Venezuela THE TRIUMPH OF DEMOCRACY
Former president Rómulo Betancourt
Courtesy Prints and Photographs Divisions, Library of Congress
Historians invariably point to Betancourt's
inauguration as
the pivotal point in four centuries of Venezuelan history.
Not
since its discovery by Spanish explorers in the late
fifteenth
century had an event so clearly marked a new era for the
country.
After nearly a century and a half as perhaps the most
extreme
example of Latin America's postindependence affliction of
caudillismo and military rule, Venezuela's political life
after
1959 was defined by uninterrupted civilian constitutional
rule.
This stark break with the past has been attributed most
often
to the government's petroleum-based wealth, which gave it
the
material resources to win a vast portion of the population
over
to the democratic consensus, and to the spirit of
cooperation
among the nation's various political entities (commonly
known as
the "Spirit of the 23rd of January," after the date of
Pérez's
fall from power) as embodied in the Pact of Punto Fijo.
Betancourt and his AD colleagues had apparently learned
from the
disastrous consequences of their strident posture during
their
previous stint at governing. They now reversed themselves
by
granting concessions to a broad range of political forces
that
included many of their most bitter enemies during the
trienio. They guaranteed, for example, the
continuation of
obligatory military service; improved salaries, housing,
and
equipment for the military; and, most important, amnesty
from
prosecution for crimes committed during the dictatorship.
The
Roman Catholic Church, whose active opposition to Pérez
had
impressed many doctrinally anticlerical AD militants,
somewhat
enhanced its political image and expanded its influence
within
the government.
In another pact written up during the weeks before the
1958
elections, known as the "Declaration of Principles and
Governing
Program," AD, COPEI, and the URD agreed on a broad range
of
matters with respect to the economy. In what amounted to
guarantees to the foreign and local business communities,
the
parties agreed to respect the principles of capital
accumulation
and the sanctity of private property. Local industry,
furthermore, was guaranteed government measures to protect
it
from foreign competition as well as subsidies through the
state-
run Venezuelan Development Corporation (Corporación
Venezolana de
Fomento--CVF). With respect to agrarian properties, any
expropriation or transfer of title would provide for
compensation
to the original owner.
Betancourt made other conciliatory moves as well. A new
labor
code granted unprecedented government guarantees of the
right to
association and collective bargaining. Vastly enlarged
state
subsidies benefited the poor in such areas as food,
housing, and
health care. The objective was to institutionalize a
"prolonged
political truce" by including as many citizens as possible
within
a popular consensus in favor of the civilian, democratic
project.
The "Spirit of the 23rd of January" informed the 1961
constitution, which guaranteed a wide range of civil
liberties
and created a weak bicameral legislature, where partisan
political conflict could be aired but would cause a
minimum of
damage. The president was given considerable power,
although he
was allowed to run for reelection only after sitting out
two
five-year terms.
The major group excluded from the political pacts of
1958 was
the extreme left. This exclusion was the result,
initially, of
the doctrinal anticommunism of AD--and of Betancourt in
particular. The exclusion was subsequently perpetuated by
the
triumph of the Cuban Revolution in 1959 and the
revolution's
precipitous radicalization during the early 1960s. The
Cuban
Revolution had a profound impact on the Venezuelan left,
particularly among student groups, who saw it as a model
for a
successful revolutionary effort in Venezuela. In November
1960,
the URD dropped out of the governing coalition with AD in
protest
over Betancourt's firm stance against Cuban leader Fidel
Castro
Ruz. AD also suffered the loss of most of its student
wing, which
in April of that year split from the party to form the
Movement
of the Revolutionary Left (Movimiento de la Izquierda
Revolucionaria--MIR), supposedly to protest delays in the
implementation of the government's agrarian reform
program.
In 1961 these groups, together with the PCV,
consolidated
their advocacy of antigovernment guerrilla warfare. The
Betancourt government supported Cuba's expulsion from the
Organization of American States (OAS), then broke
diplomatic
relations with the Castro government in December. In May
and June
of the following year, military officers sympathetic to
the left
instigated two bloody uprisings, first at Carúpano on the
Península de Paria, then at Puerto Cabello. These provoked
Betancourt into legally proscribing the PCV and the MIR,
which
promptly went underground and formed the Armed Forces of
National
Liberation (Fuerzas Armadas de Liberación Nacional--FALN).
