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THE COLLAPSE OF PUNTOFIJISMO
From the Establishment of Partyarchy to the Election of Chávez
Abstract: The collapse of the Pact of Punto Fijo which was agreed upon to establish a consolidated democratic system by the major civil political actors in Venezuela gave birth to many questions. It opened up a new chapter not only for Venezuela but for the Latin American politics with the unlikely election of Hugo Chávez. Both the corruption within Venezuelan politics and the deterioration of Puntofijismo are noteworthy in understanding the emergence of a politician like Chávez; however, without a comprehensive study on first the Venezuelan economic dynamics; then the impact of neoliberal turn in the country; lastly on the sources of support for Chávez, an explanation for the ultimate change in the status-quo would not be possible.
The remarkable changes in the Latin American politics with the turn of the 21st century has produced many questions, most yet to be answered. As commonly accepted as Latin America’s left turn, these changes have come after decades of bureaucratic authoritarian regimes and the subsequent economic austerity programs starting in the 1980s with the implementation of neoliberal agendas across the continent, backed by the international financial institutions.
Although this timeline had shown salient similarities for the most part of Latin America, the case of Venezuela has been quite different in the sense that the country is evaluated as one of the most consolidated democracies in the world until the mid-1980s while its counterparts had gone through bureaucratic authoritarian regimes or military juntas in the meantime. Furthermore, while the neoliberal agendas had started to be implemented -or rather imposed by the IMF and the World Bank- one by one, following the debt crisis of late 1970s and early 1980s; the Washington Consensus could only reach to Venezuela in 1989 when Carlos Andrés Pérez introduced his Gran Viraje (Great Turnabout). Nevertheless, these time lags did not hold Venezuelan politics and society to lead one of the major political developments of the recent world history. The unlikely election of Chávez, a leader with a leftist and populist rhetoric into the presidential office marked the beginning of a wave of a political turn in Latin America.
To understand the rise and surprising election of Chávez, Venezuelan politics should be examined commencing from the establishment of Punto Fijo system, in which the two political parties; Acción Democrática (AD) and Comité de Organización Política Electoral Independiente (COPEI), had enjoyed political authority in a unique system for decades. The dynamics of the system should be analyzed to the extent that the relationships between the political actors help to explain the eventual -inevitable for some- rise of Chavismo. Also, further explanation is required on the role of oil over Venezuelan politics throughout this period; since it is the major source of national income and the oil politics are the primary determinants of the economy.
Hence, in this paper, the historical context of Venezuelan politics, starting with the establishment of Puntofijismo up until the election of Chávez is examined. When doing so, the foundations of the Pact of Punto Fijo are evaluated and the dynamics of the system are described with its reflections on the evaluation of democracy in ideological terms. Later, the neoliberal agenda of Venezuela is explained and a macroeconomic evaluation of the economic policies of the time are done with a special focus on their impacts on the social basis. Here, the deficiencies of Puntofijismo are revealed and the side effects of this partyarchy are elaborated on. At this point, drawing upon the evaluations that had been made, the reactions to the neoliberal turn; prominently the Caracazo movement and the two failed coup attempts of 1992 are tried to be understood and the reasons for the survival of the system until Chávez are questioned. Lastly, to have a more comprehensive understanding on the rise of Chavismo, the emergence and the rise of Hugo Chávez in the political scene is examined with a focus on his surprising success in the 1998 elections.
THE FORMATION OF THE PUNTO FIJO SYSTEM
For many years, historians writing on Venezuelan politics and democracy in general, the ‘pacted democracy’ formed under the Pact of Punto Fijo in 1958 has been a product of a heroic struggle against the corrupt political environment in Venezuela. This period is characterized by the clashes between the church and military, along with the unrests among the junior army officers. By 1958, corruption, economic inefficiency, imprisonment of some religious leaders, killings of political opposition had reached its peak and a community of opposition to the heavy-handed authoritarian military rule dedicated themselves to change the existing system for the good of democracy and thus the society.
