hugo chavez - a test for u.s. policy (pdf)

8/14/2019 Hugo Chavez - A Test for U.S. Policy (pdf)

1/39


2/39

Hugo CHvezA Tst f r u.S. P licy

A Sp cial R p rt f th Int r-Am rican Dial

By Micha l Shift r

MARCH 2007


3/39

INTER-AMERICAN DIALOGUE iii

Contents

Advisory Commission Members ................................................... v

Foreword ...................................................................................... vii

Pre ace ........................................................................................... ix

Introduction and Summary ........................................................... 1

Guidelines or U.S. Policy .............................................................. 4

Background and History ............................................................. 10

Hugo Chvez: Latin Americas Pied Piper ........................... 10

Taking Control ....................................................................... 11

U.S.-Venezuela Relations ....................................................... 17

What is the Problem? ................................................................... 21

Latin American Agenda ........................................................ 22

World Stage ............................................................................. 25

Concluding Thoughts .................................................................. 28


4/39

INTER-AMERICAN DIALOGUE

Ad isory Commission MembersJeffrey Davidow is president o the Institute o the Americas at the University oCali ornia San Diego. He also served as the U.S. ambassador to Venezuela, Mexicoand Zambia and was assistant secretary o state or Western Hemisphere a airs.

Luigi R. Einaudi has served as both the assistant and acting secretary general o theOrganization o American States. He was also the U.S. ambassador to the OAS.

Mark Falcoff is a resident scholar emeritus at the American Enterprise Institutespecializing in Latin America. He was an international observer in Venezuela duringthe 1998 elections.

Peter Hakim is the president o the Inter-American Dialogue.

Donna J. Hrinak is director or corporate and government a airs at Kra t Foods LatinAmerica and has served as the U.S. ambassador to Venezuela, Brazil, Bolivia, and theDominican Republic.

Susan Kaufmann Purcell is director o the Center or Hemispheric Policy at theUniversity o Miami. She was also vice president o the Americas Society and theCouncil o the Americas.

William Luers is president and chairman o the United Nations Association o theUSA and ormer U.S. ambassador to Venezuela.

Jennifer McCoy is director o the Americas program at the Carter Center and leadstheir election monitoring e orts in Venezuela. She is also a pro essor o politicalscience at Georgia State University.

Thomas F. Mack McLarty is president o Kissinger McLarty Associates andserved as special envoy to the Americas and chie o sta to President Bill Clinton.

R. Kirk Sherr is a resident senior ellow at the Forum or International Policy with aspecialty in Latin America and the Caribbean.

Michael Skol is president o Skol & Serna. He also served as the U.S. ambassadorto Venezuela as well as principal deputy assistant secretary o state or inter-Americana airs.

Viron Peter Vaky is a senior ellow at the Inter-American Dialogue. He was also

the U.S. ambassador to Venezuela, Colombia, and Costa Rica as well as assistantsecretary o state or inter-American a airs.


5/39

INTER-AMERICAN DIALOGUE ii

Foreword

Since Hugo Chvez came to power in 1999, Venezuelahas emerged as one o the most ormidable challengesor U.S. policymakers in the Western Hemisphere. Thecountrys role as a major source o oil or the United States,coupled with a strained and deteriorating political relationship,has created a serious dilemma or Washington.

From the outset o Chvezs rule, the Inter-American Dialoguehas sought to play a constructive role in ostering an in ormedand vigorous debate about Venezuela and the potential U.S.policy options towards that country. We have organized anumber o sessionsone with President Chvez himsel thathave o ered a orum or government representatives to expresstheir positions on a variety o issues and to be questioned by in ormed Washington audiences. At the same time, we have triedto give representatives o the opposition an opportunity to sharetheir perspectives as well. Given the recent political polarizationin Venezuela, it has not been easy or the Dialogue to sponsor activities in which both sides were represented.

With the publication o this monograph prepared by MichaelShi ter, the Dialogues vice president or policy, we haveattempted to contribute to the policy discussion on Venezuelain a more systematic way. Hugo Chvez: A Test for U.S. Policyseeks to help U.S. government o cials navigate the multiplechallenges presented by the current Venezuelan situation andcome up with an e ective and sustainable policy. The guidelines

emerge rom a care ul analysis o the Chvez government andthe U.S.-Venezuela relationship in the past eight years.


6/39

HUGO CHvEz: A Test for U.S. Policy iii

In this e ort, Shi ter has been ably assisted by a top-fight andhighly distinguished group o advisors who come rom the privatesector, the policy community, and public service, including veormer U.S. ambassadors to Venezuela. We are very grate ul or their participation in a meeting held at the Dialogue in June2006, and or their consistent and invaluable contributions tothe overall e ort. They do not, however, bear any responsibility or the reports guidelines and analysis.

This project is part o the Dialogues continuing ocus ondemocratic governance in Latin America (and the Andean regionin particular), multilateral institutions, and the state o U.S.-Latin

American relations. We very much hope this report contributesto a constructive U.S. policy towards Venezuela in the coming

years and to more cooperative and productive relations amongthe countries o the Western Hemisphere. We grate ully acknowledge the support provided by the Smith RichardsonFoundation or this important initiative.

Peter Hakim

President March 2007


7/39


8/39

HUGO CHvEz: A Test for U.S. Policy x

Venezuela, U.S.-Latin American relations, regional politics, and theenergy sector were extremely help ul. The advisory commissiondoes not, however, necessarily agree with the analysis and policy guidelines contained in this report.