The
FALN engaged in rural and urban guerrilla activities
throughout
the remainder of the 1960s. The activity reached its
height in
1962 and 1963, when the FALN sabotaged oil pipelines and
bombed a
Sears Roebuck warehouse and the United States Embassy in
Caracas.
The FALN failed, however, to attract adherents among
the
poor, whether rural campesinos or the residents of the
makeshift
shacks, known as
ranchos (see Glossary), that made up
Caracas's mushrooming slum areas. The guerrillas also
proved
unable to achieve their secondary goal of provoking a coup
d'état
that would lead to a repressive military regime and,
hence,
increase popular support for the insurgents. As political
scientist Daniel H. Levine points out, the FALN's effect
proved
to be quite the contrary of what it intended: it actually
consolidated the democratic regime by making AD look--to
its many
former enemies on the right--like the better of two
alternatives.
At the same time, the insurgency provided a vital military
mission to the armed forces, one that removed them still
further
from direct participation in politics. Ultimately, the
FALN's
efforts to disrupt the December 1963 elections also proved
futile. In the midst of this guerrilla campaign, the
government
arrested all PCV and MIR congressmen in September, and in
November military forces discovered a three-ton cache of
small
arms--with clear links back to the Castro regime--on a
deserted
stretch of beach.
Castro was not Betancourt's only enemy in the
Caribbean,
however. Rafael Leónidas Trujillo Molina, the dictatorial
ruler
of the Dominican Republic, was implicated in a number of
antigovernment conspiracies uncovered within the
Venezuelan
military, as well as in the bombing of Betancourt's car in
June
1960, in which a military aide was killed and the
president badly
burned. The Venezuelan president's strong-willed antipathy
for
nondemocratic rule was reflected in the so-called
Betancourt
Doctrine, which denied Venezuelan diplomatic recognition
to any
regime, right or left, that came to power by military
force.
Highly unfavorable circumstances in the external sector
of
the economy handicapped the Betancourt administration.
Having
inherited an empty treasury and enormous unpaid foreign
debts
from the spendthrift Pérez, Betancourt nevertheless
managed to
return the state to fiscal solvency despite the
persistence of
rock-bottom petroleum prices throughout his presidency. He
also
managed to continue the effort, begun during the 1930s by
President López, of "sowing the oil" by initiating a
variety of
reform programs, the most important of which was agrarian
reform.
Aimed not at addressing social grievances but rather at
reversing
Venezuela's protracted decline in agricultural production,
AD's
land reform distributed only unproductive private
properties and
public lands. Landowners who had their properties
confiscated
received generous compensation. By the end of the 1960s,
an
estimated 166,000 heads of household had received
provisional
titles to their new properties.
During 1960 two institutions were founded that made
important
contributions toward the development of a national
petroleum
policy: the Venezuelan Petroleum Corporation (Corporación
Venezolana de Petróleos--CVP), conceived to oversee the
national
petroleum industry, and the Organization of the Petroleum
Exporting Countries (OPEC), the international oil cartel
that
Venezuela established in partnership with Kuwait, Saudi
Arabia,
Iraq, and Iran. Both organizations were the creations of
Juan
Pablo Pérez Alfonso, who, for the second time, served as
Betancourt's minister of energy. During the
trienio, Pérez
Alfonso had earned the wrath of the foreign oil firms with
his
proposition that the state should gradually assume control
of the
petroleum industry; this idea now once again became
government
policy.
Perhaps the greatest of all Betancourt's
accomplishments,
however, were the successful 1963 elections. Despite
myriad
threats to disrupt the process, nearly 90 percent of the
electorate participated on December 1 in what was probably
the
most honest election in Venezuela to that date. AD
standard-
bearer Raúl Leoni proved victorious, gaining 33 percent of
the
total vote in a field of seven presidential candidates. On
March
11, 1964, for the first time in the nation's history, the
presidential sash passed from one constitutionally elected
chief
executive to another. It was a day of immense pride for
the
people of Venezuela.