The unity among those who advocated a consolidated democracy was a result of the fruitless coup attempts by the military officials associated with Pérez Jiménez during the second half of 1958 to establish a secure, fully-in-charge military regime. The calls, primarily from the Venezuelan left, managed to get different sections of the political circles together which eventually gave birth to the Pact of Punto Fijo on October 31, 1958. These sections included the leaders of the three major political parties, outstanding names being Rómulo Betancourt of AD, Jóvito Villalba of URD (Unión Republicana Democrática) and Rafael Caldera of COPEI; the leading business organization FEDECAMARAS; top leaders of the church and a major part of the armed forces. The contract was signed among the party executives; yet, the explicit support of the other political actors and social groups made it a massive action against the status-quo and planted the seeds of a more democratic political structure. What was critical here was the exclusion of the extreme right wing and the Communists -both political and social groups- from the Pact. This also explains the backing from the United States towards this new structure. Although the US government had been identified as more comfortable with military regimes on its backyard in defending the continent against the Communist threat, the Eisenhower administration was supportive of a democratic transition in favor of a civil government in Venezuela.
In its initial phase, Pact of Punto Fijo promised the military certain autonomy over operational affairs; thus guaranteed civilian control over administration in exchange. Similarly, the business sector accepted a regulated economy, better conditions for the working class if the conditions for protecting the new industries and the predictability on making good on state’s debts were met. Therefore, both the support of the employer and the employee were acquired.
In the elections in 1958, the three political parties agreed on a coalition government with equal distribution of the governmental seats in the Congress regardless of who came the first from the ballots. As the candidate of AD, Betancourt received the %49 of the votes and included the members of the other parties in his cabinet as promised. This unusual practice had continued until the 1968 elections; however, the two major parties, AD and COPEI did not quit cooperating after then, nonetheless.
Challenges to the New System
Despite being a pact agreed upon by many sections of the political actors, the new system could only reach its maturity by the mid-1970s when the two major parties managed to overcome the insurgencies both within themselves and outside the party circles.
The insurgencies were based mainly in the military who was not completely behind this democratization and many high-ranking officials were skeptical about the changing capacity of their power. However, under Betancourt, the civil government had survived four coup attempts. To explain the success of facilitating the authority over the military, the relationship between the military and the state during Puntofijismo era is examined in detail in the following pages.
Another source of challenge was the guerilla movements in the wake of the Cuban Revolution. Being active in the beginning of the 1960s, the guerilla movements found little support from the Venezuelan society though; since especially the peasants from whom the movements would have expected a participation had enjoyed benefits of the land reform introduced by the AD-COPEI coalition in 1961. Eventually in the mid-1960s the guerilla movements declared to stop their quest.
Last but not the least was obviously the Venezuelan left that was excluded from the pact at the beginning. The disintegration in the Communist Party following Punto Fijo pushed some party factions to form new movements. The left remained to be a trouble-maker until 1971 when a strong faction of the Communist Party founded Movimiento al Socialismo (MAS) and decided to work on electoral power. With this decision, the left was virtually passivized since the AD and COPEI had already created a political environment that was hard to penetrate.
The Dynamics of Puntofijismo
After the first elections under the pacted democratic regime in Venezuela, a new formula of governability came out in the following years: partyarchy. In this system, the two major parties, AD and COPEI had undertaken an exceptional role which in the eyes of the Venezuelan people was described as partidocracia (an amalgam of partido and democracia) and later translated into term partyarchy. (Coppedge, 1994) According to Coppedge, the guardians of the partyarchy were the leading adecos and copeyanos (due to the party name initials AD and COPEI) which is referred to as adecopeyanos in the literature.
The strong establishment provided by the adecopeyanos was in fact undergirded by certain political formulas. First of all, the system was based on inclusive representativeness. That is, the two parties were so extended in organization, almost everybody in the society had a part in the politics either directly by being a party member or solely by supporting either of the two parties. Actually, almost one third of the civil society was a member of either AD or COPEI and the two parties received generally %80-90 of the general votes up until the mid-1980s with a massive participation in the elections. Despite quantitatively positive for democracy since the system reaches more people, the degree of centralization in Venezuelan politics remains questionable to the extent that the administration of even the smallest unit of state was an arena for party politics.
