Venezuela: Political Economy

Early Punto Fijo Democracy : 1958 – 75 Legitimacy & Political Economy Infrastructure Development – Modernization – Participation in the international capitalist system – Party managed distribution of resources would increase quality of life of all classes

Caracas: Modern & Western?

Caracas: Poor & Primitive

Early Punto Fijo Democracy Initial economic downturn following transition – Political instability – Oil price downturn Return to growth 1961 – 1973

First Petroleum Boom (Phase 1) Carlos Andrés Pérez 1973 – 1983 Yon Kippur war Threefold increase in the market price of petroleum Fifty years of development if Five leads to overextension of borrowing capacity

First Petroleum Boom (Phase 2) Luis Herrera Campins 1979 – 1983 Donde están los reales From austerity to renewed petroleum boom Black Friday (February 1983) and its aftermath

Political Legitimacy, Poverty and the Economic decline in the 1980’s Lusinchi government ( ) Borrowing: the gamble that failed Thirty years of AD-COPEI governments disappoint expectations – Annual inflation (1988) 40% – General poverty 39% – Unemployment 12% – Real salary levels declined

Carlos Andres Pérez & Neoliberalism Exhaustion of ISI Petroleum income falls Turn to free market think tank (IESA) World Bank demands belt tightening

Carlos Andrés Pérez II: Economic Dynamics Flawed implementation of neo-liberal policies leads to rioting (Caracazo) El Gran Virage – Economic successes Macro-economic indicators of growth positive – Economic deficiencies Economic benefits fail to “trickle down” – Political consequences Bolivarian coup of February 4, 1992

Carlos Andrés Pérez II: Downfall Bolivarian Coup of February 4, 1992 Closing ranks fails to stabilize the political regime – COPEI divided – Second coup of November 27, 1992 Impeachment of Carlos Andres Perez – June/July 1993 More neo-liberalism under interim government of Ramon Velasquez

Rafael Caldera: Second Godfather of Punto Fijo Democracy Support from the left (Movement to Socialism) Promise to return to mixed economy with safety nets Economic program not feasible given international petroleum market

Agenda Venezuela Further Undermines Punto Fijo Legitimacy Neo-liberalism returns with a vengeance CTV fails to defend gains of organized labor – pension privatization – Retroactivity eliminated PDVSA consolidates its position as a “state within the state” Informal alliance with AD facilitates control of congress while tying AD to Agenda Venezuela

The Bolivarian Revolution’s Economy: Chavez View (1999 – 2006) OPEC strengthened – more revenue % living below poverty line declines Moderate inflation Entrepreneurial activity – falls out of favor Medical services made more available to poor Foreign investment – limited to Orinoco heavy oil

The Bolivarian Revolution’s Economy: Chavez View (2006 – present) Petroleum income surges – falls in 2008 Twenty First Century Socialism proclaimed – “Savage” capitalism’s excesses tamed – Cuban Package – December 2010 Land expropriation & redistribution Popular participation in economic policy making (Community Councils )

The Bolivarian Revolution’s Economy: & Election of more Housing Inflation – 2011 – 25.8% – 2011 – 24.2% Economic growth – 2.8 % projected for 2011 (IMF)

Opposition view of Chavez’s Economic accomplishments Decrease in level of poverty not commensurate with oil income Inflation – highest in Latin America Deterioration of infrastructure Flight of professional middle class Turnkey projects contribute fail to train local technicians