Arcaya & Asociados
Economic Intelligence Unit
December 10. 2007
President Hugo Chávez's powers remain formidable despite the voters' rejection of further constitutional reforms
The winning "no" vote in the national referendum on constitutional reform held on December 2nd was a major political and personal defeat for President Hugo Chávez, and may mark a turning point in Venezuelan politics. Never has the radical leftist president lost a referendum or other election since gaining the presidency in 1998. The opposition will celebrate its narrow victory, but it remains unclear whether its disparate elements can transform this into a viable movement to challenge the president, who will remain extremely powerful.
Venezuelans participating in the referendum rejected Mr Chávez's plan to perpetuate himself in power indefinitely and further centralise control over the economy and political institutions in the presidency. Indeed, most Venezuelans are believed to be uncomfortable not only with the proposed elimination of presidential term limits, but also with "Bolivarian socialism", with support for Mr Chávez resting mostly on his generous social spending programmes and not on his ideology.
Repudiation of the 69 proposed constitutional reforms, divided into two blocks (the first block was discarded by 50.7% to 49.3%, the second by 51.1% to 48.9%), amounts to a rejection of his governing model and ideology as well.
Among the clauses thought to generate most disapproval were plans to end the autonomy of the Central Bank, weaken private property rights and civil liberties, and create new regional administrators whom Mr Chávez would appoint.
The vote was also a slap to Mr Chávez himself, who in recent weeks used a familiar tactic—rallying nationalist sentiment—to identify national identity with the reforms and bolster their chances at the polls. He had very highprofile disputes with King Juan Carlos of Spain and Colombia's president, Alvaro Uribe, spats that he clearly expected would boost his standing at home. He was so self-assured, that he even said he would stand down if the referendum was defeated. He is unlikely, however, to follow through. Instead, Mr Chávez will continue to push his reform agenda via the legislature and after a pause he may try the referendum route again.
The referendum's collapse can be attributed in large measure to the recent coalescing of a mass student-based opposition movement, combined with the open rebellion of former Chávez allies. Gen Raúl Baduel, formerly defence minister and a close Chávez collaborator, in the last several weeks publicly denounced the constitutional changes and urged Venezuelans to come out in force to vote "no". His urgings seem to have worked. A small party allied to Mr Chávez, Podemos, also rejected the proposed reforms. Even in some poor neighbourhoods that are normally bastions of Chávez support the turnout was reportedly low compared with past elections.
There was a relatively high rate of abstention overall—44.8% of voters—and many of those who stayed home are believed to have been Chávez supporters. This suggests that even many chavista cadres disapproved, but may have feared retaliation if they voted against the reforms at the polls.
A deterioriating economic situation also probably contributed to disillusionment among many. Although higher expenditures on health and education have helped many poorer Venezuelans, the government's interventionist policies—such as price controls, exchange controls, import restrictions and nationalisations—have generated a dearth of private investment, shortages of basic goods and high inflation. Such consequences typically hurt lower-income citizens most. What next?
What has not changed with the referendum is the near-complete power that Mr Chávez will continue to wield over the National Assembly, the courts, the state oil company, all but a handful of state governors and other institutions. With five more years in his current term in office, he will have plenty of time and resources, as well as presidential decree powers, to further radicalise policy and to entrench his socialist model. Further, while this was an important blow to the government, the opposition is still divided, and there is no clear challenger to Mr Chávez.
The referendum vote opened a gap for the opposition, but it has been filled by students, Gen Baduel and other disgruntled chavistas, not by the discredited traditional political parties and leaders. Whether these disparate forces can capitalise on their victory to pose a unified and strong opposition is as yet highly uncertain. Still, the startling referendum outcome should take some wind out of Mr Chávez's sails, at least temporarily. He may moderate his recent stand against Colombia, and pull back from threats of breaking political and trade relations. He may also temper his revolutionary rhetoric with regard to the rest of Latin America, where he has been actively backing leftist comrades in countries such as Bolivia and Nicaragua. Indeed, the defeat may serve to limit Mr Chávez's influence somewhat around the region.
The implications of these events in Venezuela may also reach beyond its borders in other ways. Ecuador's president, Rafael Correa, just days ago inaugurated a constituent assembly to rewrite that country's constitution. He, too, has talked of pursuing "21st century socialism" a la Venezuela. Now he will no doubt be more cautious, mindful of the lessons to be learned from pushing one's luck too far.