Venenzuelan Political Economy

1. Venezuela: Political Economy

2. 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

3. Caracas: Modern & Western?

4. Caracas: Poor & Primitive

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

6. 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

7. 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

8. Political Legitimacy, Poverty and the Economic
decline in the 1980’s
Lusinchi government (1984-89)
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

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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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)

16. The Bolivarian Revolution’s Economy:
& Election of 2012 - more
• Housing
• Inflation
– 2011 – 25.8%
– 2011 – 24.2%
• Economic growth
– 2.8 % projected for 2011
(IMF)

17. 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