Secondly, the electoral competition between the two parties have always been considered fair. Without doubt, elections are a major source for democratic governability; therefore, the fairness of this institution has utmost importance. In the Venezuelan case, the elections had been a sort of national festival in which the civil society celebrated their consolidated democracy; with the two parties campaigning for the offices mutually respectfully. When the elections are proven to be fair in a country, the percentage of the people going to the ballots increases significantly; because the people knows that their contribution to the democracy that they have matters. Until the implementation of the neoliberal agenda, when the corruption scandals were revealed in the meantime, the participation to the elections remained very high, never exceeding %12,4. (Coppedge, 1994)
The third ingredient of the Venezuelan partyarchy was the party discipline that had provided the AD and COPEI with strong party establishments that were not open to any breach either from within or from the outside opposition. Despite being the members of a democratic system, neither AD nor COPEI can be regarded as democratic institutions within themselves. The decisions were taken by a small group of party leaders -named as cogollo– and any opposition to their policies would result with a suspension of the party membership; or even with a dismissal from the party. Considering the fact that the official number of party members had reached to almost one third of the civil society in Venezuela, a large portion of the society was organically bound to party politics. Furthermore, the rest of the civil society including the student and professional associations, business sector, labor unions and even the non-governmental organizations were all dependent on the politics of the party which constitutes the bigger portion of the Congress and the presidential office. Hence, becoming an opposition was obviously dangerous. In most cases, the leaders of such organizations were the members of either of the parties and any organized opposition was not an option at all. This strong party structures eventually led to paternalism towards the masses because in some cases, benefiting from the state resources required obedience to the party policies. For instance, the labor unions of whom the party was in power remained silent throughout that term in order not to run counter to their party discipline.
The fourth formula was the intention of the Pact of Punto Fijo itself: Concertación. When the agreement was first discussed, the purpose was to work up for a democratic and civilian regime in which the whole society would benefit from the system. This required not only unambitious -against each other- party policies on the side of the parties involved; but in fact, an interdependency while making decisions on especially critical matters. That is why the champions of the general elections had included members from the other parties in their cabinet. Even though URD was proven to be not capable of challenging the AD and COPEI politically after the first elections, the two major parties remained loyal to the spirit of the agreement and had continued to consult each other particularly when national interests were at stake. First and foremost, the oil policies were generally decided on a common ground, followed by the foreign policy issues and the national defense if need be. (Levine, 1978) In other words, under Puntofijismo, the party leaders were committed to the maintenance of democratic regime; so they refrained from any possible conflict.
Lastly, the concertation between the parties was in fact a reflection of a wider set of relations in which the adecopeyanos had quite similar relations with the other political actors, as well. In other words, the main motive in relations towards any political actor on the side of the AD and COPEI was not to create any conflict. However, the relations with the other actors did not merely include a mutual consultation; but rather the two parties granted concessions primarily to the military and basically aimed to neutralize it in political affairs. Moreover, the private sector was silenced in terms of an opposition by the protective policies of consecutive governments with high tariffs and subsidies for the new industries. Consequently, it would be fair to claim that this system worked fine for every actor in the Venezuelan politics; since they enjoyed economic prosperity and internal autonomy for decades. However, it is important to point out that clientelism had been promoted by the terms of affairs and later paved the way for the abuse of Venezuelan democracy in favor of the ones in power. (Lalander, 2004)
Governability is described by Michael Coppedge as “the degree to which relations among the strategic actors observe arrangements that are stable and mutually acceptable” (1994) Thus, considering the harmony among the actors of the political system and the creation of a positive environment for democratic consolidation and progress, the level of governability in Venezuela was maximized by the new establishment. The success of the system is prone to discussion, nevertheless. Since the ability or the capacity of a system for political, economic and social progress does not mean that the actors in it would absolutely attain a top-notch level of prosperity that would be hard to break even under serious threats; the management of this governability is another issue that requires a separate evaluation. In other words, although the coalition under Puntofijismo successfully constructed an almost perfect democratic system functionally, especially after the 1980s, the system fell into decay, leaving ‘governability’ as an irrelevant factor for the people when making choices for the future of their country and their lives.
In conclusion, the “partyarchy” regime founded in Venezuela in 1958 was characterized by the following: first, the concentration of power in the hands of institutionally colonized two political parties which resulted with a centralization in politics; second, economically interventionist policies that were implemented by using clientelistic channels to get the business sector on board; third, paternalism towards the masses through party politics; and fourth, a convenient political environment in terms of democratization despite all the possible side effects of the system.
