basis for a rigorous new income tax regime and, under the 2001 hydrocarbons law, reverse the apertura process. The new constitution abolished the Punto Fijo institutional arrangements and established new organs of state and citizen power, including the right to hold recall referendums on all elected officials.

 

These measures generated immediate and intense opposition from those interests that had been protected by the Punto Fijo state. But it was difficult for them to defend their position. Early efforts to penetrate the Chávez government failed. Leading business groups, for example, proposed to Chávez their preferred candidate for economics minister. They were rebuffed. Moreover, AD and COPEI—for the first time cast in the role of opposition parties—were crushed as political forces in the 1998 elections. They were not positioned to challenge the government’s agenda from within the mainstream political framework.

 

This had two important consequences. It shifted leadership of the emerging anti-Chávez forces to trade unions affiliated with AD and COPEI, to the business lobby, and to the private media groups. These substituted for the weak and demoralised political parties, but problematically, and linking in with the second consequence, this took protest against the Chávez government out of the institutional sphere of Congress and on to the streets. Here the anti-Chávez movement became reliant on destabilising protests, tax-refusal campaigns, and strike action. In April 2002, there was a coup attempt against Chávez which briefly brought to power Pedro Carmona, president of the business organisation, Fedecamaras. Carmona dismissed all democratically elected officials, overturned the Chávez government’s legislative initiatives, and dissolved the new institutions established by the 1999 Bolivarian constitution.

 

The coup collapsed after two days amid massive pro-Chávez demonstrations, but the opposition persisted in its efforts to unseat Chávez, convening an economically damaging lockout towards the end of 2002 that led to shortages over the Christmas period. The lockout extended to the national oil company PDVSA, where the freezing of drilling, pumping and distribution by senior PDVSA officials angered at the new petroleum policy forced the company to default on its contracts and led to oil-export revenue losses in the region of $19 billion. After the national lockout disintegrated, the eclectic opposition, grouped under the umbrella body “Democratic Co-ordinating Committee”, turned in 2004 to the recall referendum mechanism introduced in 1999 to try and remove Chávez in a constitutional manner. This failed, with 59.3 per cent of voters backing Chávez to continue in office. This defeat prefigured another serious setback for the increasingly fractious and frustrated opposition in October 2004, when the chavistas won control of 21 of the country’s 23 regional governorships and 260 of the 335 municipalities.

 

The opposition’s actions transformed the Chávez government’s policy agenda and organisational machinery. The constant protests forced the attention of the government towards the need to consolidate support among its core constituency—the poor. As Venezuela became more polarised the chavistas, and Chávez in particular, relied on inflammatory rhetoric to cement ties with the poor and to discredit the opposition—the old elite and their (typically) middle-class supporters—whom Chávez referred to as escualidos (the squalid ones) and “oligarchs”.

 

Beyond the rhetoric, the government moved to introduce welfare and economic-policy initiatives that favoured the poor, furthering its Bolivarian revolutionary agenda. These included the “Missions”, a package of social-welfare programmes in the areas of education, health, food provision and employment training. For example, Barrio Adentro, the health mission, was a programme of community-based primary and preventative care delivered by twelve thousand Cuban medics through clinics located in the slums or barrios. The programme provided health care to eighteen million people (69 per cent of the population) not covered by the limited network of public provision and unable to afford private health care. Mission Mercal was a programme of subsidised food provision again targeted at the poor. It was intended to improve health and nutrition standards. Covering thirteen million people, Mercal linked to a wider project to provide free meals to children to boost attendance and learning in schools—two thousand of which were built by the government under one of its education missions. The infrastructure and framework for many of the Missions evolved out of government efforts to minimise the impact of the opposition protests. Mercal, for example, emerged from informal food-distribution chains that were established during the paralysing lockouts of 2002.

