Chavez's Weakened Position
(International Relations and Security Network 31/7/2008)


Venezuelan President Hugo Chavez has spent nearly US$90 billion promoting his own ideology and promoting his country as a regional and global leader, but his return on investment has been meager.


A series of significant events, beginning with his loss in the December 2007 referendum, has continued to signal the president's weakened position in South America, inside Venezuela and most importantly, within the group of men and women whom he considers to be his closest political allies.


Beyond the perception that international observers or political insiders may have of Chavez, his own constituents have lost a well measured amount of hope. As much as many would have liked to claim Chavez as a progressive leader, or even a revolutionary, they have resigned to disappointment.


What was once a massive up swell of hope for a national revolution has all but turned into the bitter realization that Chavez's Socialist experiment has nearly soured into just another grab for personal power.


PDVSA, the Venezuelan oil giant and nearly singular source of government funding, is struggling - a precursor to worsening economic conditions. The country's economy has slowed down and inflation continues to grow. Chavez's opposition, led by former ally and confidant General Raul Baduel, has gained more military support.


Still, Chavez remains his own worst enemy. His consistent focus on international endeavors has distanced him from what his voters really want.


The Venezuelan leader has not resigned to following Fidel Castro's best advice: Manage your revolution.


"People don't care about his visit with the King [of Spain] or whether Russia is on our side or not, or selling us weapons or not," claims one Caracas-based blogger and long time Chavez critic. "To most Venezuelans geopolitics are as important or relevant as the latest Paris fashion show, something remote and mysterious," he added in a 27 July post.


Most Venezuelans who voted for Chavez in his 2006 re-election are more worried about crime, inflation, employment and other considerations that affect their personal security and their ability to put food on the table and pay the bills.


Crime in Caracas is the highest in Latin America. The inflation levels just for food products is at least at 30 percent, with the state-owned food distribution network, known as PDVAL, delayed in replenishing its stocks, according to a 19 June report from Venezuelan daily El Universal.


PDVAL is directly connected to Venezuelan oil company PDVSA, which itself experiences ongoing problems, not the least of which has been a recent string of defaults on its payments to contractors.

According to a 17 July testimony given to members of the US Congress by the president of the Institute for Global Economic Growth, Dr Norman Bailey, the Venezuelan financial situation is "very poor."


"The free reserves of the central bank are negative and the state oil company, PDVSA, had to borrow US$16 billion dollars in 2007," Bailey testified, adding that "PDVSA management is so poor that the company is subject to dozens of lawsuits internationally for non-performance of supply contracts."


Meanwhile, Venezuelan economic growth slowed to 4.8 percent in the first quarter of 2008, down from 8.8 percent in 2007.


Yet Chavez, on his latest trip to Russia, signaled his willingness to spend another US$2 billion on military equipment, bringing the overall expenditures for Russian military equipment close to US$6 billion.


In a 24 July Economist Intelligence Unit report on political risk in Venezuela, the authors note that such military spending is "probably motivated at least as much by any perception of external threat as by the fact that Mr. Chavez's domestic difficulties make it important for him to keep the army on-side."


When former Chavez confidant and defense minister General Raul Baduel left the government, signaling his displeasure over Chavez's constitutional amendments in November 2007, he was seen as a new, powerful voice for the opposition. Given the General's former loyalties to the Chavez regime, his pre-referendum defection came at a moment when Chavez could least afford it politically.


Baduel is now an active member of the opposition - so much so that on 21 July, he said there had been an assassination attempt on his life while he was traveling back to Caracas from Maracay, some 96 kilometers southwest of Caracas.


The attempt on his life is a clear sign that at least Chavez supporters see Baduel as a threat, especially ahead of the November state elections.


But killing Baduel will not stop the tide of public sentiment now beginning to ebb away from supporting Chavez. Observers will see the Chavez political machine go into high spending mode in an effort to maintain control over a majority of the state-level leadership as November approaches.

The upcoming election is likely the most important in Chavez's political career as a resounding loss may well signal the beginning of the end for his regime. After so many billions spent on promoting his ideology across the world and region, it is becoming clear that he gave the least amount of attention to the people who most matter.


In November, Venezuelans will have a chance to show their president exactly how much return he's received on all that spending. And there's a strong chance the answer will be not a whole lot.