Leoni, a hard-working but less colorful figure than
Betancourt, differed little from his reformist predecessor
from
an ideological standpoint. Nevertheless, unlike
Betancourt, Leoni
proved unable to agree to COPEI's conditions for forming a
governing coalition and instead made an alliance with the
URD and
the National Democratic Front (Frente Nacional
Democrática--FND),
a probusiness party created around Arturo Uslar Pietri, a
noted
writer and public affairs activist.
Subversive activities quieted considerably during the
Leoni
administration. By no means were they ended, however.
Rumors of
military plots were rife throughout the five-year term;
the most
dangerous military rebellion, an attempted coup d'état in
October
1966, was swiftly put down and its leaders
court-martialed. The
threat from the revolutionary left also persisted, leading
Leoni
in December 1966 to order an army search of Caracas's
Central
University for revolutionaries. By 1965, however, the PCV
had
begun to harbor doubts about violence as a road to power,
and
over the course of the following two years, it gradually
abandoned the revolutionary path. Splinter groups with
Cuban ties
persisted in their violent activities, however, and in May
1967,
a small landing party headed by a Cuban army officer was
captured
at Machurucuto in the state of Miranda. This would prove
to be
the pinnacle of Castro's crusade to export his revolution
to
Venezuela. Insurgent activity subsequently subsided, and
bilateral relations with Cuba eventually improved.
Economic growth averaged a healthy 5.5 percent annually
during the Leoni years, aided by a recovery in petroleum
prices
and the relative political tranquility as the AD program
attained
legitimacy. Leoni kept the Betancourt reform programs on
course
and also introduced a number of impressive infrastructure
projects designed to open up the nation's interior to
agricultural and industrial development. Regional
integration
efforts advanced, albeit slowly, although Venezuela
remained
outside the newly created Andean Common Market
(
Ancom; see Glossary) in response to objections from the local
business
community, which feared competition from lower-priced
goods
manufactured in neighboring countries.
The governing party split in 1967 over the choice of
the
party's presidential candidate for the 1968 elections.
Stemming
in part from a long-simmering rivalry between former
president
Betancourt and AD secretary general Jesús Angel Paz
Galarraga, a
highly damaging split led Paz to launch the People's
Electoral
Movement (Movimiento Electoral del Pueblo--MEP). The MEP
tendered
Luis B. Prieto as its candidate, while Gonzalo Barrios
headed the
AD ticket. The URD joined forces with the FND and the
party of
former presidential candidate Larrazábal to promote the
candidacy
of Miguel Angel Burelli Rivas under the banner of a
coalition
dubbed the Victorious Front. COPEI once again ran Caldera,
who
proved victorious in this fourth attempt to capture the
presidency. His victory resulted both from the split in AD
and
from COPEI's liberalization of its image away from that of
a
strictly conservative Roman Catholic party. All four
candidates
finished strongly at the end of a hard-fought campaign,
however,
and Caldera eked out a victory over Barrios by a margin of
merely
31,000 votes. The passing of the presidential sash from
Leoni to
AD's principal opposition leader in March 1969 marked yet
another
first in Venezuela's rapidly maturing democracy.
President Caldera never made an earnest effort to form
a
governing coalition. Throughout his five-year term, his
cabinet
consisted exclusively of copeyanos (COPEI party
members)
and independents. In Congress, however, the governing
party was
forced to form a working alliance with AD in 1970 because
mounting student demonstrations and growing partisan
intransigence made unilateral rule impossible.
The major concerns of Caldera's government were not
unlike
those of his two predecessors: agrarian reform and
increased farm
production, the improvement of educational and social
welfare
benefits, the expansion and diversification of industrial
development, and progress toward local control of the
petroleum
industry. With respect to the latter, the government's tax
rate
on the petroleum companies rose to 70 percent by 1971. In
the
same year, the Hydrocarbons Reversion Law--stipulating
that all
of the oil companies' Venezuelan assets would revert to
the state
when their concessions expired--went into effect.
The key policy distinction between Caldera's government
and
those of his AD predecessors lay in the area of foreign
policy.