 

In organisational terms, the opposition’s actions led the chavistas to turn increasingly to their grassroots supporters, who were relied upon to articulate community welfare needs in line with the Missions programmes, to organise counter-protests, and to mobilise voters in the constant cycle of elections and referendums. Community councils became an important organisational force, providing a mechanism for the delivery of the Missions and enabling the government to bypass AD and COPEI loyalists in ministries that blocked its policy initiatives.

 

By contrast with the vibrancy of community-level organisations, the Patriotic Pole and Chávez’s own Fifth Republican Movement became peripheral to the revolutionary process. The chavista-allied political parties dominated elective office at all levels, but the locus of activity was politics outside the institutions. Nonetheless, chavista control of elective institutions, a default situation created by the opposition’s refusal to participate in elections, fed opposition claims of “dictatorship”. But, again, it is the opposition’s actions which emerge as the driver of chavista hegemony. The 2002 coup attempt provided a pretext for the government to purge disloyal elements in the armed forces. Similarly with the lockout at PDVSA: more than seventeen thousand PDVSA employees—mainly at senior managerial level—were fired in the aftermath of the lockout, enabling the government to consolidate control of the national petroleum company. As recalcitrant opponents were swept out of the military, judiciary and other state institutions, a new, young generation of activists and chavistas was brought in to replace them.

 

Chávez also tackled opponents in the private sector. The participation of Fedecamaras in anti-government protests and the coup attempt convinced Chávez that business groups could not be considered partners in national development. The government subsequently sought new, foreign partners for investment and joint ventures. A further punishing blow to the business community was the imposition of price and exchange-rate controls in 2002. Intended to prevent a haemorrhage of capital and ensure access to basic goods for the poor amid instability, the measures restricted the operational freedom and market access of powerful business groups.

 

The private-sector media, which controlled 90 per cent of broadcast content and which played a pivotal role in mobilising opposition to Chávez, also found itself subject to a new code of conduct. This was the first time that media regulation had been enacted in Venezuela, the media having traditionally escaped any form of control owing to their close links to AD and COPEI. In 2007, the state telecommunications watchdog, Conatel, decided not to renew the broadcast licence of RCTV, one of the key media groups. RCTV’s frequency, one of the few with national coverage, was to be awarded to community media groups that flourished across the country with government financial assistance. This strategy of “democratising” the media was informed by the experience of the 2002 April coup, when the media played cartoons instead of reporting that the attempt to oust Chávez had failed.

 

The US Government

A second, related factor driving the Chávez government in a more radical direction was the hostile strategy pursued by President George W. Bush. The Bush administration adopted a position of rigid and inflexible opposition to Chávez, and the US State Department laboured intensively to isolate Venezuela, regionally and internationally. This dogmatic hostility had a number of causes. First, the Western Hemisphere section of the State Department was dominated by former Cold War hawks who had served under President Ronald Reagan. This generation of officials had been schooled in anti-communist policies, and many of them were associated with egregious human-rights abuses committed across South and Central America during the right-wing military dictatorships and “anti-communist” repressions of the 1970s and 1980s. For these officials, among them John Negroponte, Elliot Abrams and Otto Reich, Chávez was an ideological anathema and a threat to US energy and security interests in the region.

 

Neither was the Bush administration prepared to tolerate in its South American “backyard” a Venezuela that pursued an independent foreign policy. Venezuela occupied a grey area in the black-and-white, post–11 September world of the US “war on terrorism”. Chávez resolutely opposed the US-led invasions of Afghanistan and Iraq, which he condemned as “fighting terror with terror”. He further defied the United States by opposing its “war on drugs” and by prohibiting US counter-narcotics surveillance flights over Venezuela. Venezuela’s new foreign-policy partners, which included Cuba and oil-producing countries such as Saddam Hussein’s Iraq, Libya, and Iran, were viewed as unacceptable by the United States, as was Venezuela’s adoption of a tough bargaining position in OPEC. Venezuela’s success in imposing a price-band mechanism within OPEC in 2001 that was intended to keep international oil prices at between $21 and $28 per barrel was strongly opposed and resented by the United States.

