Venezuela: Political Economy

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Venezuela Political Economy
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Early Punto Fijo Democracy 1958 75

• Infrastructure Development

• Legitimacy Political Economy

• Modernization
• Participation in the international capitalist
  system
• Party managed distribution of resources would
  increase quality of life of all classes

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Caracas Modern Western?
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Caracas Poor Primitive
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Early Punto Fijo Democracy

• Initial economic downturn following transition
• Political instability
• Oil price downturn
• Return to growth 1961 1973

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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

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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

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Political Legitimacy, Poverty and the Economic
decline in the 1980s

• 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

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Carlos Andres Pérez Neoliberalism

• Exhaustion of ISI
• Petroleum income falls
• Turn to free market think tank (IESA)
• World Bank demands belt tightening

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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

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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

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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

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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

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The Bolivarian Revolutions 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
  

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The Bolivarian Revolutions Economy Chavez View
(2006 present)

• Petroleum income surges falls in 2008
• Twenty First Century Socialism proclaimed
• Savage capitalisms excesses tamed
• Cuban Package December 2010
• Land expropriation redistribution
• Popular participation in economic policy making
  (Community Councils)

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The Bolivarian Revolutions Economy Election
of 2012 - more

• Housing
• Inflation
• 2011 25.8
• 2011 24.2
• Economic growth
• 2.8 projected for 2011 (IMF)

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Opposition view of Chavezs 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