Is Venezuela on the verge of civil war? Since December 2001, Venezuelans have lived through four general strikes and an attempted coup d’état. It is obvious that Venezuelan society is undergoing an accelerated process of polarization regarding its president, Hugo Chávez. The social breakdown has struck a blow against the economic engine of the country – petroleum – at precisely the same moment when the menace of a second Gulf War has set off a rise in fuel prices. To put an end to the conflict, the opposition is asking that elections be held immediately so that Chávez can leave office. However, the charismatic Chávez argues that the constitution prevents any official electoral announcement until August 2003. Universia Knowledge at Wharton analyzes the causes of the Venezuelan conflict and tackles this question: “Is a democratic solution to the crisis possible?”


“It is going to be very difficult to find a peaceful solution to the social and political breakdown that Venezuela is undergoing,” affirms Rafael Pampillón, professor and director of research at the Instituto de Empresa. “I can’t rule out the possibility of a violent outcome to the crisis, which could lead to a civil war or to an armed conflict because, among other reasons, everyone in this country is armed,” adds Pampillón.  Nevertheless, recalls Pampillón, “Chávez holds the law in his own hands because the text of the constitution prohibits the calling of elections until the month of August.”


The two factions involved in Venezuela’s social rift can be outlined as follows: On one side is the opposition to President Chávez. It consists of the middle class, which believes its right to private property is threatened; the independent communications media, which feel threatened by continued restrictions on their liberty of expression; and the business community, as represented by Fedecámaras, the employers’ association.


On the other side is the block tied to Chávez, consisting of the humble people who value Chávez’s agenda of social measures. The federation of labor unions, known as the CTV, wound up joining the opposition after Chávez tried to take over the petroleum industry by naming the president and managerial board of PDVSA, the petroleum company.


In reaction, and in an effort to force the departure of the president, the opposition took over the country’s principal source of income – oil. PDVSA controls 95 percent of nation’s crude oil, and owns 14,800 oil wells. Sources close to the Venezuelan government verify that half of those wells are shut down by the strike that PDVSA workers have declared. The economic cost of this showdown can be measured in tens of millions of dollars, and it will take many years to recover those losses. For example, Iran lived through the shutting down of its oil wells during the Khomeini revolution, yet that country has yet to recover the full potential of its oil production.


Even if the strike at PDVSA were to end today, it would take Venezuela four months to recover daily production levels of three million barrels that it reached before the crisis. Although the government asserts that it is now producing two million barrels a day, Pampillón notes that the opposition puts that figure at seven hundred thousand barrels. If the lower figure is accurate, continues Pampillón, “it would signify a hard blow to an economy so exposed to a sole source of income.”


Adds Pampillón, “Petroleum accounts for eighty percent of Venezuela’s exports, and usually fifty percent of [the country’s] income comes from sales of crude oil. Stability will never come to this country until it achieves a profound reform of its economic model, adjusting its public-sector spending and reducing its exposure to petroleum.  Chile knew how to solve this sort of problem. At one point, Chile depended on copper for eighty percent [of its income]. That figure has been cut to about forty percent.”


Chávez, Hero or Villain

How did Venezuela get to this point? The root of the problem dates back to December 6, 1998, when Hugo Chávez, a charismatic ex-military officer and former leader of a coup d’état, converted himself into the youngest president in the history of Venezuelan democracy. His populist ideology permitted Chávez to win over several sectors, and get the support of 56.2 percent of voters. Nevertheless, the middle and upper classes, which began by showing broad support for Chávez, gradually withdrew their trust. The revolutionary and belligerent tone of his speeches, along with the growing economic crisis, and the opposition’s accusations of authoritarianism all combined to undermine Chávez’s popularity. Eventually, on April 11, Chávez was deposed of his power for forty-eight hours as the result of an attempted military coup.