President Caldera rejected the Betancourt Doctrine, which
he
considered restrictive and divisive, and which he thought
had
served to isolate Venezuela in the world. Bilateral
relations
were soon restored with the Soviet Union and the socialist
nations of Eastern Europe, as well as with a number of
South
American nations that had fallen under military rule. By
dividing
Latin American nations from one another, the Betancourt
Doctrine,
Caldera believed, had served to promote United States
hegemony in
the region. Seeking points of unity instead, Caldera
established
"pluralistic solidarity" as the guiding principle of
Venezuelan
foreign policy. Among its positive results was Venezuela's
entrance into Ancom upon signing the 1973 Consensus of
Lima,
which assuaged the fears of the business community by
allowing
Venezuela to attach a number of special conditions to its
membership.
On the one hand, by joining Ancom, Venezuela emphasized
its
Andean identity. On the other hand, the striking expansion
of its
investment in the Caribbean Development Bank emphasized
the
nation's Caribbean character. Caldera thus began to
provide oil-
based financial aid to the nations of Central America and
the
Caribbean, an effort that would be greatly expanded in
subsequent
years.
Although the internal security situation had improved,
Caldera adopted a policy of "pacification" toward the
remaining
armed opposition. The pacification program legalized the
PCV and
other leftist parties and granted amnesty to revolutionary
activists. The government credited the program for the
dramatic
decline in guerrilla activity. Its opponents, however,
pointed
out that the most conspicuous decrease in Venezuela's
revolutionary violence came under Leoni, when Cuba and the
Soviet
Union changed their policies in the wake of the 1967 death
of
Ernesto "Che" Guevara in Bolivia and the 1968 Soviet
invasion of
Czechoslovakia.
The December 1973 election was a truly pluralistic
affair.
The twelve presidential candidates ranged from three
aspirants of
the parties on the left to an even larger number of
self-declared
representatives of former president Pérez on the right.
The MEP,
which had moved steadily leftward since 1968, allied
itself with
the PCV and nominated Paz under the banner of Popular
Unity
(Unidad Popular), modeled after the Chilean left-wing
coalition
of the same name that had elected Salvador Allende Gossens
in
1970. The URD initially joined the coalition, but the
aging
Jóvito Villalba later withdrew his party to launch his own
candidacy. The other candidate on the left was José
Vicente
Rangel of the Movement Toward Socialism (Movimiento al
Socialismo--MAS), a party that had been founded in 1971 by
a
group of PCV dissidents with liberal, "Eurocommunist"
notions of
a modern, election-oriented party. Unlike the Moscow-line
PCV,
the MAS had little bond to the Soviet Union.
Although the 1973 election was notable for the
ideological
pluralism represented in the competing political parties,
its
most important distinction was the primacy achieved by the
two
principal parties, AD and COPEI. In contrast to 1968, AD
converged around the figure of Betancourt's long-time
protégé and
minister of interior, Carlos Andrés Pérez, thus passing
party
leadership to its second generation. Campaigning deep into
the
rural Venezuelan heartland as well as in the
ranchos of
all major cities, Pérez managed to recapture much of the
populist
appeal acquired by Betancourt thirty years previously. The
campaign of his opponent, Lorenzo Fernández (also a former
minister of interior) was, by comparison, a low-key
affair.
On election day an astounding 97 percent of the
registered
voters went to the polls. Pérez, with 48.8 percent of the
valid
vote, prevailed against Fernández's 36.7 percent. Between
them,
then, AD and COPEI captured nearly 86 percent of the valid
presidential vote; the two parties also garnered 43 of the
49
Senate seats and 166 of 200 seats in the Chamber of
Deputies. AD
attained absolute majorities in both congressional houses
as well
as in 157 of the nation's 181 municipal councils. The
showing of
leftist parties, in contrast, was unimpressive: the
Popular Unity
coalition gained 5.1 percent; MAS, 4.2 percent; and the
URD, a
mere 3.1 percent. "Polarization" was the term used locally
to
describe the apparent transition of Venezuela's electoral
contests into two-party affairs. It was yet another
promising
sign in the evolution of a stable system of democracy.
Venezuela had still another reason to be euphoric at
the dawn
of 1974. The October 1973 Arab-Israeli War had triggered a
quadrupling of crude oil prices in a period of only two
months.
