For more than six years, President Hugo Chávez has tightened his grip on power in Venezuela, asserted a coercive influence on his Latin American neighbors and provoked the United States with his fiery rhetoric and increasingly radical policy decisions. How has the Chávez regime affected social, political and economic affairs in Venezuela? What are the results of his aggressive foreign policy in South America and the Caribbean? Where will the growing hostility between Venezuela and the United States lead?

World Energy Monthly Review asked a number of prominent Venezuelans to comment on these and other issues. Their responses, presented in this article, paint a menacing picture of growing tyranny at home and ideologically driven manipulation abroad, financed by soaring oil revenues.

Are the politics of Hugo Chávez having a positive or negative affect on Venezuela’s foreign relations?

What are the benefits and/or risks as they relate to the security of the Western Hemisphere?
by Milos Alcalay, Career Diplomat
Former Venezuelan Ambassador to the United Nations, resigned in 2004

The revolutionary message President Hugo Chávez has directed toward the United States has increased the level of confrontation and international tension throughout the Western Hemisphere.

Although the Bush administration took a tolerant position toward Venezuela when Chávez first came to power, this tolerance has evaporated in the face of Chávez’s firm denunciation of the arms race, as well as the spread of his Bolivarian revolution and the permanent destabilization of the region.

Venezuela’s diplomatic relations with other countries in the region have also suffered strains and problems. Relations with Mexico, Perú, Colombia, Chile, Costa Rica and El Salvador have all worsened recently, with serious consequences and effects. Although it is a violation of the norms established by the Vienna Convention, several ambassadors have been declared "persona non grata" in Venezuela.

Chávez has used the additional income generated by the increased price of oil to finance radical movements in South America. Somewhat irregular financial agreements, such as lower-priced heating oil or gasoline, have been made with the elected leaders of Nicaragua’s Sandinista movement, the guerrilla party Farabundo Martí National Liberation Front (FMLN) in El Salvador and even with leaders of poor neighborhoods in the United States.

Chávez’s strategic alliance with Fidel Castro has defined the 21st century’s socialist alternative. As a result, the United States now categorizes Venezuela as a rogue nation. Consequently, when Venezuela joined MERCOSUR, the South American trade alliance, the move was heavily criticized and many saw it as a foreshadowing of things to come. The Bolivarian Alternative for the Americas, or ALBA, initiated with Cuba, is meant to destabilize the free-trade agreements several Latin American countries have signed with the United States.

While many believe Chávez’s politics have a broad international and diplomatic effect, the internal, domestic effects are not often discussed. Democratically inspired opposition in Venezuela is silenced, which is a violation of the Interamerican Democratic Charter; human rights are consistently violated; the repression of rights has led to the arrest of political prisoners; the freedom of the press has ceased to exist; social and political institutions have been taken over by Chávez’s regime, which has stripped away any semblance of democracy; Castro’s communist ideology now permeates all levels of the government and is enforced by military power. Situations created by Chávez’s government, in both national and international spheres, endanger the security of not just Latin America, but the Western Hemisphere in general.

In a broad sense, has the Chávez administration
been good for Venezuela?
by Luis E. Giusti, Former President of PDVSA

In June 1821, Simón Bolívar led the patriot force as it defeated the Spanish army in Carabobo – a battle that marked the end of Spain’s domination of Venezuela. For more than 130 years after that battle, Venezuela was marked by the presence of what was dubbed "the necessary gendarme," a phrase that referred to the people’s alleged need to live under the boot of strongmen. Then in January 1958, the Venezuelan people removed the country’s ruling dictator, proving the citizens wanted to live in a democracy. In the years that followed, Venezuela was transformed into a modern nation able to compete in the international arena.

In December 1998, Hugo Chávez was elected president of Venezuela. He captured the imagination of the majority of Venezuela’s people because he spoke to their hopes for social improvements and the end of corruption. However, since taking office, Chávez has launched an aggressive political agenda, which includes absolute control and power over what he sees as his country. Today, Venezuela’s supreme court, congress and the electoral council, not to mention the country’s attorney general, essentially follow orders generated in the presidential palace.

Oil windfalls have allowed the government to spend heavily on social programs, which should translate into important economic growth. Yet no investment is flowing to social and economic infrastructure. While unemployment stands officially at 12 percent, informally gathered statistics place the number closer to 46 percent. Then there is the issue of corruption – it has mushroomed.