At the Inter-American Dialogue, the monograph pro ted rommy many ruit ul conversations with Peter Hakim, the Dialoguespresident, and Pete Vaky, a senior ellow at the Dialogue, both o

whom also served on the advisory commission. I am grate ul toHakim or his characteristically probing questions and perceptivecomments. I greatly appreciate Vakys political and intellectualacumen as well as his deep understanding o Venezuela, Latin

America, and U.S. policy-making. Dan Joyce deserves special

thanks or e ectively and skill ully managing this e ort ando ering superb research and editorial assistance on the report.

Vinay Jawahar ably coordinated the initial phase o this project,and contributed excellent ideas and suggestions, including duringour visit to Venezuela in March 2006.

The report is also in ormed by the collaboration o many Venezuelans and other Latin Americans. Thanks to the generoussupport rom the Smith Richardson Foundation, I was ableto make several trips to the region. In Venezuela, I had use ulmeetings with a number o key representatives o the Venezuelangovernment, including the vice president, the president o theNational Assembly, another infuential deputy, and o cials romthe Ministry o Foreign A airs. I also talked to representatives o the opposition, civic organizations, the private sector, the CatholicChurch, academia, polling rms, and the media. Conversations

with the U.S. ambassador in Venezuela, other diplomats, andoreign journalists based in Caracas, were similarly instructive.

I also visited Braslia, Lima, and Bogot and consulted witha variety o current and ormer o cials, policy analysts andjournalists regarding their views o Chvez and the U.S. responseto him. I am indebted to all who graciously shared their thoughtson such a challenging set o questions.

Michael Shifter Vice President for Policy

March 2007


9/39


Introduction and Summary

Since coming to o ce in February 1999, Venezuelaspresident Hugo Chvez has consistently stymied U.S.policy rst in the Clinton administration and later, moreprominently, in the Bush administration. Chvez, o course,has evolved considerably over the past eight yearsas has thenature o the challenge he poses to U.S. interests.

As Chvez begins his next six-year term, it is reasonableto expect him to evolve urther, responding to changingcircumstances and taking advantage o opportunities as they arise. In 2007, having amassed tremendous political power andeeling extremely con dent, Chvez claims to be entering intoa new era o 21st century socialism in Venezuela. Washington

will continue to have to deal with Chvezs unique brand o con rontational politics and his exploitation o vast oil revenuesor political aims. Since Washington has been behind the curvein understanding the Chvez phenomenon and its implications,the approaches undertaken to date have sometimes beenadversarial, sometimes conciliatoryand too o ten con usedand contradictory.

To be sure, the task o devising a coherent and sensiblepolicy towards the Chvez government is not easy. Chvezdi ers rom other Latin American leaders and in key respectsrepresents a throwback to the mutual distrust and divisions o the Cold War era. From the outset, his political posture towards

Washington has been hostile. Most Latin American presidents

and governmentseven those that are not part o a regionalmove to the le to ten seek greater distance rom the UnitedStates and disagree with Washington on particular issues.

Since Washington

has been behind

the curve in

understanding

the Chvezphenomenon and

its implications,

the approaches

undertaken to date

have sometimes

been adversarial,

sometimes

conciliatoryand

too o ten con used

and contradictory.


10/39

HUGO CHvEz: A Test for U.S. Policy

They do not, however, share Chvezs aggressive stance nor echo his belligerent tone. They certainly are not committed, ashe is, to constructing a broad alliance in opposition to the U.S.agenda in Latin America and the world. In spite o his rhetoricalantagonism, however, Chvez heads a government that providessome 12 to 14 percent o oil imported into the United States.In 2006, Venezuelas oil exports to the United States exceeded$30 billion. This combination o political strain and economicdependence poses a undamental dilemma or U.S. policymakersresponsible or dealing with Venezuela and advancing thenational interest.

Chvezs approach to domestic governance similarly setshim apart rom other Latin American heads o state. He wasdemocratically voted into power in 1998, 2000, 2004, and againin 2006, but many in the opposition maintain that some o these elections were manipulated, and Chvez has resorted toautocratic and authoritarian practices to consolidate his rule. Henow enjoys an extraordinary concentration o power and acesew, i any, checks and balances on his decisions and actions.

For the Clinton and Bush administrations, which both deemeddemocracy promotion a high policy priority, such conduct hasraised serious concerns.

Moreover, the model o governance Chvez has ashioned andostered holds scant appeal to the Latin American governmentsthat are responding to the rustration o their electorates by striving to render democratic institutions more e ective. Still,

while Chvezs model is ultimately not exportable, some o hisallies have been elected elsewhere in the region. In addition,Chvez can urther undermine hemispheric relations andseriously disrupt the U.S. agenda in Latin America on a variety o key questions, including trade and democracy.

Chvezs political position is strong, particularly in light o his December 2006 reelection and the continuing high price o

oil. At the same time, however, his governance model displays anumber o weaknesses that could become very problematic or the government over the course o his current six-year term. For starters, it is not clear that most Venezuelans, including Chvez

The combination

o political strain

and economic

dependence poses

a undamentaldilemma or U.S.

policymakers

responsible or

dealing with

Venezuela and

advancing the

national interest.


11/39


supporters, approve o their presidents zeal and determinationto concentrate power and remain in o ce inde nitely. Many alsoquestion the governments bureaucratic and management capacity to address day-to-day concerns, particularly mounting crimeand corruption. And despite some bene cial social programs,unemployment remains a serious, stubborn problem and thereare signs that price controls are creating ood shortages.