 

The Bush administration backed the Venezuelan opposition and supported actions intended to displace Chávez. Over $15 million was channelled to opposition groups through the US National Endowment for Democracy and USAID. US funds went to those groups that led the 2002 coup, the oil strike, and the recall referendum campaign.

 

At the time of the coup, the Bush administration blamed Chávez for provoking the overthrow of his own (democratically elected) government. During Chávez’s numerous election victories, State Department officials cast doubt on the veracity of the results, even when the votes had been judged free and fair by US-based observer groups such as the Carter Center.

 

President Bush and senior members of his administration very publicly met Venezuelan opposition figures, and US naval forces undertook mock exercises off the coast of Venezuela. The Bush administration conducted an aggressive divide-and-rule diplomacy across South America. A distinction was drawn between the “good” and the “bad” left, the United States emphasising its keenness to work with the good left (President Luiz Inácio Lula da Silva of Brazil, Michelle Bachelet of Chile) and urging that the hemisphere unite against the bad left—a second “axis of evil”, consisting of Venezuela, Cuba and the Bolivian administration of President Evo Morales. A US arms embargo was imposed on Venezuela in 2005 and the country was decertified as one that complied with the US war on drugs. By April 2007, the Bush administration was considering adding Venezuela to the US list of “state sponsors of terrorism”.

 

The actions of the Bush administration had a transformative effect on the Chávez government. The “asymmetrical aggression” led Chávez to accelerate plans for regional integration as a means of shielding the country. Venezuela emerged as a resolute opponent of the US-proposed “Free Trade Area of the Americas” (FTAA), which would have created a continental free-trade zone. Along with Brazil, Chávez blocked ratification of the FTAA in 2004 and launched a counter-model, the “Bolivarian Alternative for the Americas” (ALBA). Where the FTAA stressed free markets and the free movement of goods between the countries of the Americas, ALBA emphasised recognition of countries’ comparative advantages, co-operation, regional solidarity and social justice. Cuba, Bolivia, Nicaragua and Dominica were ALBA members by 2007 and agreements based on ALBA principles were signed with Argentina and Brazil.

 

After 2004, Venezuela shifted from a defensive to a more proactive strategy against the United States. Chávez’s rhetoric became increasingly hostile to Bush, and his government’s critique of neo-liberalism and institutions such as the IMF—which was condemned as a Trojan horse for US interests—more potent.

 

Words translated into action. In order to realise his vision of a continent free of the United States, Chávez played an instrumental role in establishing Banco del Sur (Bank of the South). This was capitalised by countries that included Venezuela, Ecuador, Brazil, Argentina and Bolivia and provided an alternative lending mechanism to the IMF. Venezuela also launched the pan–Latin American television network, Telesur, with neighbouring countries that included Cuba. Telesur was established as a regional broadcast alternative to Fox News and CNN, providing South American perspectives on South American issues and priorities. 

Petro‑diplomacy also emerged as an important tool in Venezuelan foreign policy. The Chávez administration initiated a number of preferential oil-supply agreements, such as Petrocaribe, with petroleum-importing countries in the Caribbean and Central America. In line with ALBA principles, the oil could be paid for in part by supplying Venezuela with commodities such as bananas or sugar.

 

US antagonism encouraged Chávez actively to embrace new foreign commercial and diplomatic partners that included China, Cuba, Russia and Iran, all of which were seen to offer Venezuela specific economic and geopolitical advantages. More than three hundred economic agreements were signed with Cuba, while China and Iran emerged as significant investors in Venezuelan oil, infrastructure and agricultural projects. Russia and China both willingly filled the weapons-supply gap left by the US arms embargo of 2005, and the Chinese energy market was recognised by Venezuela as an important potential alternative to the United States, given the requisite investments in refining and shipping.

