VENEZUELA 2009 - January 1, 2009

What will happen in Venezuela in 2009? I will not try to answer

this question in the proper, correct manner, of outlining three

basic, possible scenarios and assigning probabilities to each. I will

simply offer you a prediction, based on feelings and guesses.

THE POLITICAL SCENE: THE ROAD TO MUGABE

In the political scene, I believe that President Hugo Chavez will force a referendum on a constitutional reform that would allow him to be re-elected. This seems an easy prediction to make, since the National Electoral Council, led by members of Chavez’s clique, are already making the arrangements for this event to take place during the first quarter of 2009. I believe Chavez will lose this referendum and that he will try to commit fraud. However, the close monitoring of the opposition and some arm-twisting from the armed forces will force him to accept the results, just as it happened in December 2007.

Confronted with a new electoral defeat and an incoming financial crisis, Chavez will shed all remaining pretenses of democratic rule and will become openly autocratic. His speeches and actions will become much more aggressive. Nationalizations will give way to expropriations without due process. He could even declare a national emergency, formally suspending all constitutional rights and might send to prison one or more members of the opposition, under charges of corruption or of conspiring against his life or his regime. He could decide to close down GLOBOVISION and, even, El Nacional daily newspaper. 

His cabinet will be significantly modified, this time to be made up of his most unconditional followers: Carreño, Maduro, his brother Adan, Isturiz and the like. He might come to a confrontation with Cabello. In essence, he will adopt a strategy of political retrenchment, further developing a siege mentality. He will take measures that will be openly dictatorial in the economic sector.

THE ECONOMIC SECTOR: DEEPER INTO CHAOS

Chavez might be forced to take several controversial financial steps during 2009:

One, he might refuse to acknowledge Venezuelan debts, following on Correa’s recent example in Ecuador. By doing this, he will attempt at negotiating with Venezuelan creditors a more favorable financial arrangement, although this would be clearly immoral and would prove to be suicidal from a national perspective, placing Venezuela in the category of a financial rogue state.

Two, he will have to face a huge fiscal deficit. His 2009 budget is close to $90 billion, bigger than Colombia’s, a country with more population, and he has built it on an oil production level of 3.2 million barrels per day and an average oil price for the year of $60 a barrel. This is pure fiction, since production is closer to 2.4 million barrels per day and the average oil price could well be in the $50 per barrel during 2009. Therefore, in order to make ends meet he will have to devalue the Bolivar by about 30%. International borrowing is out of the question. No banks or countries will lend him more money, since China, Russia and Iran are experiencing their own acute problems.

Three, he will have to cut his social programs. He has already started to do this. He will also have to suspend help to Ortega, Morales, Lugo, Funes and Kirchner. Either one of these two actions will create severe political problems for him.

Four, levels of imports will have to be reduced. They are now at some $40 billion per year and this is unsustainable under the new financial situation. Travel allowances for Venezuelans going abroad will be reduced.

Five, although he would have to reduce oil exports to comply with OPEC’s quota restrictions he will try to cheat because he is already producing much less than what he claims. Petroleos de Venezuela will experience severe cash flow problems, delay payments to contractors and project execution and reduce maintenance and required investments. This, in turn, will result in further loss of production in the short term. 

Six, corruption will increase, as his followers and the parasitic bureaucracy he has created will try to grab as much as they can, in case the regime collapses (“raspar la olla” is the Venezuelan term).

Seven, food shortages, electricity outages, labor strikes and popular protests will increase, as the regime will be unable to maintain public utilities in good operating shape and incapable to fulfill its obligations and promises to the nation. The regime will enter into a spiral from which it might not be able to recover, unless another dramatic surge in oil prices takes place.

THE SOCIAL SECTOR

Handouts to the Venezuelan poor have been the backbone of Chavez’s strategy to consolidate political power. As oil income was significant he could afford to keep everyone happy at the same time. This will no longer be possible in 2009. Furthermore, Chavez will want to “punish” those that did not vote for him. He has already blamed poor sectors of the population, such as the Petare marginal area, for his electoral loss of Caracas in November 2008. The “Misiones” will start to reach less Venezuelans and this will create increasing unrest among the poor. The food distribution business will continue, although with increasing levels of corruption and inefficiency. The literacy program will be essentially abandoned since it has been unable to surpass an asymptotic 93% existing in Venezuela since the 1990’s. Educational projects making use of the artificial satellite Simon Bolivar will die at birth, for lack of trained personnel.

There is a small possibility of violence in the country. Venezuelans have been suffering increasing humiliations and social ailments during the Chavez regime. However, this has been a slow and systematic process, similar to the boiling of a live frog, done by careful increase of the water [political] temperature. For some years, Chavez was almost successful in boiling democratic Venezuela without the frog jumping out of the pail. However, his attempt at becoming president for life in 2007 and his renewed effort in 2008 made the frog jump out and are not going back in. Venezuelans might resort to violence to force him out but all indications suggest that this will not be necessary, as the regime is clearly imploding.

VENEZUELA AFTER CHAVEZ

Although Chavez will probably survive 2009 it is time for Venezuelans to consider what will happen after he is gone. This is not an easy question, as the country is in ruins, both materially and spiritually. Political instability, financial and economic chaos and high levels of social and, even, racial, friction dominate our nation and will continue to do so for some time after Chavez is gone from the presidency. Chavez and his band will not quit politics and will continue to be an important factor of national unrest. An all out effort will have to be made to put Venezuela back on a democratic track. If there is something positive to be learned from the Chavez’s nightmare is that the poor have to be taken into account, not at the exclusion of every other component of our society, as Chavez has done, but as a component that needs attention and urgent upgrading and not handouts, empty promises and rhetoric.

Gustavo Coronel

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Gustavo Coronel was a founding member of the Board of Directors for Petroleos de Venezuela (PdVSA), 1976-1979. He was elected to the Venezuela's House of Deputies for the State of Carabobo, the most highly industrialized state in Venezuela, however the Congress was dissolved by Hugo Chavez in 1999. Mr. Coronel is a graduate of the University of Tulsa, Central University of Caracas and Johns Hopkins University’s School of Advanced International Studies.

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See also:

Democracy in Venezuela Blog - by Diego Arria

Crime and Punishment, Crime without Punishment - by Diego Arria

What Chavez Has Wrought - by Duncan Currie

The Future of Hugo Chavez's Petro-diplomacy - by Gustavo Coronel

The Threat Closer to Home - by Gustavo Coronel

Venezuela 2009 - by Gustavo Coronel

From uncle Sam to uncle Tom - by Diego Arria