Furthermore, Chvezs substantial spending outside o Vene-zuelaat the expense, or example, o necessary improvementsin public in rastructure at homeis a potential area o vulner-ability that was exploited with some success by the oppositionin the last presidential race. Despite high economic growth ratesueled by oil pro ts in recent years, there is a real risk that badly needed oreign direct investment will signi cantly decrease asChvez moves ahead with his nationalization program. In addi-tion, declining revenue due to underinvestment in the petro-leum sector could become a problem i oil production dropsdramatically or prices continue to all. Chvez won reelectiondue to a consumer boom, his control o key institutions, and

the lack o a compelling opposition plat orm, but there are clear signs in Venezuela o growing disillusionment with the govern-ments misplaced priorities and poor per ormance.

It is not clear that

most Venezuelans,

including Chvez

supporters,

approve o theirpresidents zeal and

determination to

concentrate power

and remain in o ce

inde nitely.


12/39


Guidelines for U.S. Policy

T he contours o the Chvez governments grandiosedomestic and oreign policy ambitions are increasingly clear. In 2007, the Venezuelan president has gone intohigh gear, intent on dramatically overhauling the economy,suppressing independent sources o political and economicpower, and spreading his radical agenda throughout theregion and the world. At this critical juncture, it is timely and

valuable to set out some guidelines or U.S. policymakers. Therecommendations that ollow take into account and seek toadvance the national interest and values o the United States. They are intended to ashion a more coherent and e ective approachtowards a corrosive and complicated bilateral relationship andhelp repair the image o the United States in Venezuela andthroughout Latin America. The United States should:

1. Take Chvezs talk and actions seriously. With ample resourcesand waning U.S. regional in luence and attention, Chvezsdetermined pursuit o an agenda hostile to Washington is causeor concern. He is intent on extending his in luence and power throughout Latin America and even globally. However temptingit may be or the United States government to ignore him, it hastried that course with little to show or it. Experience suggests that

when the United States avoids dealing with Chvez, disruptionsin bilateral and hemispheric relations tend to accumulate.

2. Only support democratic and constitutional means of addressing

the challenge posed by Chvez. Employing, condoning, or encouraging regime change is morally reprehensible as well as a clear violation o U.S. law and the Inter-AmericanDemocratic Charter o the Organization o American States

When the United

States avoids

dealing with

Chvez, disruptions

in bilateral andhemispheric

relations tend to

accumulate.


13/39


(OAS). It would also be entirely counterproductive and havenegative repercussions throughout the hemisphere. The Bushadministrations ill-advised initial response to the 2002 coupagainst Chvezimmediately recognizing and supportingthe short-lived opposition administration ueled distrusttowards the United States in Venezuela and elsewhere in theregion, while boosting Chvezs popularity and power.

3. Drop its unrealistic expectations and calls for a united frontamong friendly Latin American governments to oppose the Chvezgovernment. Such appeals have alienated key Latin Americanallies in the past, and are likely to continue to do so. For mainly economic but also domestic political reasons, Latin

American governments are o ten understandably reluctantto denounce the Chvez government, unless extremecircumstances warrant. It is neither productive nor wise or

Washington to orce other countries to take sides, in a manner reminiscent o the Cold War era. By pushing this di icultchoice, Washington tends to distance itsel rom moderate,riendly democratic administrations in the region.

4. Closely track political developments in Venezuela and publiclyidentify violations of democratic norms and practices, preferablyvia multilateral channels. In light o the negligible, and declining,checks and balances within the Chvez government, the riskso abuse are signi icant and apt to increase. The situationmerits great and constant vigilance. Media laws that border oncensorship, regulations that limit international support or civicorganizations, and e orts to undermine judicial independenceshould continue to draw proportionate reaction and criticism.

While this is an appropriate area or U.S. policy, any publicstatements or actions tend to be ar more e ective whencarried out multilaterally, pre erably through the OAS. TheOAS secretary generals expression o concern about Chvezsdecision not to renew the license o Radio Caracas TV (RCTV),or example, was valuable and justi ied.

By orcing

other countries

to take sides,

Washington tends

to distance itselrom moderate,

riendly democratic

administrations in

the region.


14/39


15/39


include Brazil and Chile. Andean countries such asColombia and Peru, already allies, should be treated

with greater generosity and ar-sightedness on criticalquestions concerning trade and development assistance.

While they may not be the primary ocus o U.S. attention,countries that appear to challenge the United States, suchas Bolivia and Ecuador, should be made to understandthat Washington remains open to cooperation.

i. The U.S. Congress should make every e ort to overcomepartisan divides and approve the pending tradeagreements with Colombia and Peru as soon as possible.Trade pre erences should be extended or Bolivia andEcuador to avoid social and economic turmoil as wellas to maintain and develop connections with thosenew governments.

ii. The United States should sustain the level o its counter-narcotics aid while exercising proper oversight over theuse o these unds and directing additional money toward

social programs ocused on alternative developmentand employment generation.

iii. Though they may di er on particular policy questions, the United States should encourage a moderate country like Brazil in its pursuit o greater regional and globalleadership, such as its role in the G-20 group during theDoha round o World Trade Organization negotiations

or advocacy o United Nations Security Council re orm.iv. Millennium Challenge Account (MCA) unds have just

begun to be dispersed in Honduras, El Salvador, andNicaragua. The program could help re urbish the U.S.image in Latin America and help the region develop i it

were extended more widely. Current discussions betweenthe U.S. and Bolivian governments should serve as a

oundation or an expanded MCA program in the region.6. Exercise restraint in issuing highly public denunciations.

Tit- or-tat exchanges between Washington and Caracas haveinvariably ended up bolstering Chvez. In contrast, the relatively

Tit- or-tat

exchanges between

Washington and

Caracas have

invariably ended upbolstering Chvez.