SOWING THE OIL: THE IMPACT OF OIL OVER VENEZUELAN POLITICS
The increasing dependence on energy resources, particularly on oil in the 20th century has provided certain advantages for many countries with great reserves in the international economy. Having the biggest reserves of crude oil on earth, (US Energy Information Administration, as of 2014) Venezuela is -not surprisingly- one of the major beneficiaries of the petrodollars.
The discovery of oil reserves marked a watershed in the history of the country; Venezuelans could now distinguish a time before and after oil. (Salas, 2015) To illustrate, while in 1921, a year before the oil drillers struck the first enormous gusher, the exports of coffee constituted nine times the earnings of oil exports; in 1935, Venezuela has generated $676.8 million from oil which is sixteen times what coffee and cacao exports generated combined. (Hellinger, 2009) The earnings from oil have continued to increase exceedingly afterwards, especially in the times when the oil prices went up in the global market.
Venezuelan politics and the changes in it, especially in the last few decades are at best superficially covered unless the role of oil in all spheres of life in the country is studied in depth. Beyond everything, the flow and the accumulation of unprecedented amounts of money changed the traditional social structure from the start. It enabled the Venezuelan governments to establish a more social state, provided the merchants both within and outside the country opportunities for establishing trade relations and lastly, created a new working class working both in the oil fields and in related sectors.
The roots of the oil politics in Venezuela can be found in the formation of Acción Demócratica (AD) in 1941. Being governed by a military leader, Juan Vicente Gómez until 1935, many people were uneasy against the administration and criticized it on the grounds that the country was not using its economic capacity well, both for the good of the people and the state itself. Therefore, Rómulo Betancourt, who later took part in the Pact of Punto Fijo delivered a strategy for a better statesmanship in the 1930s. His ideas, which in the following years laid the foundations of AD remarked his struggle for electoral democracy. His doctrine basically consisted of challenging the oil companies and put forward the idea of nationalization of oil; then, with the money generated out of it, by “sowing the oil”, to modernize the national economy and provide better living conditions for the people. He also appraised universal suffrage on his path to democracy; so that a political base for his project would be sustained.
Based upon these ideas, Isaías Medina Angarita, a progressive leader who remained in the presidential office between 1941 and 1945, took steps to renegotiate the terms of agreements with the British and American oil companies and finally managed to pass the 1943 oil legislation. Fearing that a nationalization could actually occur as it did in Mexico in 1938, the executives of the companies settled for a better provision of tax revenues. However, the nationalization of oil industry could only take place in 1976; yet, in time of Puntofijismo the companies were handsomely compensated.
After the nationalization of the oil industry, a holding company, Petróleos de Venezuela (PdVSA) was established and immediately incorporated fourteen companies under its body, following the remaining three others in 1997. Nevertheless, the nationalization did not mean a full scale control of the industry; neither did it provide with all the revenues to the government. It merely gave Venezuelan names to the old companies and they maintained the business as it usually was. The PdVSA emerged as an autonomous and powerful political actor in this period. The relationships of governments with PdVSA, including that of Chávez’s, had significant impacts over Venezuelan economy; and hence on its politics. Relatively, many corruption stories had been revealed from this relationship especially during the neoliberal era of Venezuela.
Regarding the management of oil and its repercussions on the Venezuelan politics, a critical milestone was the ambitious “Oil Opening” policy of Caldera administration during the neo-liberalization of the country in the late 1980s and in the beginning of the 1990s. In contrast to the efforts made by his predecessors, Caldera, finding a receptivity among the PdVSA executives, sought to attract foreign investors. The company even published an eight-page advertisement in Time Magazine entitled as: “Opening the Door for Foreign Investors: The Venezuelan Oil Opening” (Ellner, Rethinking Venezuelan Politics: Class, Conflict and the Chávez Phenomenon, 2008) The project redounded Venezuela with hundreds of millions of dollars; yet, making the country’s benefits available for foreigners alienated many people both in the politics and in the civil society, as well. Accordingly, when Chávez ran for presidency in 1988, his campaign rhetoric was primarily consisted of the redistribution of the national wealth. In addition, Chávez’s promise to end corruption was very much related to his redistribution policy since the national wealth was melt by this affair.