When Pérez assumed the presidency in February 1974, he was
immediately faced with the seemingly enviable task of
managing a
windfall of unprecedented proportions. To combat the
inflationary
pressures that would result from the sudden addition of
some US$6
billion in annual government revenues, Pérez set up the
Venezuelan Investment Fund (Fondo de Inversiones de
Venezuela--
FIV), with the objective of exporting 35 percent of this
unexpected income as loans to Caribbean, Central American,
and
Andean neighbors. The greatest portion of this aid money
went to
the oil-importing nations of Central America in the form
of long-
term loans to pay for half of their oil-import bills.
Venezuela
also loaned out its "excess capital" through various
multilateral
lending institutions, including the Inter-American
Development
Bank (IDB).
The FIV loan program engendered considerable
international
goodwill on behalf of Venezuela, particularly among the
recipient
countries. Building on that prestige, Pérez and Mexican
president
Luis Echeverría Alvarez (1970-76) founded the Latin
American
Economic System (Sistema Económico Latinoamericano--SELA).
SELA,
with headquarters in Caracas, had twenty-three Latin
American
nations as its initial members in 1975. It was formed to
promote
Latin American cooperation in international economic
matters such
as commodity prices, scientific and technological
exchange, and
multinational enterprises and development projects. SELA,
it was
hoped, would help create the building blocks of a "new
international economic order," in which the developing
nations of
the southern hemisphere would challenge the economic
hegemony of
the developed nations of the north.
Pérez's aggressive stance on behalf of the Third World
helped
to cool Venezuela's traditionally warm relations with the
United
States. Other contributing factors to this change included
Venezuela's displeasure with both the revelations of
extensive
covert intervention by the United States against the
Allende
government in Chile and the reluctance of the United
States to
begin negotiations with Panama over future control of the
Panama
Canal. The major irritant, however, was OPEC's petroleum
policy,
marked by OPEC's 1973 price increases, and the embargo on
oil
shipments to the United States instigated by the Arab
members of
OPEC during the October War. Despite the fact that
Venezuela had
increased its oil shipments at that time in order to meet
United
States needs, the United States retaliated against the
embargo by
excluding Venezuela, along with the other OPEC-member
nations,
from the 1974 Trade Act, which created the Generalized
System of
Trade Preferences to lower tariffs on designated imports
from
developing nations. Proud of never having denied the
nation's oil
to the United States, even during periods of war and
political
tensions, Venezuelans took offense at what they saw as
unwarranted punitive action by the United States.
At home, President Pérez put aside his promised
intention to
"manage abundance with the mentality of scarcity," and
embarked
on a spending spree designed to distribute Venezuela's oil
wealth
among the citizenry. Price controls that subsidized the
public
consumption of food and other commodities were introduced.
Government-authorized wage increases, combined with
foreign
exchange controls that subsidized imports, led to periodic
buying
binges of Japanese stereos and televisions, German
automobiles
and cameras, and clothing and processed foods from the
United
States. Per capita consumption of Scotch whiskey soared to
a
level among the world's highest. Government subsidies
assumed a
variety of other forms as well: in 1974, US$350 million in
debts
owed to state agencies by the Venezuelan farming community
were
simply cancelled.
The Pérez administration initiated various other
programs to
spur employment. The 1974 Law of Unjustified Dismissals
made it
very difficult for employers to fire workers and mandated
ample
severance payments to those who did lose their jobs.
Public
employment doubled in five years, reaching 750,000 by
1978.
Although unemployment levels thus dropped precipitously,
Venezuelans' traditional disdain for hard work increased,
leaving
many necessary jobs either unfilled or filled by a growing
number
of indocumentadosas (undocumented or illegal
aliens) from
Colombia and Brazil.
Although these subsidy and employment programs
theoretically
sought to improve the lot of the poor, in fact, the actual
outcome was that a significant portion of the population
continued to live in a state of misery. Income
distribution was
less equitable in 1976 than it had been in 1960, and one
study
found that fully 40 percent of the population nationwide
were ill
fed and undernourished. This contrast of widespread
poverty
amidst urban development and the conspicuous consumption
of the
middle and upper classes was particularly damaging to
Pérez, who
had been elected with a public image as a "friend of the
people."
AD's failure to address adequately the needs of the poor
would
plague the party during the 1978 electoral contest.