16/39


subdued way in which Washington dealt with Chvezs stridentand abusive speech at the UN General Assembly, which wisely

went unanswered and hurt his image, re lected progress ine ective diplomacy in the region. But too o ten U.S. o icialshave gone or Chvezs bait, heightening antagonism with

Venezuela and alienating potential Latin American allies.Chvez thrives on heated exchanges with U.S. policymakers,

which only put the spotlight on him and cement his care ully cultivated image as an underdog ighting or the downtrodden.The political costs o this sparring have been considerable.

7. Only assist open and professional civil society organizationsand avoid backing explicitly partisan groups with narrow politicalagendas. In the past, support or such groups has playedinto the Chvez governments hands and undermined thecredibility o the United States on democracy. And backing theseorganizations is inconsistent with the aims o strengtheningdemocratic institutions and ostering reconciliation in sucha polarized society. In contrast, open and independent civicorganizations committed to democracy that lack a partisancharacter deserve to be considered or external assistance.

8. Develop a thorough inventory of diplomatic levers to respondto explicitly anti-U.S., adversarial actions taken by the Chvezgovernment. It should avoid political retaliation disguised asdi erences in principle, which have been utilized in the past (suchas withdrawing U.S. support or $250 million in internationalloans to Venezuela in response to human tra icking allegations).They have been little more than pinpricks, accomplishing

virtually nothing while weakening the ability o the UnitedStates to credibly address substantive issues. Instead, whenabsolutely necessary, the United States should be ready to useongoing programs and established channels to communicateits displeasure in ways that are subtle but clear to Venezuelangovernment o icials. Washingtons decision not to permit other governments that use U.S.-made parts to sell military hardwareto Venezuela is an example o such a response. It e ectively

In the past, support

or explicitly

partisan groups

with narrow political

agendas has playedinto the Chvez

governments hands

and undermined

the credibility o the

United States on

democracy.


17/39


conveyed displeasure about a Chvez policy and made it moredi icult or him to pursue his goal.

9. Reduce dependency on Venezuelan oil, and oil in general, inanticipation that Chvez could eventually divert exports away

from the United States. As Senator Richard Lugar has rightly pointed out, deteriorating relations between the UnitedStates and Venezuelaand the real possibility o an eventualoil cuto constitute a compelling case or contingency plans and greater energy diversi ication. Setting aside theenvironmental debate, a robust alternative energy sector

would give the United States much greater lexibility indealing with Chvez and his successors. A June 2006 reportrom the General Accounting O ice argues that the UnitedStates is not adequately prepared to address this potentially critical problem. Part o this contingency plan should includecollaboration with reliable Latin American energy partners.The recent Bush administration move to orge a stronger alliance with Brazil revolving around ethanol productionrepresents a welcome step in this direction.

10. Seek to open channels of communication with Venezuelanofficials. U.S. o icials should make every e ort to initiatediscussions at a ormal or in ormal level in order to bridgethe sharp divide between the two governments. The talksmay start at lower levels and may not address speci ic policy issues at irst, but they will build mutual trust over time. Oneo the top priorities in these discussions should be reachinga working agreement with Venezuela to control narcoticstra icking. Over the past several years, the Venezuela-Colombia border has become a major cocaine transit pointand a particularly dangerous area, ri e with illegal armedgroups and drug tra ickers. Reaching a solution will require

vigorous diplomacy and skill ul compromiseit is unrealisticto expect the Chvez government to welcome U.S. orces

with open arms. Venezuela may be willing to cooperate,however, and even an in ormal or low-pro ile collaboration ispre erable to the current situation.

A robust alternative

energy sector would

give the United

States much greater

fexibility in dealingwith Chvez and his

successors.


18/39

HUGO CHvEz: A Test for U.S. Policy 0

Background and History

Hugo Chvez: Latin Americas Pied Piper

To his most ardent backers in Venezuela and among theinternational le t, Chvez is a hero driven by humanitarian

impulses to redress social injustice and inequality. They believe he is tackling problems that were long neglected by atraditional ruling class that was intent on protecting its ownposition while denying the masses their right ul share o wealthand meaning ul political participation. Chvez is bravely ghtingor Latin American solidarity and standing up to the overbearingUnited States. With his charisma and oil dollars, he is seizing an

opportunity to correct the imbalances in power and wealth thathave long characterized Venezuelan and hemispheric a airs.

To his opponentsthe embattled domestic oppositionand many in WashingtonChvez is a power-hungry dictator

who disregards the rule o law and democratic process. He ison a catastrophic course o extending state control over theeconomy, militarizing politics, and carrying out wrongheadedsocial programs that will set the country back decades. He is anauthoritarian whose misguided vision and policies make hima ormidable menace to his own people, his Latin Americanneighbors, and U.S. interests.

These caricatures have de ned the poles o a debate thathas obscured the reality o the Chvez phenomenon. Chvezsappeal cannot be understood without acknowledging the deepdissatis action with the political and economic order elt by much o the population in Venezuela and throughout mucho the rest o Latin Americathe worlds most unequal region.Chvezs claims that he can remedy Venezuelans legitimate

Chvezs appeal

cannot be

understood without

acknowledging the

deep dissatis actionwith the political

and economic

order elt by much

o the population

in Venezuela and

throughout much

o the rest o Latin

Americathe

worlds most

unequal region.


19/39


20/39


constitutional and institutional re orms that trans er more andmore power to the executive. Chvez set out to remake Venezuelaspolitical order rom a corrupt and unresponsive oligarchy into whathe calls a participatory democracy, which he sees as refectingthe wishes o the countrys long-neglected masses.