Illusion of Venezuelan Exceptionalism
The use of oil in national politics by almost every significant leader is not a surprise. Since the 1920s, when oil first drilled as a source of wealth, it established a tutelary relationship between the state and the society in Venezuela. That is, the legitimacy of a democratic regime was bound to its achievements on the use of oil revenues and how it returned to the people. In fact, the term “sowing the oil” meant that the country was dependent on oil which was a never-ending resource to provide collective prosperity for the Venezuelan people. (Coronil, 2000) Actually, Venezuelan people has always seen oil as a blessing; but many politicians and scholars has given warnings on the fact that it was also a curse on the country. As an example, Pablo Perez Alfonzo, a former Venezuelan Oil Minister and a co-founder of OPEC has described oil as “the devil’s excrement” and warned his country even in the midst of the 1970’s oil boom that the unconscious dependence on oil would easily destroy the country’s economics in the years to come. (Collins, 2005)
The illusion of a Venezuelan exceptionalism paved the way for many problems in the future as foreseen. First of all, it curtailed the productivity in the country. In order to sustain the Punto Fijo system, consecutive governments established a social state that had guaranteed the society generous social and economic rights; such as free access to education, health services and decent minimum wages. Yet, when the oil prices fell down dramatically; or during the global financial crises, the Venezuelan society did not have any substitute industry to recover for its losses from oil. Secondly, as mentioned above, the dependence on oil produced corruption and social injustice in terms of economics. Thirdly, the strong PdVSA eventually became a state within the state. Being managed by foreign investors even after the nationalization, the company isolated itself from the state and acted autonomously. Many times, the Congress lost its control over its own oil policy, leading the company to decide to open itself for foreign investment by discretion, during the time of privatizations. Finally, oil helped to consolidate partyarchy in Venezuela. Since the political parties had kept the society somehow happy under a welfare state thanks to oil revenues, the citizenship as a democratic identity became abstract; yet remained influential on paper. More precisely, even though the people considered their votes counted for the direction of the country; converging in time, AD and COPEI practically did not make any difference and isolated themselves from the society in decades. With the corruption on the background increasing, the political elite distinguished itself from the public. However, the big picture could only come out when the neo-liberalization started to take place and the corruption scandals were revealed.
To conclude, John Lombardi’s description would be more than enough to summarize the role of oil in Venezuela:
“Venezuela’s economic dependence on the “Hispanic extractive engine” (first cacao, then coffee, now oil) has condemned it to a cycle of rising hope and crushing defeat following declines in world prices for its single commodity.”
THE GREAT TURNABOUT AND THE RISING UNREST TOWARDS PUNTOFIJISMO
The developments in Venezuelan politics beaconed a wave of change in Latin American politics in the following years. Although these changes are commonly referred to as “Latin American left turn”, there were only two problems with this notion: first, it was not left; second, it was not a turn. (Beasley-Murray, 2010) What a left turn is tasked is basically to change the status-quo. Yet, based on the Venezuelan and later other Latin American so-called left turn experiences, the eventual changes of power were the results of already occurred changes in the depths of the society. In other words, the leaders or more broadly the movements who came to power afterwards were the agents of an already shifted status-quo; and substantially tasked with setting the politics of their state into their original places. In fact, these leaders and their movements mostly benefited from the power vacuums in politics during certain processes; rather than carrying out the whole period.
After presenting the characteristics of the Punto Fijo system and the economic dynamics of Venezuela based on its oil industry, Venezuela’s sudden neoliberal turn and its reflections are examined in this part. After an elaborative discussion on this period, the answer to the question of “What is left of left?” becomes more apparent and why has not there been a left turn in Venezuela is clarified. Therefore, the process that had brought Hugo Chávez to the political scene could be judged as a finalization of a chain of events; rather than an end in itself.
Foreshocks of Economic Deteriorations
Thanks to its oil revenues and the booms of oil prices in the global market in the 1970s, the economic crisis that had affected the most Latin American countries came to Venezuela relatively late. Even though the signs of an economic deterioration were obvious, frankly speaking, the international developments somehow saved Venezuela from a collapse of its economy.
