March 2000 Vol. 221 No. 3  International Politics

Stuart Wilkinson,  Contributing Editor

Venezuela takes stock of Chavez after one year

CARACAS – February 2 and February 4 are now two important dates in Venezuela. February 2 became important, as it is the anniversary of the first year of President Hugo Chavez’ government. February 4 marked the eighth anniversary of the coup attempt led by Chavez in 1992.

That coup attempt failed, but it eventually changed the government of then-President Carlos Andrés Pérez (of the "Acción Democrática" party), replacing him with interim President, Dr. Ramón Velásquez. In the next presidential contest, Rafael Caldera was elected. He had broken with the social Christian party "Copei" (which he had formed) and had run under his own banner – the "Convergencia" party – with the support of such parties as "MAS" (Movement to Socialism) and what is now "PPT" (roughly translated, "A Motherland for Everyone"). The latter two parties are now part of Chavez’ political base.

In the Caldera administration, "Apertura Petrolera" – the opening of state oil company PDVSA to private investment – was started by then-PDVSA President Luis Giusti. To some observers, Apertura becamethe economic policy of that administration, a way for economic development to cascade down into the rest of the economy. To others at that time, this policy was considered blatantly wrong. The Chavez administration has brought "corrections" to these "wrong" policies.

One year later. Taking February 2 as the first topic of discussion, what has happened in this first year economically? Arguments come from both sides. To be fair, one should say that from the government’s standpoint, economic results have been good. Compared with previous years, annual inflation is low, at just under 20%, and the bolívar has remained within the Central Bank’s targets. However, unemployment stood at 20% for 1999, with half-a-million people or more losing their jobs during the year, according to independent estimates. GNP contracted more than 7% in the same period. But again, according to the government, major political advances were made during Chavez’ first year in office. This occurred mainly through the Constituent Assembly, the new constitution, and through defeat and burial of the old political parties, Acción Democrática and Copei, who, in this administration’s eyes, had ruined the country over the last 40 years or so.

Last year was a time for sorting things out politically. Year 2000 is the year of the economy, when "reactivation" of some programs comes under a cleaned-up political system. This is what officials have promised the electorate. Apart from localized reactivation stemming from the reconstruction of flood-devastated Vargas State, economic movement is planned to come from exploitation of the Orinoco / Apure Rivers axis, and development of the natural gas and petrochemical sectors.

In terms of hydrocarbons, PDV Gas has started up a gas development plan by setting up the selection process for potential partners for the transport system that will operate between Anaco and José. Investments for year 2000 will add as much as $100 million to this effort, when the transport system from Barbacoas to Margarita Island is added in. In a sense, this emphasis on gas development (and the gasification of cities) is about a cascade of development in the rest of the economy. It is a matter of placing more emphasis on non-oil projects without neglecting spending on oil.

So what about OPEC’s policy on oil production cuts? According to Vice Minister of Energy and Mines Alvaro Silva Calderón, production cuts, themselves, do not affect the private oil sector. He said they stimulate investment in projects that previously were affected negatively by low oil prices. This is a position contradicted by voices coming from the Petroleum Chamber, who say that the cuts have brought severe economic recession to Venezuela. Nevertheless, in a television interview on February 2, Energy and Mines Minister Alí Rodríguez Araque (of the "PPT" party) said that the Chavez government’s overall balance for the first year was "highly favorable." He said that the rise in oil prices during 1999 – from $7.53/bbl at the beginning to $26.25/bbl at the end – improved income, activities and employment.

Hitting hard, PDVSA president Héctor Ciavaldini made it clear that, within the company’s management previous to the present government, there had been serious administrative failures and negligence – a clear indication that he believed that very wrong decisions had been made. To a certain extent, the "man on the street" sees that the government is trying to straighten out the country and clean up what many people see as ingrained corruption and abuse of power, be this from political parties, unions or those in privileged positions.

Eight years later. This really is what one may understand that February 4 symbolizes: a movement to some type of more efficient participation in decision-making. At the same time, it also means that "hard" positions may have to be taken at certain times. Such a hard position can be seen in PDVSA’s relationship with the oil unions, in which Rodríguez Araque said that the union demagogues’ flags should be taken away, and the rights of workers should be respected.

So why is February 4 really important? According to certain people speaking on behalf of the government, the failed coup on that date in 1992 opened the doors to real democratic development of Venezuela. And in this context, one must remember that the military people who were involved in that action, and later events of November 27 of that same year, will have a good chance of being integrated back into what is now called the "Armed Force" (rather than the plural "Armed Forces"). These people are also part of the present government’s political base. Officials have to satisfy the desires of many people and various sectors of society. One must hope that their oil policy is sufficiently correct to match the desires of the people, who have put a great deal of trust, hope and faith in the government.

Stuart Wilkinson is a Caracas-based journalist with extensive experience covering Venezuela’s petroleum industry. He currently is editor of the English section of the magazine, Enfoque Petrolero. He will be a regular contributor to this column, which features oil-and-gas-related political news and analysis from various world regions, as well as quarterly reports on U.S. governmental activities.

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