In pursuing this grand project, Chvez has dismantled or drastically altered many o the countrys political and socialinstitutions. A measure passed by the Chvez-controllednational assembly in February 2007 granted him the power toissue decrees over an 18-month period on a variety o dramaticpotential policy changes rom eliminating private education toredrawing Venezuelas territorial divisions. This Enabling Law

was a logical culmination o a process put in motion at the outseto his rule. The proposal to permit Chvezs inde nite reelection,similarly assured o approval, leaves little doubt about his desireto remain president or li e.

Indeed, immediately a ter his rst election, Chvez began hisoverhaul o the established order by rewriting the constitution.He altered electoral rules to avor his already-popular party, the

Fi th Republic Movement, which enabled him to gain a largemajority in the pivotal constitutional assembly. These maneuverscleared the way or the passage in 1999 o the new constitution,

which lengthened presidential terms rom ve to six years,allowed the president to be consecutively reelected once, andchanged legislative power rom a bicameral Congress to a singleNational Assembly. The military gained a greater role in politics,

as did instruments o direct democracyincluding re erendaand recalls. The new constitution, approved through a nationalre erendum, was only the rst o many political and socialchanges that have shi ted the balance o power in Venezuela andplaced virtually all key decisions in the hands o the president.

For the most part, the opposition in Venezuela has been unableto uni y and provide a viable alternative to Chvezs populist

Bolivarian revolution. The oppositions general ineptitude hasbeen refected in prolonged in ghting and poor decision-making.Chvezs shrewd institutional manipulations and public spendingon social programs have made its task even more di cult. To

The opposition

in Venezuela has

been unable to

uni y and provide

a viable alternativeto Chvezs

populist Bolivarian

revolution.


21/39


be sure, the opposition has tested the Chvez administrationon various occasions, but they have so ar ailed to capitalize onthese opportunities and mount a signi cant political challenge.For example, massive protest demonstrations in 2001 and 2002came to a head on April 11, 2002, when violence erupted in thestreets o Caracas and the armed orces helped remove Chvezrom power temporarily. Con usion ensued as opposition actions

vied or control and the new government sought to dismantledemocratic institutions. Two days later, the military shi ted itsallegiance back to Chvez, who was reinstated. In the end, theattempted coup only allowed Chvez to bolster his control over the military and justi y cracking down on the opposition.

At the end o 2002, the opposition tried a di erent course tooust Chvez. Labor unions and business organizations called or

workers to strike at Venezuelas national oil company, Petrleosde Venezuela (PDVSA). Though it lasted or months, Chvez waseventually able to use the military and other workers to break thestrike and bring production back on line. Ultimately, the strikeback red, allowing the president to re thousands o workers he

deemed to be disloyal, ll executive positions with like-mindedindividuals, and exert nearly complete control over Venezuelasimmensely pro table oil industry.

And in 2003, a coalition o opposition organizations was ableto orce a recall re erendum against Chvez by collecting thesignatures o over 20 percent o the total electorate. Chvez wonthe re erendum, held on August 15, 2004, with a 59 percent No

vote. Although observers rom the Carter Center and the OAScerti ed the elections as air, some sectors o the oppositioninsisted there were irregularities in the voting lists, machines,and procedures. Still, in the end, the recall process enhancedChvezs legitimacy and urther marginalized the opposition.

Moreover, citing concerns that voter secrecy would becompromised and the election would be rigged, opposition

parties boycotted the congressional election in late 2005.Such a decision, calculated to provoke an international outcry about the regime, only ensured that pro-Chvez parties wouldll all 167 seats in the National Assembly. A year later, Chvez

Ultimately, the

PDVSA strike

back red, allowing

the president to

re thousands oworkers he deemed

to be disloyal, ll

executive positions

with like-minded

individuals,

and exert nearly

complete control

over Venezuelas

immensely

pro table oil

industry.


22/39


23/39


sign o Chvez restricting press reedom, however. According tothe new criminal code, it is an o ense to show disrespect or the president and other government authorities, punishableby up to 20 months in jail. The Law o Social Responsibility inRadio and Television, passed in early December 2004, comesclose to censorship by imposing administrative restrictions onradio and television broadcasts. The measure has been strongly condemned by various groups, including the Inter-AmericanCommission on Human Rights, a body o the OAS, and theInter-American Press Association. The possibility o arbitrary en orcement o these restrictive laws or political reasons hashad a chilling e ect on the press.

The Venezuelan Congress has already taken the rststep toward passing the Law o International Cooperation,

which would require every domestic and international non-governmental organization (NGO) that receives internationalunding to register with the government. The law restricts thetype o activities in which NGOs can engage and grants theexecutive the authority to determine the conditions the NGOs

must meet in order to registeran invitation to abuse. There isalso credible evidence that government o cials have practiced aorm o political discrimination or instance, using re erendumpetitions to single out opposition sympathizers and deny themaccess to social programs or government jobs.

In addition, the military is becoming increasingly involved inpolitical a airs in contemporary Venezuela. Chvez, a ter all, was

a decorated lieutenant colonel in the Venezuelan armed orcesbe ore he led the coup that earned him a two-year jail termalong with widespread popular approval. Chvez knows themilitary well and uses these connections as president. He changed

Venezuelan law in order to remain an active military o cer.More than one-third o the countrys regional governmentsare controlled by soldiers directly linked to Chvez. Many

military o cers have even been appointed to senior positionsin vital enterprises such as PDVSA, development corporations,and ood distribution agencies. The role o the military under Chvez has expanded to include a variety o internal security

There is credible

evidence that

government o cials

have practiced a

orm o politicaldiscrimination or

instance, using

re erendum

petitions to single

out opposition

sympathizers and

deny them access to

social programs or

government jobs.


