HUGO CHAVEZ : HIS LEGACY AT STAKE / THE FINANCIAL TIMES COMMENT & ANALYSIS

August 19, 2013 7:40 pm

 

Hugo Chávez: His legacy at stake

 

By Benedict Mander

 

Infighting and corruption in President Nicolás Maduro’s party are harming efforts to save Venezuela’s revolution

 

Living in the shadow: Chávez bequeathed an economy on the ropes to Mr Maduro

When almost 500 families invaded the estate owned by the Santa Teresa rum company in 2000, Alberto Vollmer decided that using brute force to expel them would be futile. Hugo Chávez had just won the presidency and was encouraging Venezuelans to squat on private land. So instead, Mr Vollmer devised a plan to allow some families to remain, so long as the government paid for their housing.
 
He was one of the first among Venezuela’s business elite to realise that their attitudes were going to have to change under Chávez’s “Bolivarian revolution”. He pioneered innovative social programmes that later won the leftwing leader’s explicit approval. “Project Alcatraz” aimed to rehabilitate criminals by, for example, letting rival gangs take out their aggression on the rugby field. Even while Chávez railed against the “rancid oligarchy” of capitalists, Mr Vollmer managed to turn around a failing business. The president even called the aristocrat a true revolutionary.

 

 

At a time of upheaval that caused thousands of other private enterprises to collapse, Chávez struck fear into the hearts of foreign investors as he expropriated farms, factories and even huge oil ventures from majors such as ExxonMobil and ConocoPhillips.

 

But since Chávez’s death in March, there are tentative signs that the political winds are shifting. Mr Vollmer and the rest of Venezuela’s private sector are keenly watching out for signs of change and compromise by the new government led by Chávez’s successor, Nicolás Maduro.

 

“[Maduro’s] government realises that [during the Chávez years] there has been a major social revindication and that it is time to solve economic problems,” says Mr Vollmer. “Just as the private sector has learnt that it cannot ignore social problems, so the government has realised the importance of having a productive private sector, which ultimately is mutually beneficial.”

Significantly, shortly after winning April’s election, Mr Maduro summoned Lorenzo Mendoza, who runs Venezuela’s largest private company, the food and drink giant Polar, to a secret meeting at the Miraflores presidential palace. In the past, Mr Mendoza was a whipping boy of the pugnacious Chávez, who said he deserved a “place in hell”. However, a person present at the meeting described it as “excellent” and said that Mr Maduro showed “genuine respect” towards one of Venezuela’s richest men.

If this is part of a trend, the extension of such an olive branch would be a significant shift. While businessmen such as Mr Vollmer always had to accommodate themselves to Chávez’s socialist Project, the meeting at Miraflores could suggest a more pragmatic approach from his successor.

Many observers say that Mr Maduro, a former bus driver and trade unionist, needs to be more emollient than Chávez. He has inherited an economy teetering on recession, ravaged by shortages, a yawning fiscal deficit and inflation that has run at 42.6 per cent over the past 12 months. This is jeopardising Mr Maduro’s own position politically, with the opposition still refusing to recognise his razor-thin electoral victory, while he struggles against internecine fighting within the ruling United Socialist party of Venezuela (PSUV).

 

At stake is the economic future of a unique socialist experiment that, although sapped by gross mismanagement, was fuelled by the largest oil reserves in the world, funding revolution throughout the region.

Success by Mr Maduro in setting Venezuela on a steady course would assure Chávez’s vision a place in history. Failure would crush his dream of installing so-called “21st-century socialism” in the Opec country.

 

Luis Vicente León, a pollster, says the government now recognises its economic problems, which is “a significant step compared to the Chávez government, which tried primitive, communist solutions.” He argues that Mr Maduro has chosen a blend of radical politics combined with more moderate economic policy.

“Still, to recognise its problems is one thing and actually to do something about them is quite another. Actions are needed,” says Mr León.

There is certainly an air of optimism among business leaders. Jorge Roig, president of the business chamber, Fedecamaras, says: “The rapprochement is far greater than I can say publicly.” However, there are also strong grounds to doubt whether Mr Maduro can make profound changes.

Conversations with the private sector are only luke warm and are held in secret. “So far it is just talk, with no obvious results.

Something is happening, but not at the speed that we would like,” says Mr Roig. Indeed, reports that Mr Maduro asked Mr Mendoza’s Polar to run underperforming state food-processing factories, which were nationalised by Chávez to help solve shortages of basic goods, have so far led to nothing.

The principal stumbling block to major reform is Mr Maduro’s loose grip over opposing factions within the government that succeeded Chávez. Fears among the PSUV’s radical ideologues that Mr Maduro may compromise the revolution’s socialist goals have paralysed decision making.

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The nature of business in Venezuela is also turbid. While the canny Mr Vollmer’s methods won him international recognition for weathering hostile conditions – his experience has been used as a case study at Harvard Business School – another class of businessmen was far more opportunistic. Known as the “bolibourgeoisie”, some business magnates thrived over the past decade thanks to close links to Chávez’s government. They gained lucrative contracts with state institutions and executed shady currency deals, making magnificent fortunes almost overnight. Real reform would mean fewer favours for those closely connected to government but it is now difficult to challenge their interests.

Certainly, there are models to follow. Raúl Castro has begun tepid reforms in Cuba after his brother Fidel relinquished power, with numerous meetings between businessmen and the government.

There is also the model of President Vladimir Putin’s Russia, where oligarchs can flourish to their government’s benefit. “There is a Neo-bolibourgeousie emerging,” says Juan Carlos Zapata, a journalist who has written a book about the bolibourgeousie and coined the term.