 

The US approach throughout the 2000s was counter-productive, allowing Chávez to capitalise on burgeoning anti-American sentiment in South America and elsewhere. In seeking to isolate Chávez at the regional level, the United States provoked the antagonism of South American countries, which have a long history of non-interference in the sovereign affairs of neighbours. Apparent US support for the 2002 coup went against efforts to exclude the military from politics in South America and collectively to support democratic forms of government. The Bush administration’s failure to recognise the potency of Chávez’s anti-poverty narrative also made the US government appear out of touch with regional sentiment. And in channelling money to the opposition, the United States undermined democracy and stability in Venezuela. Because the opposition received US funds, it was seen as unpatriotic. More problematically, the opposition looked to its US funders for tactical leadership at a time when it should have been seeking to reconnect with ordinary Venezuelan voters.

 

The Oil Price

A more fundamental miscalculation on the part of the United States was economic. Oil prices rose precipitously as US–Venezuelan relations deteriorated. By 2007, Venezuelan oil was over $80 per barrel, giving the country, which produces in the region of 1.6 million barrels a day, tremendous fiscal leverage. The rise in oil prices allowed the Venezuelan government to transform its Bolivarian agenda from a utopian wish-list into a programme of radical change. The windfall oil revenues financed an expansive array of social programmes, with over $12 billion in PDVSA revenues channelled towards the Missions, social spending, and subsidised co-operative movements in 2006–7. Venezuela’s commercial, energy and military agreements in South and Central America and the Caribbean, and with China, Russia and Iran, would have been unconscionable without the surge in oil prices, which had the additional effect of making Venezuela impervious to US pressures such as embargos. The regional initiatives, such as Banco del Sur and ALBA, gained serious traction only as a result of the boom in commodity prices, and the additional income enabled the Venezuelan government to expand state control of the key aspects of the country’s infrastructure, as seen in the nationalisation of the electricity, telecommunications, cement and steel sectors—with full compensation for the expropriated owners.

 

But the oil boom also created challenges for the government, and by 2007 it was labouring with the contradictions of trying to create a socialist model amid an influx of oil wealth. A number of economic management problems had become evident. The price and exchange controls created a flourishing black market for dollars, chronic overvaluation of the Venezuelan currency, the bolívar fuerte, and shortages of staple products such as bread and milk, with producers unwilling to put goods into a controlled market. While there was progress in reducing inflation, underlying inflation remained an ongoing problem. Moreover, Venezuela once again became susceptible to the “Dutch disease” that led to economic crisis in the 1980s. As the oil price strengthened, it lifted the value of the domestic currency, making non-oil exports expensive and uncompetitive and imports artificially cheap. This undercut progress in developing domestic agricultural and manufacturing production, in turn reinforcing Venezuela’s reliance on oil exports. The Venezuelan treasury and PDVSA were also becoming fiscally overextended, with the latter failing to invest inadequately in drilling and production capacity. The nationalisation process and PDVSA’s acquisition of a $30 billion stake in heavy-oil projects raised questions as to the fiscal sustainability of the Bolivarian Revolution, and it is against this backdrop that the Venezuelan electorate opted to put a break on the revolutionary process in a referendum on constitutional reform held in December 2007. 

Referendum Defeat

Following his victory in the December 2006 presidential election, Chávez sought to accelerate the Bolivarian Revolution, allowing Venezuela to advance to a model of “twenty-first-century socialism”. This was to be achieved through “five motors” that included the granting of temporary executive-decree powers, constitutional reform, wider nationalisation of economic sectors, a swifter transfer of power to community councils, and the creation of a new institutional geometry. In parallel with this, Chávez proposed to create a single political party, the United Socialist Party of Venezuela (PSUV), to merge all parties that supported the Bolivarian Revolution.