24/39


25/39


many cases. Evaluating their ultimate value is more problematic,and some misiones have been carried out largely according topolitical criteriathat is, loyalty to Chvez and his government.

Chvez is able to und these social programs rom the massiveoil revenues brought in through PDVSA. When Chvez came topower in 1999, oil was selling or less than $10 a barrel. Duringhis administrations, the price rose to over $75 a barrel be oredropping o . Most experts agree that in the short and mediumterm the price will probably stabilize at $55 to $60 per barrel.Oil revenue accounts or roughly one-third o Venezuelas totalGDP and 80 percent o its export revenue. This infux o cashgives Chvez fexibility in setting his budget that ew other leaders have in mostly cash-strapped Latin America (or, or thatmatter, anywhere in the world). It also allows him to spread the

wealth around the country, thereby building a solid political basethrough traditional, clientelistic politics.

Whether most Venezuelans are marginally better or worse o under Chvezthe evidence is mixed and raises methodologicalquestionsit is clear that the government has not devised policies

that generate employment and take advantage o the abundantresources it has at its disposal or Venezuelas broad-baseddevelopment. There are serious and valid questions regardingthe sustainability o Chvezs ormula or social betterment. A number o signs strongly suggest the Chvez experiment may beanother lost opportunity or the countrys poor.

U.S.-Venezuela RelationsIn the past, relations between the United States and Venezuela

have been mostly cordial and cooperative. During the 1960s andmuch o the 1970s, Venezuela represented a model o politicalstability and economic progress in an o ten turbulent Latin America.There has long been substantial U.S. investment in Venezuela,particularly in the petroleum sector, and the two countries have also

had close cultural ties. To be sure, there have also been momentso some tension and confict, such as during the 1970s and 1980s,

when Venezuelas oreign policy diverged somewhat rom that

The infux o oil

money allows

Chvez to spread

the wealth around

the country, therebybuilding a solid

political base

through traditional,

clientelistic politics.


26/39


27/39


28/39

HUGO CHvEz: A Test for U.S. Policy 0

I implemented, the move would go considerably beyond theprevious policy o imposing sti er taxes and royalties on U.S.companies, which were applied in May 2006 to the dismay o investors in the petroleum sector. In February 2007, Chvezreached deals with and o ered acceptable compensation to

Verizon and AES. He may avert a urther deterioration in bilateraleconomic relations i he ollows this path in uture deals.Nevertheless, given the thrust o Chvezs autocratic moves on a

variety o rontsand heightened uncertainty about continuedU.S. investment in Venezuelait is unrealistic to hope or animprovement in the overall bilateral relationship.

In addition to his nationalization e orts, Chvez has previously expressed a desire to close down some re neries in the UnitedStates and to seek other markets or Venezuela, especially inChina and India. These statements signal the new directionthat Chvez would like to take in order to reduce the countrysdependence on the U.S. government and its vulnerability to apotential decision not to buy more Venezuelan oil. Still, expertsagree that there are ormidable technical and economic obstacles

to the pursuit o that course, at least in the near term. Thereis a constant tradeo between Chvezs political vision o 21stcentury socialism and the economic exchange with the UnitedStates that is essential to generate the resources needed toachieve this vision.

Given the thrust o

Chvezs autocratic

moves on a variety

o rontsand

heighteneduncertainty about

continued U.S.

investment in

Venezuelait

is unrealistic

to hope or an

improvement in

the overall bilateral

relationship.


29/39


What is the Problem?

F or the United States, the act that Venezuela supplies asigni cant share o all U.S. oil imports is a undamentalreason why the increasingly deteriorating bilateralrelationship poses a problem that should be addressed rather than ignored. Energy issues are and should be a central concernor Washington in dealing with Venezuela given the continuing,mutual dependence between the two countries.

But in light o Chvezs explicitly anti-U.S. rhetoric andactions, it would be surprising i he did not eventually seek tosupplant the U.S. market, in an e ort to protect Venezuela romany harsh, punitive action by Washington. Indeed, Chvez hasalready substantially increased oil exports to China while PDVSA has set up a Beijing o ce. Venezuelas oil exports to China grew ten old rom 2004 to 2006 rom 12,300 barrels to 150,000andthey are expected to triple again in the next ve years to 500,000barrelsa quarter o the countrys total oil exports. Chvez ismoving aggressively to open up and expand other markets inan e ort to shi t away rom the United States, end dependence

on his main adversary, and extend his infuence in Latin Americaand throughout the world.

Chvezs hereto ore ample supply o petrodollars hasenabled him to vigorously pursue his political project, not only in Venezuela, but across Latin America and globally as well. O course, the increasingly autocratic tendencies o Chvezs ruleshould be cause or concern in Washington and throughout a

region that has repeatedly committed itsel to democratic normsand progress. The erosion o the rule o law and woe ully de cientdemocratic and institutional sa eguards in Venezuela could leadto greater restrictions o undamental civil and political rights.

Chvezs hereto ore

ample supply o

petrodollars has

enabled him to

vigorously pursuehis political

project, not only

in Venezuela,

but across Latin

America and

globally as well.


30/39


The di culties the United States aces in dealing with theChvez administration are not limited to Venezuela. They directly infuence Washingtons agenda in Latin America as wellas sensitive U.S. national interests across the world. On regionaland global levels, Chvezs rhetoric and actions counter thepriorities Washington is pursuing and, as a result, pose a seriouschallenge to the United States.