When the price of oil gradually had fallen at the end of the 1970s, it was expected that the so-called Venezuelan exceptionalism might face the harsh reality; however, as a savior, first the Iranian Revolution in 1979 and the launch of war between Iran and Iraq caused another boom in the prices. Hence, together with the promises of the two AD presidents; Luis Herrera Campins (1978) and Jaime Lusinchi (1983), to act more frugal, the existing system was kept unquestioned during the first half of the 1980s. Nevertheless, the OPEC oil boom finally came to an end and the earnings fell down significantly. It was on February 28, 1983, when the so-called “Black Friday” happened, and the Venezuelan bolívar devalued. Only on this day, the people had finally realized that something bad was taking place. The economy went into a gradual decay in the following years. The long-lasting low unemployment and the still exchange rates reversed. Even then, there was little effort by the politicians to take serious measure for the worse. This was primarily due to the dedication to keep the system unimpaired; so that the corrupt political interests would be sustained.
At this point, what had invited the crisis to the country at the first place becomes relevant. The roots of the economic crisis in the 1980s are surely rooted in the previous administrations. The reasons can be lined up as threefold. First, there was an ideological misdirection especially after the mid-1970s and this continued throughout the 1980s, making Venezuela more vulnerable to a deepening of the already existing crisis. “Sowing the oil” became a motto of the economic development almost fifty years ago when Betancourt equaled democracy with anti-imperialism in his struggle against the mismanagement of his country. Then, after the nationalization of oil industry had been realized, no other goal was set for further development and “Sowing the oil” has continued as the only means of attaining financial stability and growth. It was clearly not enough. Moreover, the ideological shift of both AD’s and COPEI’s agendas to the center originated a convergence. Although many decisions were taken on a basis of mutual consultation, the law degree of opposition in the politics caused unproductivity.
Second, deep corruption left the second generation Puntofijismo party leaders with a settled way of affairs in which any kind of improvement was bound to personal interests. However, what was more striking was the capital flight from the country in the 1980s after these corruption stories were revealed. Venezuela lost an approximate worth of $17.3 billion capital, both due to the debt payments and the capital flight. (Hellinger, 2009) Together with the falling oil revenues, 1980s marked a total collapse of the Venezuelan economy. According to Coppedge (1994) the increasing corruption was a product of partyarchy in Venezuela itself; because the continuation of it required a climate of impunity. Interestingly enough, neither AD nor COPEI had brought up the issue of corruption and displayed the other’s degeneration; as if there was a secret clause in the Pact of Punto Fijo.
Third, just as any opposition was prevented from within the parties or in the existing two party system; the obsession with control on the side of the two parties prevented the emergence of new critical actors. Already colonized in the country, AD and COPEI had somehow managed to ensure their authority over any type of institution in Venezuela. In plain words, the so-called consolidated democracy of Venezuela during Puntofijismo was empty inside. The governability of the system may seem quite favorable; but the absence of even the possibility of the emergence of an opposition left it with unproductivity politically, economically and socially. Eventually, the system went into a phase of collapse when the debt crisis finally hit the country in 1983. Only after then, the control over civil society eased off and different opinions on the administration of the state flourished.
El Paquetazo (Economic Package) of Pérez Administration
By the end of 1988, the rate of inflation had risen to almost thirty per cent; which historically been a single digit number. In addition, external debt had reached to approximately $26.6 billion due to the money borrowed from international financial institutions to recover from the economic crisis. Yet, the most threatening of all was the fall of international reserves by $9.5 billion only in two years between 1986 and 1988 due to capital flight. (Lander & Fierro, 1996) It was in this backbreaking situation when Carlos Andrés Pérez returned to presidential seat with a populist rhetoric that he would bring the country into the days he used to govern. Yet, not long after, the people were shocked with Pérez’s austerity program of El Paquetazo. The package was presented as Gran Viraje (a great turnabout); that is, a cruel but a necessary step to attain prosperity once again.
The package included double edged adjustment programs: first, the economic adjustment that was going to be implemented by government policies; second, a structural adjustment in which the government was supposed to change institutionally for sustainable results. The economic adjustments included the following: first of all, the external debt was going to be paid. In fact, this was the major point that Pérez government urged upon; just as his predecessors did in the 1980s. Secondly, a polity reform in which the state undertook a less interventionist position and cleared the way for a globally integrated market economy. This prescribed the production and then the trade of non-oil goods; therefore, the establishment of new industries. Thirdly, in accordance with the second provision, the package demanded a more liberal state in terms of its politics. That is, Venezuelan politics needed to transform into a ‘modern’ state, instead of its long-lasting tradition of populist, welfare approach. Hence, an expansion of free market would be provided; because now the international capital would feel more comfortable to flow into Venezuelan market.
