Debilitating distractions weaken Chavez

Por Venezuela Real - 3 de Abril, 2008, 18:19, Categoría: Política Nacional

April 03, 2008


SUBJECT: Implications of the government's failure to focus on crucial domestic concerns.

SIGNIFICANCE: Continuing concentration on foreign affairs -- particularly deteriorating relations with the United States -- is distracting the government from pressing domestic challenges.

ANALYSIS: The government of President Hugo Chavez has yet to regain traction after defeat in December's referendum on constitutional reform. Although Chavez promised that his administration would address popular concerns relating to crime, unemployment, housing and food shortages -- where lack of government action is seen to have cost it support in December -- it has only been in recent weeks that policy measures have been announced: • 'Energy revolution'. Chavez has announced an 'energy revolution' backed by planned state investments of 20 billion dollars over six years, including 52 raw material processing and petrochemical projects to be financed by the National Development Fund (FONDEN), which has reserves of 35 billion dollars. The announcement was made during the inauguration of a 'model' housing project in Carabobo state. The 459 'socialist' community of houses were constructed from petroleum-based PVC plastic produced by the state-owned petrochemical firm Petrocasa; 60,000 new PVC houses have been promised for poor families in the south, generating an estimated 600,000 jobs.

'Barrio Adentro'. Chavez announced plans further to integrate health provision under the 'Barrio Adentro' community health initiatives. This will be funded by a planned windfall tax on oil profits, which is reportedly to be set at 50% of oil revenues above 70 dollars per barrel, and 60% above 100 dollars.

Improved food production. The government has signed a series of technological support agreements with Brazil, Argentina and Uruguay. A 51 million-dollar cooperation agreement between Venezuela's National Agricultural Research Institute (INIA) and the Brazilian agricultural company Pesquisa Agropecuaria is to improve soya, sheep, cattle and buffalo in Venezuela. The food minister has hinted that a new phase of the government-supported food production initiative, Mission Mercal, might be launched and there is a renewed drive for self-sufficiency in food.

Pending problems. These measures are intended to address disaffection within the government's core support base among the poor and socially excluded. However, they are unlikely to generate the outputs intended. More problematically for the government, they are unlikely to propel the Chavista movement to success in November's regional and municipal elections:

• It is unlikely that these projects will deliver the welfare benefits intended in the short term -- and certainly not before the elections.
• Success is likely to be undermined by the lack of reform in other areas of government policy. For example, agricultural lobby Fedeagro has argued that price and currency controls and insecurity of land tenure will offset efforts to improve food supply.
• The Chavista movement faces broader problems outside the policy sphere, with sectarian struggles within the new ruling United Socialist Party of Venezuela (PSUV) proving debilitating ahead of the November elections. Disputes over candidate selection have widened rifts between the grassroots of the movement and the PSUV national executive, and between left and centre-left factions -- in contrast with the unprecedented level of consensus shown by the opposition in its candidate selection process.
• Although he remains broadly popular, Chavez has been personally damaged by December's defeat, with opinion polls showing that his support has fallen to around 35%. The December setback has undermined Chavez's aura of invincibility both within and outside of the Chavista movement.

A recent survey of 1,000 people by Alfredo Keller Associates showed that 37% of respondents identified themselves as Chavista, while 41% were oriented toward the opposition. Surveyed as to government progress in rectifying problems in areas such as unemployment, corruption and cost of living, 62% considered that these problems were getting worse. The decision by the Comptroller's Commission of the National Assembly to investigate allegations of corruption by two of Chavez's brothers in relation to land purchases in their home state of Barinas, where their father is state governor, is a further concern for the government. The case, launched following accusations by the former leader of the pro-Chavez Fifth Republic Movement, also reflects the growing intensity of factional and personal struggles within the PSUV.

Analysts are now increasingly shifting their attention away from the question of whether Chavez will step down in 2012, to the question of whether he will survive until then. In particular, there are doubts that Chavez would survive a second recall referendum were one to be convened next year. However, despite the urgent need to address domestic political and policy challenges, foreign affairs continue to be a significant distraction. There is a strong sense within the Chavista administration that its US counterpart is pushing for one last effort to displace Chavez before President George Bush leaves office.

Terrorism allegations.

Bush has requested that the State Department consider placing Venezuela on the list of state sponsors of terrorism. This follows from HRes 1049, proposed by Republican representatives from Florida and based on claims that Venezuela has provided financial and material support to the Colombian FARC rebels. Chavez has emphatically rejected the claims: • He has questioned the authenticity of the files reportedly discovered on the laptop of FARC leader Raul Reyes, killed in a Colombian raid on March 1, which in late March were handed over to the Venezuelan Embassy in Bogota by Colombian authorities. • From the Venezuelan perspective, the allegations of terrorist links are seen as part of a new phase of 'vertical warfare', including US allegations of Venezuelan non-complicity in the war on drugs, engaging in a regional arms race, human rights abuses, engagement in money laundering and efforts to destabilise the region. Venezuelan concerns over US intentions have increased following a series of US military exercises off the Caribbean coast and high-level meetings between US military and Department of Defense officials and their Colombian counterparts. In February, the US Southern Command deployed the Fourth Fleet to the Caribbean for the first time since the end of the Cold War and in March, the US Navy dispatched the aircraft carrier Harry Truman to engage in 'preventative' military exercises in the region. Commercial consequences. Were Venezuela to join Iran, Cuba, Syria and North Korea on the list of states that sponsor terrorism, sanctions would have dire consequences for US-Venezuelan commercial relations, estimated to be worth 50 billion dollars annually:

• They would dramatically raise the cost to US firms of doing business in Venezuela.
• The bilateral double taxation treaty would be terminated.
• According to figures from the Venezuelan Embassy in Washington, the cost of US exports to Venezuela (currently valued at 10.2 billion dollars per year) would rise by 30 cents on every dollar.
• The cost of Venezuela's oil exports to the United States (around 1.58 million barrels per day) would increase by 20%, further destabilising international oil markets.
• Some 230,000 US manufacturing jobs generated directly or indirectly through trade with Venezuela would be lost. For example, state-oil company PDVSA's US subsidiary, CITGO, makes annual purchases of goods and services from 800 US companies valued at 2 billion dollars. Florida, Texas and Michigan would be worst affected.

CONCLUSION: US sanctions on Venezuela would be likely to have a significant negative impact on both countries. Although this may militate against their application, concerns over bilateral tensions will fuel Chavez's anti-imperialist rhetoric and further divert the government's attention from crucial domestic concerns that threaten to undermine its support base. Inflation

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