Chávez had assumed that his populism would lead to convincing electoral success.  His story reflects “a recurrent phenomenon throughout the history of Latin America,” explains José Maria Peredo, journalist and professor of international relations at the Universidad Europa. Peredo says, “Usually, [populism] emerges when traditional parties monopolize the structure of power yet do not represent the majority of the population. In addition, this lack of representation comes at the same time as an economic crisis or a corruption scandal, leading to a rising number of protests and the emergence of several individuals who promise change.”


Nevertheless, the populist measures that follow are “not profitable but generally focused on charity,” Peredo asserts. For example, “Alberto Fujimori, ex-president of Peru, gave away bicycles to the poor. In most cases, populism lacks sufficient intellectual strength and international staying power, as well as truthfulness. That’s because a system cannot change in a year and a half. Moreover, if populists promise change and it doesn’t happen, the people react by branding them as traitors.”


The arrival of Chávez was accompanied by a drop in oil prices that forced the Venezuelan government to recalculate its budget several times during that year. To top things off, tax evasion deprived the state’s coffers of forty percent of its collections. “A corrupt legal system and a political class that is incapable of satisfying the needs of society — six of every ten Venezuelans were living in poverty — combined to create a suitable breeding ground for the promises of change and social well-being that proved successful for Chávez,” Pampillón explains.


After acquiring power, Chávez began the constitutional process that culminated on December 15, 1999 in the approval by a wide majority of the “Bolivarian Constitution,” although it should be emphasized that 54 percent of the Venezuelan electorate abstained in that vote. Parallel to these developments, President Chávez had been acquiring special powers ever since the outset of his administration, culminating in the moment in October 2000 when the National Assembly granted Chávez the authority to legislate by decree in matters involving the economy, as well as social and public administration.


During the first year of Chávez’s administration, public expenditures shot up, thanks to an improvement in the price of crude oil. “The president’s priorities were social assistance, constructing public housing and schools, and creating new jobs,” recalls Pampillón. Nevertheless, the International Monetary Fund warned Chávez that the benefits of improved oil prices were being neutralized by excessive public spending.


Moreover, the opposition argued that Chávez’s way of doing things was generating inflation. The only way Venezuela could reduce its exposure to crude oil was to strengthen its private sector, but Chávez did not appear disposed to adopt such measures. All these factors were causing his popularity to drop at the very same time when several social sectors were losing confidence — to the point where his powers of speech were derided as incoherent.


The Crisis Erupts

In November 2001, Chávez continued his populist measures, approving by decree a package of forty-nine laws. This included the polemical “Law of Lands,” which permits the Venezuelan government to use lands that are not used productively by its owners, as well as the “Organic Law of Liquid Hydrocarbons.” At once, these new regulations stirred up fear and distrust among the middle and upper classes. The opposition then began to mobilize, and demonstrations opposed to Chávez’s policies took place. On December 10, 2001, there was a general strike. On January 23, 2002, there was a massive demonstration. In February, other protests continued…  Each time, it became more obvious that the goal of all these demonstrations was Chávez’s departure from government.


The climax in this nerve-wracking process arrived on April 10, when the CTV and Fedecámaras declared a general strike of indefinite duration.  The following day, demonstrators arrived at the Palace of Miraflores, demanding Chávez’s resignation.  Their protest march led to a violent confrontation between supporters of the President and the opposition, resulting in more than twenty wounded and a hundred dead.  Ultimately, the Armed Forces supported the backers of a coup.  Chávez resigned, and Pedro Carmona Estanga, president of Fedecámaras, emerged as head of the provisional government. Nevertheless, the new chief executive remained in power for barely forty-eight hours.


The coup failed because its most important supporters broke their alliance by publishing a government decree that annulled the Bolivarian Constitution. Moderate military officers and the CTV began to lose confidence in the new government. Meanwhile, Chávez’s strongest supporters came out onto the streets in protest. As Pampillón explains, “The middle and upper-middle classes are the ones who really oppose Chávez because they are the ones who have seen their economic status threatened. The richest people are above good and evil, while the poorest classes show their support for the President. But it is the Army that really has power.”


