Chavez wins this round, but Venezuela's bill is coming due

McClatchy NewspapersFebruary 16, 2009 

CARACAS, Venezuela — President Hugo Chavez now reigns as the undisputed political king of Venezuela after winning a national referendum Sunday that could allow him to serve as the elected president of this oil-rich nation for life.

Before Chavez can focus on seeking another six-year term in 2012 and perhaps others beyond, however, he faces a coming crisis that could imperil his ambitious plans. The global economic crisis and the 75 percent drop in oil prices are expected to halve Venezuela's oil income this year, the country's economic lifeblood.

Opposition leaders had high hopes after they defeated Chavez's first attempt to scrap term limits in December 2007 and then held him to a draw in November's regional elections.

They conceded defeat in the latest referendum, however, and were left to complain Monday that Chavez had abused his power by using state money and government workers to win 54 percent of the vote to abolish term limits.

From the balcony of the presidential palace Sunday night, Chavez claimed a mandate to continue transforming Venezuela into a 21st-century socialist state, as thousands of supporters below roared their approval. He declared that he'd be a candidate in the 2012 elections, eliciting more roars.

Along with his charisma, Chavez's continued popularity has depended on showering billions of dollars in oil income on his poor supporters in the form of free medical care, apartments and schooling for adults and subsidized prices for food. Not surprisingly, he didn't rein in the spending in the weeks leading up to the referendum, despite the plummeting oil revenues.

Economic analysts, however, think that Venezuela's bill is coming due — if not late this year, then early next year — unless Chavez reduces spending and devalues the bolivar, the country's currency.

Either way, Pedro Palma, a Caracas-based economist, predicts that this year Chavez will have to confront the twin evil of stagflation: inflation and stagnant economic growth. After the economy grew by 4.9 percent in 2008, Palma thinks that it will shrink by 1.7 percent in 2009, while inflation will rise from 31 percent to 45 percent.

In a sign of the impending problems, Petroleos de Venezuela, S.A. — the state oil company, better known as PDVSA — is running up tens of millions of dollars in unpaid bills to contractors.

Chavez seems to have two choices: He can maintain spending, betting that Venezuela has sufficient foreign reserves — thought to be about $30 billion — to cover his needs until oil prices rise again or he can begin to impose unpopular austerity measures.

Saul Cabrera, a Caracas-based pollster, predicted that the president will keep his foot on the spending accelerator.

"He'll blame the economic elite for the country's problems," Cabrera said.

In the past, Chavez also has blamed problems on the United States, but that appears to be more difficult with the change of administrations in Washington. While poor Venezuelans reviled President George W. Bush and the Iraq invasion, they express delight that a black man now occupies the White House.

Apparently in recognition of this, Chavez said Saturday that he was open to speaking with President Barack Obama to try to mend tattered relations between Venezuela and the United States.

The onrushing economic problems could produce an especially hard landing for Chavez supporters because he has yet to prepare them for what's to come. Among a dozen supporters who were interviewed Sunday, not one seemed aware that the economy is headed for a nose dive.

"If Chavez remains in office, all will be well," said Cesar Ayazo, a 69-year-old retired construction worker.

"Chavez is a great communicator with money," said Anibal Romero, a political science professor at Caracas' Metropolitan University. "Let's see what happens when he runs out of money."

In the wake of their defeat, opposition leaders talked bravely Monday. They noted that the 5 million votes against Chavez's proposed amendment to the constitution were the most against him they'd ever mustered. They think that the economic crisis will weaken Chavez's hold on the downtrodden permanently.

"In 2013, we'll have another government," said Carlos Vecchio, a spokesman for an umbrella opposition group, Comando Angostura, that formed to oppose lifting the term limits.

In the meantime, Chavez and his allies control PDVSA, the Congress, the judiciary and a majority of the state governorships.

For the opposition to realize its dreams, it would help for Chavez to fall prey to Lord Acton's famous 19th-century dictum: "Power tends to corrupt, and absolute power corrupts absolutely."

It's worth noting that Chavez just marked his 10th anniversary in office and that the last two Latin American presidents who served that long were Peru's Alberto Fujimori and Argentina's Carlos Menem.

Fujimori resigned in 2000 amid an enveloping corruption scandal and is now on trial, accused of orchestrating paramilitary squads that gunned down supposed leftists. Menem completed his second term in 1999 but was blamed for the economic calamity that struck Argentina two years later. He, too, is on trial, on corruption charges.

For Latin American presidents reluctant to relinquish power, said Michael Shifter, the vice president for policy at the Inter-American Dialogue, a Washington-based research center on Western Hemisphere affairs, "usually the ending is not a happy one. It usually ends up being a national trauma."

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McClatchy Newspapers 2009

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