The government continued, as it had been doing for
nearly
four decades, to put a large portion of its petroleum
revenues
into building an industrial base, with the objective of
generating future income after the nation's oil reserves
had been
depleted. With massive amounts of money to spend, emphasis
was
now placed on large-scale, high-technology infrastructure
and
industrial development projects. The Pérez
administration's Fifth
National Plan, conceived during the mid-1970s and
scheduled to
become operative in 1977, accordingly called for some
US$52.5
billion in investments over a five-year period.
In an effort to minimize the bureaucratic entanglements
entailed by such a major increase in the fiscal
responsibilities
of the central government, funding was instead vested in
autonomous and semi-autonomous entities. The four years
following
the 1973-74 oil boom saw the creation of no less than 163
such
entities, including textile and lumber companies, a
hydroelectric
consortium, shipbuilding firms, and a national steamship
company
and airline. By 1978 the budget outlay for state-owned
enterprises and decentralized agencies was 50 percent
higher than
the federal budget.
The centerpiece of this state-directed program of
industrial
development was the massive industrial complex at Ciudad
Guayana.
Located near major deposits of iron and other raw
materials in
the vast Guiana highlands, the complex was placed under
the
supervision of the Venezuelan Corporation of Guayana
(Corporación
Venezolana de Guayana--CVG). Ciudad Guayana was developed
during
the early 1960s as an effort to decentralize industrial
development away from Caracas. It attracted considerable
private
as well as public investment--most notably the Orinoco
Steelworks
(Siderúrgica del Orinoco--Sidor), a CVG subsidiary--and
grew
quickly; by 1979 its population reached 300,000. During
the Pérez
administration, Sidor benefited from massive new
investments,
including a US$4 billion project designed to increase its
refining capacity five-fold. The government erected
modern,
large-scale aluminum and bauxite refineries and massive
hydroelectric projects with a vision of converting the
Orinoco
Basin into a Venezuelan Rhineland.
In January 1975, the government cancelled the iron ore
concessions of subsidiaries of two United States-owned
firms
(United States Steel Corporation and Bethlehem Steel)
operating
in the Guayana highlands. It was not an unexpected move,
as local
ownership of raw-material extraction had been frequently
addressed during the 1973 presidential campaign. The
nationalization process took place smoothly: the two
companies
accepted US$101 million in compensation and agreed to sign
one-
year management contracts to provide continuity in the
operation
of the mines during the transition.
Congressional approval, the following August, of a bill
nationalizing the petroleum industry had also been
anticipated.
The fourteen foreign oil companies involved did not object
vigorously to the move; the Venezuelan government had
granted
them no new concessions since 1960, and their share of the
profits from the petroleum they extracted had dropped to
30
percent. The US$1 billion they received, though only a
fraction
of the replacement cost of the assets they surrendered
(including
12 oil refineries with an aggregate capacity of 1.5
million
barrels of oil per day, along with some 12,500 oil wells),
was
generally believed to be as fair and generous a
compensation as
possible under the circumstances. The fourteen foreign
firms were
consolidated into four autonomous entities, modeled after
the
four largest of the foreign enterprises, and placed under
the
administrative supervision of the Venezuelan Petroleum
Corporation (Petróleos de Venezuela, S.A.--PDVSA), a
holding
company fashioned out of the CVP. General Rafael Alfonso
Ravard,
who had managed the CVG in a highly efficient,
technocratic
manner quite atypical of most government ventures, was
chosen to
head PDVSA.
The Pérez administration had devised its grandiose
Fifth
National Plan under the assumption that rising oil prices
would
boost government revenue throughout the 1970s. Instead,
Venezuela's oil income leveled off in 1976, then began to
decline
in 1978. Foreign commercial banks, awash with petrodollars
deposited by other OPEC nations, provided loans to make up
the
shortfall so that Venezuela's development program could
proceed
on schedule. On the one hand, the banks saw oil-rich
Venezuela as
an excellent credit risk, while on the other hand, the
autonomy
of Venezuela's state firms allowed them to borrow
excessively,
independent of central government accounting. To expedite
their
receipt of this external financing, the autonomous
entities opted
for mainly short-term loans, which carried higher rates of
interest. As a result, by 1978 the public-sector foreign
debt had
grown to nearly US$12 billion, a five-fold increase in
only four
years. An estimated 70 to 80 percent of this new debt had
been
contracted by the decentralized public administration.
