March 6, 2013 7:13 pm
Venezuela: To the heir, a poisoned chalice
Many forgave Chávez for his economic blunders but such generosity is unlikely to be shown to the next leader
©Reuters
End of an era: Chávez’s death has robbed the Non-Aligned Movement of one of its most colourful anti-US critics
Shortly before announcing the death of President Hugo Chávez on Tuesday, his expected successor made some thinly veiled accusations.
Nicolás Maduro, vice-president, called for an investigation into the cancer that had afflicted Venezuela’s leader and suggested that the country’s “historic enemies” had a hand in his illness. In case there were any doubt about the identity of those enemies, he expelled two US diplomats.
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Mr Maduro’s accusations had a familiar ring. Chávez himself had mused in 2011 that the US could have developed carcinogenic technology that had infected both him and Argentine President Cristina Fernández de Kirchner.
The message from Mr Maduro’s broadside against the yanquis was clear: the self-styled socialist struggle against the US and its brand of capitalism is still alive. But it will not be easy to carry on the fight. Mr Maduro will now struggle to fill the void left by a man whose brimming charisma made him a lionised but polarising figure at home and abroad.
If Mr Maduro’s message was familiar, his delivery was not what Venezuelans have come to expect over the past 14 years. Mr Maduro speaks in a purposeful, dry manner but Chávez peppered his frequent anti-US tirades with songs, dances and jokes that won him a huge popular following.
Most importantly, many poor Venezuelans would often forgive Chávez for the country’s swelling tide of economic and social problems – ranging from sky-high inflation to one of the world’s highest murder rates. The former paratrooper had won an unwavering devotion for including the poor in a political process from which they had long been excluded. They also venerated him for halving poverty and providing discount stores and clinics in indigent barrios.
The peculiarly inviolable aura that enveloped Chávez could be clearly seen in the phenomenon of petitions that sprang up in his rule. While many poor Venezuelans accepted that corruption and inefficiency were rife in his government, they would still often gather – even in tropical rainstorms – to present him with their personal requests for help.
Chávez himself was seen as standing apart from the failings of his government. Now that he has gone, poor management of the world’s biggest oil reserves is more likely to haunt his successor.
A mustachioed 50-year-old former bus driver and union leader, Mr Maduro is one of the very small circle of loyalists who survived in the predominantly one-man show that was the Chávez government. He is relatively little known, thanks to the micromanaging late president’s penchant for taking all the important decisions for his ministers, often doing all the talking for them too.
Mr Maduro has a reputation for being a canny diplomat. Colombian officials who observed him in peace talks with the Farc rebel forces in Havana last year praised him for his shrewdness. But Mr Maduro now faces a much larger stage.
Almost three months ago, before Chávez returned to Havana for his last session of cancer surgery, he anointed Mr Maduro as his political heir, telling the country to vote for him “should anything happen to me”.
And it did. His death brings to a close a turbulent chapter in which Chávez, first elected in 1998, subdued a political elite that had dominated the country for four decades. The self-described socialist struck lucky and rode a wave of high oil prices to fund his social programmes.
But his economic reforms mean Mr Maduro could now be inheriting a poisoned chalice. Chávez spearheaded thousands of nationalisations, bringing energy, telecommunications, banks and farms under state control. He seized assets from major foreign companies, most notably stripping ExxonMobil and ConocoPhillips of their majority stakes in their crude projects in the Orinoco.
His reforms won him adulation from his core supporters but this overhaul of the economy came at a price. Chávez bequeaths a country on the ropes. It has one of the world’s highest inflation rates, a significantly overvalued currency despite a 32 per cent devaluation last month and widespread shortages of basic goods such as flour, eggs, sugar and even gasoline.
“Chávez was more interested in going down in history in a blaze of borrowed spending,” says Juan Nagel, a Venezuelan economist at the University of the Andes in Santiago and co-editor of the influential blog Caracas Chronicles. “But the mess his successor will now have to deal with is enormous.”
All eyes are on the oil reserves. Foreign oil companies will be looking for any clues that Mr Maduro could soften his stance towards investors to improve the country’s economic condition. The country’s web of leftist allies will also be concerned: particularly Cuba, where the Castro regime has in effect been propped up by Chávez’s petrodollar diplomacy.
But the transition will be most keenly felt in Venezuela itself because the extravagance of the oil-fuelled economic model that Chávez used to bolster his popularity may have reached its end.