Latin American Agenda

Chvez has consistently sought to block progress or cooperation on several U.S. projects in Latin America. To illustrate,rom the outset o his rule, Chvez has ercely opposed U.S.plans to extend ree trade throughout the Americas, particularly

via the region-wide Free Trade Area o the Americas (FTAA). In July 2005, Chvez said such e orts should be buried. He hascalled the FTAA a vehicle o U.S. imperialism. He has depicted

Washingtons position on ree trade as an attempt to imposeU.S. economic and political control over more vulnerable Latin

American economies. In his e ort to construct and orti y acounterweight to U.S. infuence in the region, Chvez proposedhis own regional integration mechanism called the Bolivarian

Alternative or the Americas (ALBA), which he claims is based oncomplementary trade and cooperation rather than ree-marketcompetition. So ar, the only other ALBA members are Cuba,Bolivia and, most recently, Nicaragua.

In April 2006, Chvez said that he would leave the Andean

Community o Nations (CAN) because two o its membersColombia and Peruhad negotiated ree trade agreements with

Washington. For Chvez, this was an unacceptable deviationrom his own vision or the region. Venezuelas membership inthe Mercosur trade group o South America refects an e ort toadvance his political agenda and extend his infuence throughoutthe region. Chvez is seeking to trans orm the arrangement into

a political organization, moving it substantially away rom itsoriginal purpose. So ar, Argentina, Paraguay, and Uruguay havebeen reluctant to admit Bolivia, a strong Venezuelan ally, into

From the outset o

his rule, Chvez

has ercely

opposed U.S.

plans to extend reetrade throughout

the Americas,

particularly via the

region-wide Free

Trade Area o the

Americas (FTAA).


31/39


Mercosur, partly because it would give Chvez greater say over the blocs uture. These countries do not share Chvezs socialist

visionUruguay reached a trade and investment agreement with the United States in early 2007. Such di erences set up astalemate that threatens to urther unravel and undermine oneo the most important regional organizations in Latin America.

To pursue his Latin American strategy, Chvez is relying on closeallies such as Bolivia, led by Evo Morales, to go along with him.In 2006, despite setbacks in Peru and Mexico, Chvez supporters

won the presidencies o Nicaragua, where Sandinista DanielOrtega returned to power, and Ecuador, where voters electedRa ael Correa, a political novice who has pro essed riendship

with Chvez and echoed his anti-U.S., anti-globalization rhetoric.It is unclear to what extent both o these leaders will ollow Chvezs lead, particularly in view o their own agendas and their stated desire to cooperate with the United States as well.

In the case o Bolivia, however, despite some di erences with Venezuela and cooperation with the United States, the alliance with Chvez seems to have solidi ed over the rst year o the

Morales administration. In late 2006, Venezuela pledged to sendtroops and spend millions to help Bolivia build military bases onits borders, which raised particular concern in neighboring Chileand Peru. The Bolivian Congress has stalled the pact so ar, butcivil unrest, Venezuelan pledges to ght or the Morales regimein a crisis, and the arrival o several dozen uni ormed Venezuelansoldiers have done nothing to lessen the apprehension o the

Bolivian opposition or its neighbors.To carry out his grandiose schemes, Chvez is also counting

on the indulgence and acquiescence o other Latin Americanleaders such as Luis Inacio Lula da Silva in Brazil and Nstor Kirchner in Argentina. Most o his proposed projects or regionalintegrationincluding Petrosur, Petrocaribe, and the Pipeline o the Southessentially revolve around oil, but have explicitly

political aims. Estimated costs and technical easibility areserious concerns and raise doubts that they will eventually cometo ruition. Still, Chvez is pledging to proceed with a variety o regional integration initiatives, and pragmatic Latin American

The di erences

among Mercosur

members set

up a stalemate

that threatens tourther unravel

and undermine

one o the most

important regional

organizations in

Latin America.


32/39


governments are open to an in usion o resources and preparedto wait and see what actually results. Though it is still expanding,the Petrocaribe initiative, through which Venezuela distributesnearly 200,000 barrels o oil daily to various Caribbean nations,has helped Chvez consolidate alliances in the region.

The most symbolically power ul de ance o Washington by Chvez in the Western Hemisphere has to do with his warmriendship with Fidel Castro and economic support or hisregime. Chvezs supply o some 100,000 barrels o oil every day has been a signi cant subsidy propping up the Cuban economy.In turn, Castro has provided Chvez with thousands o teachers,doctors, and, it has been widely reported, a variety o military intelligence and security advisors, who per orm a range o political unctions to bolster Chvezs rule.

The nature o the Venezuela-Cuba relationship in the post-Fidelera is uncertain and subject to a great deal o speculation, butit is reasonable to assume that economic assistance and mutualsupport will continue on the current course, though the levelo aid may change. While Ral Castro apparently does not have

the same close relationship with Chvez that his brother does,he cannot a ord to orgo the substantial aid Chvez provides.The United States should seek to help make whatever transitiontakes place in Cuba as peace ul and democratic as possible. The

Venezuela relationship is now a central economic and geopoliticalactor in the Cuba challenge that cannot be ignored.

By attempting to lead a realignment in the Americas, Chvez

is disrupting a regional agenda based on democratic politics,market economics, and better relations with the United States.The good news is that most Latin American governments,though disappointed with the results o that agenda in their ownexperience and increasingly distrust ul o the United States, rejectsuch a radical and divisive approach to regional politics. This o ersan opportunity or the United States to reengage constructively

with the region on a variety o rontsthe social and governanceagendas in particularand compete with Chvezs undamentally unworkable and unappealing recipes or social betterment.

The Venezuela

relationship is now

a central economic

and geopolitical

actor in the Cubachallenge that

cannot be ignored.