Between the vast increase in oil revenues before 1976
and the
immense foreign debt incurred by the government, the Pérez
administration spent more money (in absolute terms) in 5
years
than had all other governments during the previous 143
years
combined. Perhaps inevitably, a lot of money was
squandered in
mismanagement and corruption. Despite expansive overseas
programs
to train managers of the new public entities, the lack of
competent personnel to execute the government's many
sophisticated endeavors became painfully evident. The
delays and
myriad cost overruns that ensued formed the backdrop of
frequent
malfeasance by public officials. Overpayment of
contractors, with
kickbacks to the contracting officers, was perhaps the
most
rampant form of graft. Featherbedding and the padding of
payrolls
with nonworking or nonexistent employees also became
common
practices.
By the time of the December 1978 elections, these
issues had
brought serious doubts to the voters as to the competence
and the
probity of the AD government. AD's candidate Luis Piñerua
Ordaz
lost to COPEI's Luis Herrera Campins by a little over 3
percentage points. The loss had less to do with the
program
presented by either candidate than with the public's
rejection of
the free-spending, populist style of President Pérez.
Otherwise,
the 1978 campaign was most notable for the vast sums spent
by the
two major candidates on North American media consultants.
More
than any previous electoral contest, this campaign was
conducted
on television, increasing the relative importance of image
over
substance. The two major parties captured almost 90
percent of
the total vote; a divided left shared 8.5 percent of the
total
among four candidates. In the subsequent June 1979
municipal
council elections, however, the MAS, MEP, PCV, and MIR
presented
a united slate that captured a more impressive 18.5
percent of
the vote.
Announcing during his March 1979 inaugural address that
Venezuela could not continue as a "nation that consumes
rivers of
whiskey and oil," President Herrera promised to assume an
austere
posture toward government fiscal concerns. Public
spending,
including consumer subsidies, was ordered cut, and
interest rates
were increased to encourage savings. When the Iranian
Revolution
and the outbreak of the Iran-Iraq War caused oil prices to
jump
from US$17 per barrel in 1979 to US$28 in 1980, however,
Herrera
abandoned his austerity measures before they had had a
chance to
yield results.
Early on in his term of office, President Herrera also
pledged to pursue policies aimed at reviving the moribund
private
sector. The first of these measures, however, the
elimination of
price controls, only contributed further to rising
inflation. As
with his commitment to austerity, the president failed to
persist
in his pledge to business; yielding to political pressures
from
the AD-dominated Confederation of Venezuelan Workers
(Confederación de Trabajadores de Venezuela--CTV), in
October
1979 the administration approved sizable wage increases.
Meanwhile, the number of those employed by state-owned
enterprises and autonomic agencies, which Herrera had
promised to
streamline and make more efficient, proliferated instead.
The
administration initiated, among other projects, a huge
coal and
steel complex in the state of Zulia, a new natural gas
plant with
1,000 kilometers of pipeline, a new railroad from Caracas
to the
coast, and a bridge linking the Caribbean Isla de
Margarita with
the mainland, running in the process a deficit of some
US$8
billion between 1979 and 1982. A retired Venezuelan
diplomat,
writing in The Miami Herald in 1983, noted that,
"There
must be examples of worse fiscal management than that of
Venezuela in the last eight or nine years, but I am not
aware of
them."
The lack of confidence in President Herrera's economic
management by the local business community contributed
significantly to a precipitous decline in the growth of
real
gross domestic product
(
GDP--see Glossary) from an annual average
of 6.1 percent between 1974 and 1978 to a sickly -1.2
percent
between 1979 and 1983. Unemployment hovered around 20
percent
throughout the early 1980s.
An unexpected softening of oil prices during late 1981
triggered further fiscal problems. World demand for
oil--on which
the Venezuelan government depended for some two-thirds of
its
revenues--continued to decline as the market became
glutted with
oil from newly exploited deposits in Mexico and the North
Sea.
The resumption of large-scale independent borrowing by the
decentralized public administration came amidst publicly
aired
disagreements among various officials as to the magnitude
of the
foreign debt. Not until 1983 did outside analysts agree on
an
approximate figure of US$32 billion.