On the international front, Chávez’s main objective has been to extend the borders of the so-called Bolivarian Revolution. The government is engaged in a wide-open alliance with Cuba, and it lends support to other rogue governments. There is speculation that the Venezuelan government has been supporting the guerrillas of the Revolutionary Armed Forces of Colombia and other revolutionary groups in Latin America.

When it comes to the oil industry, Venezuela has built an image that is pure bravado. It has almost become national policy to reject the accepted rules of cooperation and use oil as a political weapon. Oil companies operating in Venezuela experience difficulties because the rules for doing business are constantly changing. The national oil company, PDVSA, has been degraded to an arm of the government, and it has lost more than 50 percent of its production capacity.

The "gendarme" has reappeared, and despite having been legitimately elected, Chávez’s actions are far from legitimate. Domestically, the institutional framework has been dismantled, crime has escalated, violations of human rights are common, public infrastructure has deteriorated seriously, oil production has dropped significantly and – despite its growth – the economy does not offer future stability. On an international level, the country is becoming isolated owing to the aggressive and contentious positions of the Chávez government. Venezuela has clearly suffered a dramatic reversal of fortune.

How has Venezuela changed after seven years
of the Chávez government? How have those changes
affected Venezuelan society?
by Rafael Alfonzo, Former Chairman of the Venezuelan Food Industry Chamber
(Cámara Venezolana de la Industria de Alimentos, CAVIDEA)

In 1999, Chávez’s goal was to demolish the old regime at an ideological level; however, what he has managed to do is refresh and update the Marxist-Leninist ideology and its discourse.

During his seven years of power, he has increased the government’s military budget and taken complete control of the military by establishing militias. The president has given positions of prestige to those in his favor, and established a system of surveillance and punishment against those who oppose him. With this power, he persecutes political dissenters, undermining any sense of legitimacy associated with rival leadership; he has systematically averted the reorganization of other political parties. The president has also instituted a "gag" law and has pressured journalists and the media as a means to control information and ideas presented to the people of Venezuela.

As part of his national takeover, Chávez has taken complete control of the government and has seized control of the congress, the national electoral council, the attorney general’s office, the Supreme Court, the public defender’s office and the office of the national comptroller. He has even gone as far as organizing a network of intellectuals who provide a legitimizing ideological dimension to his "revolution." Chávez’s "state-run capitalism" has made Venezuela a polarized country.

New investments are welcome, and the economy thrives on them. However, expropriations have become common, and ever-changing laws will begin to affect outside investments.

A lot of money is flowing through the state; but instead of investing the oil money, Chávez uses it to meet expenses, which creates more consumption and leads to inorganic growth.

We have a government that is destroying the country’s ability to produce oil; doesn’t invest in infrastructure; wants to replace private investment with nonsense cooperatives; confiscates private property; manipulates the ideology taught to children; and creates hate between the social classes. What is the objective of these measures? Chávez gains power, no matter the cost.

Is there an alternative to President Chávez?
by Michael Rowan, Former President of the International Association of
Political Consultants and a journalist living in Caracas

In April 1998, Hugo Chávez was running a distant fourth in the presidential race, with only a few percentage points in the national voter polls. But he won with 56 percent of the vote by promising to share Venezuela’s oil wealth with the poor. Since then, he has not delivered. While Chávez has relatively more power and money for elections than any other candidate in the democratic history of all the Americas, he can lose the December 3, 2006, presidential election.

Voters want results, not propaganda. Poverty, corruption and insecurity have increased dramatically since 1998. So why has Chávez won nine more elections since his 1998 victory? The answer is simple: No alternative leader or credible message to defeat poverty, corruption and insecurity has come forth. What the opposition has been trying to do is get rid of Chávez – and nothing more. But Venezuelans want to vote for, not just against. They don’t want an opposition; they want a proposition. And in 2006, they will hear a proposition they can vote for.

All of the challengers, but especially Teodoro Petkoff, are presenting constructive solutions for using oil wealth to defeat poverty, corruption and insecurity while restoring sanity to Venezuela. By July, Petkoff may well emerge as the unified leader to offer voters their first real choice in an election in recent memory. His idea to make a direct investment in poor families would double the income of the bottom half of the population, freeing them to solve their economic problems independent of state ownership and control.