The Venezuelan state has spent more than $1tn of oil revenues over the past 60 years but a third of that spending has taken place since Chávez came to power in 1999. Last year, despite near record oil prices, the country even racked up a fiscal deficit estimated at 17 per cent of output, when a then healthy-seeming Chávez spent heavily to ensure his successful re-election in October’s presidential vote.
These pressures have led many to believe Mr Maduro will have to be more pragmatic. Still, it is unclear whether he will even attempt to correct the myriad distortions and anomalies in the economy.
The fact that Venezuelan sovereign debt has rallied 40 per cent in the past year indicates a belief on Wall Street that a post-Chávez Venezuela may eventually embrace more orthodox economic policy.
Daniel Kerner, an analyst at Eurasia Group, suspects that Mr Maduro “could end up being more chavista than Chávez”, arguing that Mr Maduro will need to “win his spurs as Chávez’s successor by taking radical decisions, and so convince the more hardcore chavistas that he will continue the revolution”.
Building up that hardcore support is especially important to Mr Maduro as it will bolster his position against two other men from Chávez’s inner circle who are seen as his closest collaborators but also most active competitors: Diosdado Cabello, the president of Congress and a former comrade-in-arms of Chávez who took part in his failed coup in 1992 and remains popular among the military; and Rafael Ramírez, the president of the powerful state oil company, PDVSA.
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So far, Mr Maduro’s actions suggest he has little intention of deviating from Chávez’s radicalism. Following his mentor, Mr Maduro has not shied from accusing the private sector of causing shortages by “hoarding and speculating”. He recently seized warehouses of Pepsi-Cola Venezuela, a subsidiary of Venezuela’s biggest privately run company, Polar.
Mr Maduro warned private businesses last month that they were “playing with fire” and assured people that if they took to the streets over food hoarding “we will be right behind them”.
“Maduro is inheriting a tough situation, I don’t think anyone would deny that,” said Steve Ellner, a historian at Venezuela’s University of the East. There are “intense social pressures coming from different groups: the working class, those who want an increase in the size of the state to move the [revolutionary] process along, and the marginalised sectors who want money for the social programmes.”
Finding the money is a challenge. Without a continued rise in oil prices, Mr Maduro will need to trim waste and make government spending more effective. If he cannot deliver on Chávez’s revolutionary pledges, in particular maintaining the social programmes, Mr Maduro will face severe problems. “It’s a pyramid scheme. The only way the Chávez economy is sustainable is if more and more oil money keeps pouring in,” says Prof Nagel. “It can’t last.”
All of this has emboldened the opposition. But although they have gained popularity and become more unified after learning from their mistakes during the Chávez years, many opposition sympathisers are demoralised after suffering heavy losses both in presidential elections last October and regional elections in December, even though Chávez was not there to boost his weaker candidates.
The United Socialist party remains a formidable machine for mobilising voters. Despite doubts about sustainability, significant social gains achieved under Chávez mean that the poor majority are likely to continue to support his successor.
“We will never waver in our support for the Bolivarian revolution. We haven’t come this far just for nothing. Now we are all Chávez,” screamed a tearful “chavista” at a recent rally.
Mr Maduro can take heart that the economy is on its knees, not flat on its face. Although Venezuela’s debt is now 10 times higher than a decade ago, it remains relatively low, at about 50 per cent of gross domestic product. That compares to an average for the EU in 2012 of 82.5 per cent. Not only can the government issue more debt but it may also be able to secure more loans from countries such as China, which has lent Venezuela roughly $40bn in the past six years.
Still, even Venezuela is subject to the forces of economic gravity. When they kick in, the country can come down with a crash. There is historical precedent for this in Carlos Andrés Pérez, whose first presidency in the 1970s coincided with an oil price boom.
Although from opposite ends of the political spectrum, the two presidents were both populist spendthrifts and “had pharaonic visions for Venezuela,” says Enrique Krauze, an influential Mexican historian. When Pérez was re-elected for a second term in 1989, his dream imploded following a collapse of oil prices. Weeks after his term began, Venezuelan society exploded with a popular uprising.
Ironically, it was this collapse that inspired Chávez to lead a coup three years later. But while Pérez is widely vilified today, Mr Krauze believes that even if Venezuela’s economy falls apart again, Chávez “will still be adored by the people, rather like [Argentina’s] Eva Perón. Chavismo may crumble, but Chávez will still live on as a saint.”
Copyright The Financial Times Limited 2013.
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