Compounding growing balance of payments difficulties,
rumors
of an impending monetary devaluation precipitated a wave
of
private capital flight overseas in early 1983. While the
Central
Bank of Venezuela (Banco Central de Venezuela--BCV)
president
argued with the finance and planning ministers over what
measures
to adopt to meet the growing crisis, some US$2 billion
left the
country during January and February alone. At the end of
February, the government at last announced a system of
foreign
exchange controls and a complicated three-tier exchange
system.
Under this system, the public sector retained the existing
rate
of US$1=B4.3, selling bolívars (for value of the
bolívar--see Glossary) to the private sector at a higher rate of
US$1=B6.0 or
more, while a free-floating rate was established for
tourism,
"nonessential" imports (luxury items), and other purposes.
At the
same time, price controls were reinstated to control
inflation.
The annual increase in consumer prices, which had hit a
peak of
21.6 percent in 1980, fell to 6.3 percent for 1983.
Seeking a way out of the dismal economic situation, the
Herrera administration decided to transfer a greater share
of
ever-growing government expenses to PDVSA. The Central
Bank of
Venezuela appropriated some US$4.5 billion of PDVSA's
reserves to
pay the foreign debt, thereby throwing the petroleum
corporation's autonomy to the wind. Partisan politics
began to
play a larger role in the selection of members of PDVSA's
board
of directors. In September 1983, Ravard was forced out as
head of
PDVSA and replaced by Humberto Calderón Berti, who as
minister of
energy had spearheaded the effort to bind the oil giant
closer to
the central government. The rapid politicization of PDVSA
drew
criticism both at home and abroad and cost the government
credibility as well as its good credit rating with foreign
banks.
The unceremonious firing of the highly respected Ravard
was
condemned by both candidates for the December presidential
election and was reversed by the new administration the
following
February.
By historical standards, the 1983 electoral campaign
was a
dull affair. Enjoying a substantial lead in opinion polls
from
the start, AD's Jaime Lusinchi coasted to an easy victory
over
former president Caldera, who was burdened with both the
miserable record of the outgoing COPEI administration and
the
undisguised hostility of his fellow copeyano,
President
Herrera. Lusinchi, a physician with no previous
administrative
experience, ran a campaign that focused on the failings of
the
Herrera administration, and won the contest on December 4
with
56.8 percent of the valid vote, the highest percentage
gained by
a candidate since the dawn of the democratic era in 1958.
Caldera
gained 34.9 percent, while the combined vote of the two
candidates on the left totaled 7.4 percent.
Although the 1983 elections again demonstrated the
predominance of the two major parties, the record of
ineffective
government (known locally as desgobierno),
corruption, an
increasing foreign debt, and a growing list of unaddressed
socioeconomic problems all contributed to a widespread
disillusionment with the political process among the
electorate.
After twenty-five years of gradual consolidation of
democracy in
Venezuela, doubts had emerged as to the future stability
of the
much-cherished democratic political process that had
proven so
elusive before 1958.
* * *
There is a wealth of first-rate literature in English
on the
history of Venezuela. Perhaps the most useful general
histories
are Judith Ewell's Venezuela: A Century of Change
and John
V. Lombardi's Venezuela: The Search for Order, the
Dream of
Progress. On the all-important oil industry, volumes
by
Rómulo Betancourt (Venezuela's Oil and
Venezuela: Oil
and Politics) and Franklin Tugwell's The Politics
of Oil
in Venezuela are standards, while Jorge
Salazar-Carrillo's
Oil in the Economic Development of Venezuela treats
the
subject from the standpoint of economic rather than
political
history. George W. Schuyler's Hunger in a Land of
Plenty
examines the tragic irony of poverty amidst Venezuela's
vast oil
wealth.
Robert L. Gilmore's Caudillism and Militarism in
Venezuela, 1810-1910 remains a valuable source of
information
on nineteenth-century caudillismo. The crucial period of
the
transition to democracy during the 1940s and 1950s is
examined in
The Venezuelan Democratic Revolution by Robert J.
Alexander and in Conflict and Political Change in
Venezuela by Daniel H. Levine. Stephen G. Rabe, in
The
Road to OPEC: United States Relations with Venezuela,
1919-
1976, provides the most comprehensive look at
Venezuela's
important relationship with the United States. (For
further
information and complete citations,
see
Bibliography.)
Data as of December 1990
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