Venezuela’s trade unions, which initially welcomed the arrival of Chávez, ultimately agreed that his government had brought about a deterioration in the people’s standard of living. In addition to inflation, the Bolivar lost more than 80 percent of its value on currency markets. Moreover, unemployment reached a rate of 16.2%, as of last June. “The problem with Chávez is that he has governed on behalf of only one social sector, while attacking other sectors such as businessmen and the communications media. For Venezuela’s population, this process has generated a great deal of nervousness and a profound fracturing of society, especially because this is such a weak economic environment,” notes Pampillón.

A Confluence of Internal and External Forces

Some observers have looked outside Venezuela to find ultimate responsibility for the crisis, focusing on the drop in crude oil prices and its impact on the country’s finances. However, Professor Peredo says, “There is no reason to look outside the country to find the fundamental factors that brought on this crisis. Consider, for example, that [Cuba’s Fidel] Castro has faced significant international opposition throughout the course of his term in office, yet Castro remains in power.”  Peredo speculates, “Perhaps Chávez has been held in less esteem than other populist leaders.”


On the subject of external factors, it’s worth mentioning a report in The New York Times of April 16, 2002, in which the Bush administration confirmed that it had arranged meetings with the leaders of the Venezuela opposition before the crisis broke out.  However, the American government has always denied playing any role in promoting the Carmona coup d’état.


What factors might have motivated the United States to intervene in Venezuela?  From the outset of his administration, Chávez had grounded his policy in petroleum production. He had positioned himself toward cooperation with developing countries, and had tried to pursue international independence — above all, with respect to the United States, the largest importer of Venezuelan crude.


It should be noted that other governments, not just the United States, sympathized at first with the provisional government of Carmona.  Pampillón explains why: “The presence of [Carmona], the most prominent businessmen of the country; Carmona’s desire to strengthen the private sector, and his interest in attracting foreign business [to Venezuela], all gave foreign governments greater confidence in the Carmona government.”  Nevertheless, as Pampillon notes, “With hindsight, those same foreign governments have criticized the [Carmona] uprising.”


At this stage, suggests Pampillón, “Chávez must restore stability to the country if he wants to win over the international community and, above all, foreign investors. Currently, foreign capital is leaving Venezuela, which demonstrates clearly that there is a little confidence that the crisis will have a peaceful outcome.”


In an effort to reconstruct Venezuela, César Gaviria, secretary-general of the Organization of American States (OAS), decided last January to create a Group of Friends that will try to mediate between the parties. The United States, Mexico, Brazil, Spain and Portugal have taken on the joint mission of finding a meeting point for putting an end to the crisis. “The menace of war against Iraq has awakened the interest of the international community,” notes Pampillón. Oil markets have lost five million barrels of daily production; one half comes as a result of Iraq, the other half from Venezuela.


This situation is bringing about an escalation of oil prices that might wind up making the increases suffered during the first Gulf War look ridiculous by comparison. Before that conflict erupted, the price of a barrel of crude oil was seventeen dollars, and it went up as high as forty dollars as a result of the war.  Now, despite the fact there has been no attack against Iraq, the price of crude is thirty dollars a barrel. How high can prices rise?


“The only way out is to achieve an agreement that satisfies all the parties involved,” says Pampillón. But the opposition to Chávez doesn’t appear disposed to wait until August, and Chávez is not disposed to move up the date for the elections. Explains Pampillon: “The strikers know that, even if new elections are held, Chávez can wind up the winner again. The opinion polls don’t take into account the poor people who live in the most humble and marginal neighborhoods; the people who, in case there are elections, will go out and vote because they are the beneficiaries of Chávez’s policies.”


Concludes Pampillon, “The longer elections are delayed, the more ballots President Chávez has to wind up being reelected.  And the opposition knows it.”