 

Over the course of the year, it became evident that the revolutionary process was losing momentum. There was sectarian infighting over the creation of the PSUV, which revealed divisions between grassroots organisations and the chavista political parties, and between moderates and more left-wing ideological positions. Equally problematic was the progress of Chávez’s constitutional reform proposals. The chavista-dominated National Assembly added an additional thirty-three proposals to Chávez’s existing thirty-three recommendations for constitutional change. As a result, the package of proposed reform measures presented to the electorate in December 2007 was unwieldy, disparate and open to misrepresentation by critics. The proposals included an extension to lesbian and gay rights, executive control of international reserves, wider authority for the community councils, and an end to the prohibition on a president’s serving more than two terms in office. They were rejected by a narrow majority of voters after a weak campaign by the chavistas in which Chávez, distracted by negotiations to release hostages in neighbouring Colombia, played only a minor role.

 

Defeat in December 2007 was the first electoral reverse for the chavistas, a development that enthused the opposition and fired their optimism ahead of the November 2008 regional and municipal elections. As for the chavistas themselves, the referendum defeat deepened antagonisms between different sectors, moderates accusing more radical, leftist elements of trying to move too far, too fast. The referendum result demonstrated that the chavistas had become progressively detached from their core constituency. It was abstention by traditional Chávez supporters that was pivotal to the rejection of the constitutional reform proposals.

 

This focused the chavistas’ attention on the need to revise and rectify their strategy and above all to consolidate progressive initiatives that had considerably improved the lives of Venezuela’s poor. Specifically, the chavistas needed to focus attention away from pure quantity of welfare provision and move towards quality, targeted provision—a difficult leap in the absence of institutional capacity. Additionally, the defeat called attention to the lack of progress made in addressing elementary needs such as security. The government’s failure to tackle crime and corruption and speed up the delivery of its social programmes helped determine its defeat. Amid the clamour of the revolutionary process, the government’s focus on foreign affairs and the need to respond to day-to-day political challenges rather than laying out a long-term policy vision led the administration to neglect micro-issues that were central to the lives of ordinary people.

 

Although the Chávez government emphasised its respect for the referendum result and acknowledged the need to slow the process of change, trends since December 2007 demonstrate that it is still actively pursuing its revolutionary agenda. The most significant change is not in policy but in intra-chavista politics. Chávez has been weakened, and owing to the highly personalised nature of the government, he is intimately identified with the defeat in December. The result has been read more as a referendum on Chávez and his ambitions than on policy per se. For the first time, debate within chavista ranks began to extend to alternatives to Chávez and to a future without him. His term ends in 2012 and next year he might yet face another recall referendum. 

Venezuela’s Example 

The Bolivarian Revolution was an important transitional stage in Venezuela. It has moved the country away from a sclerotic and corrupt political system and brought new people into politics and the formal economy. There have been important social advances. Poverty has been reduced, social expenditure as a percentage of gross domestic product has doubled, the human development index has improved markedly, and according to the respected polling firm Latinobarómetro, Venezuelans are highly confident in their democratic system and are among the most politically active and engaged citizens in the region.

 

There are important lessons for the development community in Venezuela’s initiatives favouring the poor as these measures do represent best practice in development theory. Venezuela has delivered in situ welfare, directly targeted the needs of core groups such as women and children, and tackled profound social inequality. More broadly, the Chávez administration has brought to the fore the need to redress poverty in a region that has traditionally neglected the poorest sectors of the population and that has the world’s highest level of inequality. Of particular significance, change in Venezuela has proceeded with the assent of its population. Democracy and elections have been the key methods and mechanisms of this revolution.

 

The Chávez government has drawn attention to the profound inequalities implicit in North–South relations and to the lack of democracy and representation within international institutions. It has recast Venezuelan foreign policy in a realistic and pragmatic manner, responding to the rise of new powers and reorienting Venezuela away from dependence on the United States, an economic deadweight that is entering into recession. But while Chávez’s influence should not be underestimated, neither should it be overstated. A change in any of the three variables that have driven his Bolivarian Revolution forward—the domestic opposition, the antagonism of Washington, and the high price of oil—would have serious implications for the government and its project.