Poverty can be eliminated in five years; the economy can double in size as the poor invest $40 billion in wealth creation activities; government corruption and insecurity can be drastically curtailed; and PDVSA can get back on track, upping its production from around 2 mbpd today to the 5 mbpd it should be producing. The Chávez asymmetric war plan is to jack up the world oil price through terror, create dependent client states in Latin America against U.S. power and trigger a global oil recession.

Whether the poor will vote for that foreign rhetoric over $40 billion in their own pockets is what we are about to see.

This article is excerpted from "Getting Over Chávez and Poverty," which is available by writing to Michael.Rowan.book@gmail.com.

Has the presidency of Hugo Chávez lived up
to the expectations of those who elected him?
by José Guerra, Professor of Economics at the Universidad Central de Venezuela (UCV),
Former Chief of the Research Department, Banco Central de Venezuela (BCV)

With the highest levels of oil income in Venezuelan history, Chávez had a unique opportunity to improve the standard of living of the Venezuelan people. But instead, Chávez spent most of his time attacking the business sector while his followers took over farms and houses by force. As a result, investment has been falling and unemployment has risen dramatically. In 1998 there were 11,117 industrial enterprises in Venezuela; by 2004, the most recent year for which statistics are available, the number of enterprises had fallen to just 6,787.

One of the most striking features of the Chávez government has been the increase in poverty despite the large sums of money coming from Venezuela’s oil wealth, which in seven years has generated $190 billion. According to estimates from researchers at Andrés Bello Catholic University, general poverty has jumped from 49.9 percent in 1999 to 57.9 percent in 2005.

Is Venezuela’s oil policy effective?
by Oscar García Mendoza, President of Banco Venezolano de Crédito 

In 1968, oil production in Venezuela was at 3.6 mbpd and it was in third place among world producers, with about 10 percent of the global share in production. In 1975, the government went full steam ahead with the nationalization of the oil industry, taking control over the whole operation.

Fast forward to 2006, and production is well below 2.5 mbpd. And declining. Venezuela’s government is using oil and the generous income it generates as a geopolitical weapon against the interests of its own people.

Due to Venezuela’s role as one of the main energy producers in the Western Hemisphere, it is imperative that the oil industry regain the importance it had decades ago. The so-called oil liberalization strategy (Plan de Apertura Petrolera), developed in 1991, aimed to have production up to 6 mbpd by the year 2006. If it had been implemented as planned, we would be producing that amount today. A wide privatization strategy to increase production by 8 mbpd is not completely out of the question. We need change. We need a government that looks after the real interests of the nation. It is not easy, but a large number of Venezuelans are fighting for it.

Is Venezuela’s oil policy effective?
by Roberto Smith, Presidential Candidate for the December 3, 2006 elections,
Venezuela de Primera political party, Former Minister of Transportation and Communications

The present oil policy in Venezuela, with state ownership of the petroleum industry, is negating opportunities to use oil’s net present value to boost the economy and develop our country.

The political polarization in Venezuela has made the impossible quite possible: The qualified, trained and expert personnel that used to run the country’s oil business were fired and blacklisted by the government. In other words, the people who used to run our oil industry are barred from participating in it at any level. Not only are they barred from PDVSA’s operations, but also from any company related to the state-owned oil industry.

As a result, Venezuela’s oil production has decreased. Currently, our country’s actual production level is 2.6 mbpd. To make matters worse, refining problems have forced several products out of the normal production line. Finally, it is hard to quantify the effects of the pressure placed on foreign companies that have invested in Venezuela’s oil industry. Companies have been forced into joint-venture agreements that make it very difficult for foreign investors to consider our country as a secure investment destination.

The future for our country, undoubtedly, is to build a strong and growing oil industry. Reaching production levels never reached before, levels that could generate income that would allow Venezuelans to benefit directly, should be a primary goal. With a correct balance between public and private investments, the state could channel the profit straight to the people, and the private companies making the investments would receive appropriate margins of returns.

Around the world there is proof that state-owned businesses, particularly state-owned oil companies, have not led to social development and improved living standards. In Venezuela, we must do the right thing. There must be improved social benefits for the majority. We must build an oil industry that will provide real benefit for all Venezuelans.

Should Hugo Chávez’s bravado be taken seriously?
by Diego E. Arría, Visiting Scholar at Columbia University and
Former Venezuelan Ambassador to the United Nations

A conflict is developing in Venezuela, one that is of critical importance for the future of freedom in the country and that also has serious implications for all of Latin America. It is not exactly a clash of civilizations as much as it is a confrontation of cultures: democracy vs. autocracy.