33/39


34/39


are eclipsed by the political signals. They tell the world that Iran,an international pariah, is welcome in Latin America, which istraditionally regarded as the strategic preserve or backyard o the United States. For Washington, which sees Iran as an adversary and worries about its role in Iraq and its nuclear program, therelationship with Venezuela and, by extension, other Latin

American governments, should be o particular concern.Beyond Iran, Chvez is also actively seeking to consolidate

ties to other major powers and use his oil wealth to establish hiscredentials as a serious global player. Chvez is putting particular emphasis on his relationship with China in an attempt to divertthe principal market or Venezuelan oil rom the United States.President Hu Jintao has met with Chvez several times and isclearly interested in deepening the economic relationship. Inaddition, Chvez has sought to strengthen his relationship withRussia. Arms purchases o Kalashnikov rifes, Sukhoi ghter jets,and Russian military helicopters have been an important pieceo Chvezs global strategy. He also has been pursuing closer ties

with countries around the world that share his social agenda and

anti-U.S. stance, including Belarus, Vietnam, Syria, Qatar, Benin,and Angola.

To date, Chvezs aggressive global diplomacy has yieldedmixed results at best. Though he has spent over a year away rom

Venezuela on oreign trips since taking power and was able to lineup support rom Russia and China, Venezuela ailed to secure anon-permanent seat on the UN Security Council in 2006. Just as in

Latin America, most governments throughout the world welcomeChvezs oil and economic deals but remain uncom ortable withhis con rontational and adversarial politics. Widespread oppositionand criticism o U.S. global policiesin Iraq especiallydo notnecessarily translate into support or Chvez.

Just as in Latin

America, most

governments

throughout the

world welcomeChvezs oil

and economic

deals but remain

uncom ortable with

his con rontational

and adversarial

politics.


35/39


Still, it would be a mistake to underestimate Chvezs tenacity on the world stage or his impassioned determination to orge ananti-U.S. coalition, which is the coherent thread running throughmany o his renetic oreign policy initiatives. He is a notably astutetactician, sophisticated in his understanding o global politics.He is plainly trying to take advantage o U.S. weakness andde ensiveness, and ride what he sees as heartening political wavesin Latin America and throughout the world. The risk that Chvezcan continue to disrupt and complicate U.S. policies in a variety o sensitive areas o the world should not be dismissed.

It would be

a mistake to

underestimate

Chvezs tenacity

on the world stageor his impassioned

determination to

orge an anti-U.S.

coalition, which is

the coherent thread

running through

many o his renetic

oreign policy

initiatives.


36/39


Concluding Thoughts

I n light o the myriad global challenges acing the UnitedStates, it is tempting to view Venezuela under Chvezs ruleeither as a sideshow that should be ignored or as a threatthat should be met with an aggressive reaction. In oreign policy discussions, there is o ten pressure to t it in one o the twocategories.

In reality, however, Venezuela is a sui generis policy challengethat should be treated on its own terms. With a lot o money anda clear agenda, Chvez has relentlessly opposed U.S. interestsand values in Latin America and worldwide. Though his agendais at sharp odds with the concerns o the vast majority o leaders,Chvez has upset U.S. priorities in Latin America, ueled disarray in the region, and omented anti-U.S. sentiment across the world.To date, both passivity and direct con rontation rom Washingtonhave only tended to worsen matters and strengthen Chvez.

Against that backdrop, this report sets out a series o guidelinesor U.S. policymakersthe executive and Congressthat seekto put U.S. policy towards Venezuela on a more productiveand coherent course. The guidelines are designed to helpthe United States keep Chvezs more disruptive and divisiveactions in check, while at the same time remain open to areaso cooperation with the Venezuelan government and society.Grounded in U.S. interests and values, the guidelines strive tobe realistic and recognize the narrow range o policy levers andoptions available. They also take into account that resources and

high-level attention will necessarily be limited in the near uture,as the most senior o cials will doubtless be distracted by other,more urgent oreign policy prioritiesIraq in particular.

Venezuela is a

sui generis policy

challenge that

should be treated

on its own terms.


37/39


38/39


39/39

Inter-AmerIcAn DIAlogue1211 c i Av , nWS i 510

Washi , Dc 20036

PHone: 202-822-9002FAX: 202-822-9553emAIl: iad@ h dia

Inter-AmerIcAn DIAlogue

Th Int -A ican Dial is th l adin u.S. c nt fp licy analysis, xchan , and c nicati n n iss s inW st n H isph affai s. Th Dial b in s t thp blic and p i at l ad s f ac ss th A icas t add ssh isph ic p bl s and pp t niti s. T th th y s k t b ild c p ati n a n W st n H isph nati ns andad anc a i nal a nda f d c atic nanc , s cialq ity, and c n ic wth.

Th Dial s s l ct b ship f 100 distin ish d citi nsf th h t th A icas incl d s p litical, b sin ss,acad ic, dia, and th n n n ntal l ad s. Tw lDial b s s d as p sid nts f th i c nt i s and

than tw d n ha s d at th cabin t l l.

Dial acti iti s a di ct d t n atin n w p licy id as

and p actical p p sals f acti n, and ttin th s id as andp p sals t n nt and p i at d cisi n ak s. ThDial als ff s di s Latin A ican and Ca ibb anic s acc ss t u.S. p licy d bat s and disc ssi ns. Bas d

in Washin t n, th Dial c nd cts its w k th h t thh isph . A aj ity f B a d f Di ct s a f LatinA ican and Ca ibb an nati ns, as a than half f thDial s b s and pa ticipants in th l ad shipn tw ks and task f c s.

Sinc 1982th h s cc ssi r p blican and D c aticad inist ati ns and any chan s f l ad ship ls wh inth h isph th Dial has h lp d shap th a nda

hugo chavez - a test for u.s. policy (pdf)

Documents