by Diego Zuluaga Laguna

Those of us who believe in free societies as the foundations of individual empowerment and human flourishing were encouraged by the resounding defeat of the incumbent chavista forces in the Venezuelan parliamentary elections of 6 December 2014. Yet Venezuela’s problems go further back than the disastrous years of chavismo.

For the first time since the advent to power of Hugo Chávez, opposition forces – grouped together in the Democratic Unity Roundtable (MUD), which includes parties ranging from social democracy to free-market conservatism – won a majority in the National Assembly. Not only that, but they gained enough seats to push through constitutional reform and thus confront head-on the relentless concentration of power in the hands of current President and Chávez heir Nicolás Maduro.

The shift was anything but unexpected. The economic policies pursued since the socialist government first took office in 1999 have been catastrophic for Venezuelans at all levels of the income scale. Inflation, gauged by the IMF at 160 per cent in 2015 (although it may be as high as 800 per cent according to reputable calculations from Johns Hopkins University), has ravaged the purchasing power of ordinary Venezuelans.

Price controls on an ever-increasing basket of goods have led to acute shortages of everything from meat and nappies to essential medical supplies. Moreover, a fundamental lack of respect for private property rights on the part of the administration has scared away foreign and domestic capital.

To top it all off, the ongoing slump in commodities prices has hit few countries as hard as it has Venezuela. Crude oil exports represent 96 per cent of the country’s foreign earnings, and at current levels of public expenditure the Venezuelan state needs a price per barrel of around $120 to break even. With the price hovering around $30 and little prospect of a rebound, it does not take a maths genius to realise that Venezuela’s public finances are in a very dire state. The trouble is that a decade-and-a-half of arbitrary intervention by public authorities into economic life has undermined the productive structure of virtually every other industry, making a redeployment of capital in the short term unlikely.

Nevertheless, with the economy on life support and opposition forces newly empowered by the electorate, it might seem inevitable that change will soon come to Venezuela in the guise of market reforms, a rebuilding of democratic institutions and the separation of powers, and perhaps even a new non-chavista President.

Indeed, Maduro has so far been unable to prevent the popular will from being enforced by the new parliament, despite his best efforts at undermining the transfer of power by curbing the National Assembly’s remit and bringing key legislative functions under the presidential wing.

However, it is difficult to predict how long it will take for such fundamental transformations to begin. We do not even know what form change will take – whether it will follow democratic procedure or be the result of violent conflict between an increasingly power-hungry authoritarian government and its dissatisfied people. Furthermore, it is tempting to think that once chavismo is ousted from power, all will be well and Venezuela will enjoy a gradual but rapid recovery, perhaps even aided by resurgent crude prices.

Yet, Venezuela’s problems – much as they have been entrenched and compounded since Chávez took office – are more deep-rooted than 17 years of misguided socialist ideology. A weak rule of law, the use of state resources to bribe the electorate, and corruption by the political elites have characterised Venezuelan institutions since at least the 1950s. Two key figures defined what modern Venezuela has become – and chavismo took cues from both to come up with its own brand of nationalistic, anti-American, petroleum-fuelled state capitalism that has ended up bankrupting the country.

The first defining character is Marcos Pérez Jiménez, an army general and dictator who ruled Venezuela from 1952 to 1958. Pérez Jiménez is today remembered for the large infrastructure and industrial projects which he sponsored, and for the wave of European immigration – particularly from Italy and Spain – which he encouraged and presided over.

In many ways, he was a classic Latin American strongman: authoritarian, anti-communist and keen to implement Western ways. But Pérez Jiménez also came up with an ideology which set the goalposts for what subsequent governments have aimed and been expected to deliver.

His vision for Venezuela was embodied in the so-called New National Ideal. This was a mixture of nationalism and developmentalism that sought to create a common narrative for all Venezuelans, based on a patriotic morality and the pursuit of prosperity through the exploitation of the country’s natural resources. The New National Ideal is not dissimilar from the corporatist nationalism prevalent in other Latin American states throughout the 20th century. And, like Juan Perón in Argentina and Lázaro Cárdenas in Mexico, Pérez Jiménez’ legacy continues to shape Venezuela to this day.

After the dictator’s ousting from power in 1958, Venezuela entered an extended period of democratic government, dominated by two political forces, the centre-right COPEI and the centre-left AD, which alternated in power all the way up to Chávez’ election in 1998. Few figures featured as prominently during this period as Carlos Andrés Pérez, a salient AD leader who was President of the country during two terms, first from 1974 to 1979, and then from 1989 to 1993.

Pérez – or CAP, as he is known – was hugely popular during his first term, not least because of the high oil prices which accompanied it. Indeed, in 1976 CAP nationalised the Venezuelan oil industry and began to lavishly spend the proceeds from crude exports. New social programmes were introduced, including scholarships for Venezuelans to study abroad. Trade unions were granted extensive powers, and myriad industries were brought under the state’s wing in a bid to achieve full employment.
Such oil-financed largesse was just about affordable during the years of high crude prices, but they became unsustainable as the price per barrel entered a steady decline from the early 1980s. Having left office with enviable approval ratings at the height of the Second Oil Crisis, it is little wonder that CAP was elected for a second term in 1988. But the second-term CAP was very different from the one Venezuelans had experienced in the 1970s – or at least his policies were.

Facing mounting external debts and capital flight, CAP brought in technocratic ministers who recommended spending cuts, privatisations and a reduction of the state’s role in the economy, which over the preceding decade had given rise to inefficiency and corruption.

The International Monetary Fund offered similar recipes, which CAP went on to implement. While such measures were doubtless badly needed and market reforms would, over the long term, have greatly improved the fundamentals of the Venezuelan economy, they implied pain in the short term. In a country that had grown accustomed to generous state handouts during the boom years, belt-tightening brought social unrest.

In the wake of two military coup attempts – one of them led by none other than a young Lieutenant Colonel by the name of Hugo Chávez – and amid allegations of stupendous embezzlement, CAP was impeached in 1993. The continuing economic and political crisis in the years that followed helped to bring Chávez to power, with a promise of change and a more equally shared prosperity, in 1999.

Seventeen years later, we know how elusive the promise of 21st century socialism has proven. Indeed, while it inspired many similar movements across Latin America, notably in Bolivia, Ecuador and Argentina, chavismo is now on the retreat, as low commodity prices and disappointing economic performance have forced a reckoning across the continent.

However, it is important to understand that Venezuela’s problems are more deep-seated and long-standing than the policies of the chavista government. For several decades, the country’s political leaders have used nationalism and natural resources to whip up public support, bribe voters into compliance and lull the poor and vulnerable into complacency. The elites’ patronage has arguably hampered the development of robust and independent public institutions, fostering instead dependency and a fixed-pie mentality about the country’s wealth which in turn has bred social conflict.

We can all look forward to the day when Venezuela definitively leaves behind the catastrophe of chavismo. But we must understand that this will merely be the end of the beginning in the task to put the country back on a sound footing. For that to be achieved, the legacy of Pérez Jiménez and Carlos Andrés Pérez will have to be decisively confronted, and that will take a generation.

23 February 2016
This text was published in Bullseye issue 63