This confrontation is not simply between differing Venezuelan factions. The regime that currently controls Venezuela is projecting its influence beyond its borders. At the same time, the international community is finally beginning to recognize the legitimacy of the complaints coming from the people of Venezuela, who are suffering under a regime that perpetuates its rule not through popular support, but through the support of the armed forces.

Chávez’s regime is rapidly developing dangerous relations with Iran, Cuba, Libya, North Korea and, recently, with Hamas in the Palestinian territories. Chávez also maintains more clandestine relations with radical and subversive groups around the world. These activities are starting to raise concerns in the international community.

It is becoming increasingly more difficult for Latin American countries to not take sides regarding Chávez. This is especially the case because Venezuela’s regime is giving away barrels and barrels of oil to, among others, Cuba (its favorite), Bolivia, Uruguay, Caribbean countries and Argentina. Lately Chávez has extended his generous subsidies to lower- and middle-income communities in the United States. In the last seven years Venezuela has had u precedented oil revenues, out of which the regime has dedicated $27 billion to ensure the solidarity, unconditional support and very often the silence of those governments.

Recently, Chávez, as the leader of the Venezuelan petroregime, took a page from the book of his friend Saddam Hussein and threatened "to burn our fields like the Iraqis did" if the United States dared to invade his country. (He got it wrong. Oil wells were burnt in Kuwait.) This threat, coming from a man who twice in the past, when confronted by domestic forces, chose to run and surrender, should not disquiet anyone. But some of his most fanatical followers just might take him seriously; and a man awash in an unprecedented amount of oil money, who has declared himself an enemy of the United States and an ally of Iran and Cuba, among others, should be taken at his word, because many of his deeds are already visible and speak for themselves.

Response to World Energy
by Bernardo Alvarez, Ambassador of Venezuela 

When it comes to the energy sector, the politics of President Hugo Chávez are focused on three basic elements: 1) Venezuelan sovereignty over its natural, exhaustible resources of oil and gas; 2) Elimination of asymmetries in energy consumption based on fair prices, access to resources, and equilibrium among producers, consumers and industry; 3) Energy integration for the Caribbean and Central and South America. Today, the world is running out of cheap oil. No new resources have been discovered to cope with skyrocketing consumption, and only few countries in the world will remain net exporters. In terms of refining products, there is already a shortage in refining capacity to fulfill future demand.

Hurricanes Rita and Katrina were clear examples of such vulnerability. If we add to those elements several geopolitical factors, we end up with a pretty nasty scenario, which is reflected by the high oil prices we experience today. Aware of this reality, Venezuela is taking courageous steps to ameliorate the heavy burden this situation is creating for the vast majority of countries in the Western Hemisphere and worldwide.

The current model of consumption and trade when it comes to oil is no longer valid and might be, in the long term, destructive to many countries. This is what forced Venezuela to shape a strategy based on cooperation and solidarity toward its neighbors through the creation of initiatives like PETROCARIBE and PETROSUR. These initiatives go beyond securing the crude supply to cover the development of infrastructures such as storage facilities, refinery expansion and terminals. Venezuela is the biggest reserve holder of oil and gas in the Western Hemisphere, with 316 billion barrels of crude oil reserves and 150 trillion cubic feet of natural gas reserves, which by any form of calculation is the cornerstone to guarantee the energy security of the hemisphere.

However, energy security cannot be based solely on commercial terms; rather, it needs to be leveraged with a social view, and this is exactly the Venezuelan approach. Venezuela’s vision for energy security is based on reaching a fair equilibrium among all players. Domestically, this means securing a sustainable return through an efficient fiscal regime, fostering a real integration of the citizens of Venezuela in the productive apparatus and promoting the development and enhancement of the quality of life of the most excluded people in the country.

Externally, Venezuela’s effort to reach that equilibrium is achieved by implementing a viable legal framework attractive to investors, and by creating within OPEC the necessity to improve dialogue between producers and consumer countries. With its huge amount of reserves already in place, Venezuela has a responsibility to develop its resources in a most efficient way, so it can remain a sustainable and reliable supplier to its customers throughout the world. Under that guideline, Petróleos de Venezuela (PDVSA) – the state-owned oil and gas company – is implementing a $56 billion business plan to boost its production level to 5.8 million barrels per day and increase its refining capacity to 4.1 million barrels per day by 2012.

© 2006 Cristal Montañéz for World Energy
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