According to Mr Zapata, it was businessmen who enjoyed good relations with the government who recently bought two media groups: opposition television station Globovisión and Cadena Capriles, which owns Venezuela’s most widely circulated newspaper, Últimas Noticias. He also predicted further acquisitions in banking.

 

“That newspaper [Últimas Noticias] wasn’t for sale. They came and bought it for about half of what it is worth,” says a person close to the deal. “The government basically told a group of businessmen who profit from their connections [with the government] to buy it, because they were fed up [with its stance].”

In the end, Mr Maduro may have to opt for a hybrid model. There are limits to parallels with Russia. Although Russia is also a petro-state, Venezuela has even fewer industries that can produce oligarchs. Oil is the only genuinely productive asset and it is in the hands of the state.

 

“In Venezuela, it is all just merchants trying to make a killing on imports,” says Pedro Burelli, a former executive at PDVSA, the state-owned oil company. He says Rafael Ramírez, the company’s president, is the only Venezuelan who could count as a real oligarch. “He has privatised the cash flow of PDVSA, even if the state still holds on to a 100 per cent share of it.”

Whichever path Mr Maduro chooses to revitalise Venezuela, it will be peppered with pitfalls.

“I get the impression that they are desperately clinging on to their ideology, debating internally how not to betray their socialist ideals, while at the same time wanting to achieve something, dreading the fact that they might actually be wrong and be forced to use mechanisms that border on capitalism,” says one businessman with close ties to the government.

Mr Maduro still has to keep an eye on the opposition, which will attempt to turn municipal elections in December into a plebiscite on his rule. Their sharpest criticism is that he is strangling dissent. In addition to the sale of Cadena Capriles and Globovisión – which no longer broadcasts the speeches of opposition leader Henrique Capriles – the government has hit two critical newspapers by freezing their editors’ assets.

 

The Supreme Court, which Chávez packed with friendly judges, has fined Mr Capriles after rejecting his “disrespectful” challenge against the validity of the April election result. It also asked the attorney-general to prosecute him for filing the petition.

Mr Maduro’s government has also targeted the opposition in a high-profile crusade against corruption. He has requested decree powers from the national assembly to do so, triggering concerns that those powers could be used to attack opponents. Yet corruption seems more pervasive in the government, which has access to the murky accounts of PDVSA, which receives about $100bn in oil revenues each year. Critics insist that schemes whereby Caracas exports discounted oil to neighbours are big earners for corrupt officials.


. . .

 

Even diehard supporters of Chávez, such as the influential journalist Mario Silva, now complain about deep-rooted corruption in the revolution’s ranks. In a leaked recording of a conversation he held with a Cuban intelligence agent, Mr Silva, who is better known for his vicious attacks against the opposition in a now cancelled chat show, aired serious concerns about illicit enrichment schemes, back-stabbing and even coup-mongering within the PSUV.

 

“We are immersed in a sea of shit, compadre, and we haven’t realised it yet,” he bemoaned. Diosdado Cabello, the president of the national assembly and considered to be Mr Maduro’s main rival, was the principal target of his distress.

 

Even opposition politicians agree that the threat to Mr Maduro from within the PSUV is far greater than anything they can muster themselves. “If I were Maduro, I’d be far more afraid of Diosdado than the opposition,” says Ramón Muchacho, expected to become the opposition’s mayor in the Caracas municipality of Chacao in December’s election.

If the situation continues to unravel, opponents are likely to call a recall referendum, which is allowed three years into his presidency and could potentially cut his term short.

Either way, Venezuela could be on the brink of important change. Without it, the Caribbean nation risks, at one extreme, slipping into irrelevance or, at the other, the prospect of rising unrest, potentially even triggering a coup from inside the PSUV.

“We are seeing the atrophy of 10 years of hypertrophic growth. Chavismo is not a sustainable model,” says David Smilde at the Washington Office on Latin America.

It has fallen on Mr Maduro to correct Chávez’s failings. Without a more realistic approach, the grand ambitions of his predecessor – like those of his hero Simón Bolívar 200 years earlier – risk being be dashed.


. . .


Polar: Better not to mess with the bear

The late President Hugo Chávez reserved some of his most scathing criticism for Venezuela’s “rancid oligarchy” of capitalists, whom he considered to be little more than “traitors” and “craven lapdogs” of the US “empire”.

 

And there are few more powerful businessmen in Venezuela than Lorenzo Mendoza, who runs the country’s largest privately owned company, Polar.

But despite his notoriety for seizing private property, Chávez never messed with the giant food and drink producer, despite once insisting that Mr Mendoza was guaranteed a place in hell.

The socialist firebrand may have issued repeated threats to expropriate Polar – a tradition his successor Nicolás Maduro continued shortly before his election victory, darkly warning that “everything in life comes to an end” – but there is every reason to believe that Venezuela’s socialist government would never dare.

Put simply, it would be too risky in a country already wracked by shortages. Founded six decades ago, Polar has become a national icon and has come to be considered a paragon of corporate culture in Venezuela.

According to local pollsters, it always remained far more popular than Chávez ever was, while he still leads Mr Maduro by double digits in the Popularity stakes six months since his death.

For most Venezuelans, scarcely a day goes by without them consuming one of Polar’s products – there are few sights more common or treasured in Venezuela than the polar bear, the insignia of Polar’s flagship beer, while its Harina PAN maize flour is the key ingredient for the national staple, the arepa, Venezuela’s answer to the sandwich.

Venezuela’s shortages of basic foods are in large part due to government incompetence and they are already a source of widespread discontent. Imagine Venezuelans’ reaction if their favourite beer started running scarce too (Polar controls about three-quarters of the alcohol-loving nation’s beer market).

That would be the last thing Mr Maduro needs as he tries to stop the nation’s divisions from opening any wider.


 

Copyright The Financial Times Limited 2013.