Considering the pure neoliberal nature of el Paquetazo it was obvious that the Pérez administration took the recommendations of International Monetary Fund’s Report on Venezuela seriously. (1987) However, Pérez was not the one to blame on such a decision, considering the fact that the report included a conclusion that “the ability of Venezuela to obtain new external financing depends on the economic program that is adopted.” (International Monetary Fund, 1987) Given the capital need of the country and the pile of external debt to be paid, the shock therapy was the only option.
On the other edge of the adjustment programs, there was the structural adjustments that were claimed to help sustain the achievements expected to be attained by the short-term economic adjustment policies. The structural adjustments included policies that would pay off in the long run; therefore, especially after the neoliberal agenda confronted with a heavy public unrest, most of them could not be implemented. Nevertheless, in order to better understand what had caused the public unrest following the declaration of el Paquetazo, it is important to note what was projected as structural adjustment policies. These included: restriction in public expenditures; restrictions on the wage levels (particularly pointing to traditionally high minimum wages); establishment of a single floating exchange rate; flexible interest rates, reduction on the price control by the state; decrease in the level of public investment; reduction of subsidies; introduction of a sales tax, adjustment of the prices of certain goods, especially that of oil; and finally, a reform of the trade policy in favor of low trade barriers. (Lander & Fierro, 1996)
Evaluation of the Great Turnabout
Before moving on to the reactions to the austerity program, a macroeconomic evaluation of it would be fair to determine if it was successful at least for the economy of the state.
At the beginning, the adjustment policies had shown positive results. Venezuela did well on the balance of payments and managed to catch an economic growth of 6.47 per cent in 1990 and 9.73 in 1991 which was the highest among Latin American countries in that year. Also, the balance on trade was numbered positive. As expected, these improvements granted Venezuela new loans from international financial institutions and the amount of investment increased. Although the expectations were somehow met at this stage, only a year later, Venezuela faced with the grim reality. The country owed much of its growth to the reductions in the government spending and the new landings. Despite better than 1989, the economy once again fell into a recession with the inflation rising and the capital flight out of control. Nevertheless, the major objective of the program was to pay the external debt and it was achieved to a certain level; but a sustainable growth was still out of the picture.
Another virtue of a neoliberal agenda was expected to be the creativity and the increasing production in the country. This predicted a diversification of industries and decreasing the dependence on oil-industry. In this period, the number of firms and the varieties of industries had increased remarkably; but dependence on oil increased nonetheless. This was primarily due to the opening of oil industry to foreign investment and the increasing demand for energy resources in the global market. Not only the production and export of oil increased; but also most of the new industries were founded around oil related activities. Therefore, dependency on oil reached a level that made it the center of politics once again. By taking into account this shift, the eventual rise of Chávez with a rhetoric to give people the earnings of what they naturally have is only logical.
Social Impacts of Economic Adjustment
On the day el Paquetazo was passed in the Congress, the prices of oil increased a hundred per cent and accordingly the prices of transportation almost doubled. Naturally, as the prices for the energy resource that made any kind of economic activity to continue possible rose, most of the services including the most vital ones; electricity, telephone and water had become more expensive.
Notwithstanding the deepening income inequality in the country for decades, Venezuelan society at least enjoyed its so-called exceptionalism to the extent that the public had free access to most services. Along with the increasing prices of such services and the external debt spiral that the country was deeply in, Venezuelan society now had to adopt to a ‘modern’ country. However, it was not only the increasing prices or the burden of payment for the traditionally free services that changed the pace of life in Venezuela; certain policy changes according to neoliberal agenda had more detrimental impacts on the Venezuelan economy; and thus on society.
First of all, as in other developing countries, liberalization of economy meant an expansion of industrial and service sectors; consequently, the agriculture sector was neglected with the rural depopulation. Naturally, the prices of even the essential foods had risen and the purchasing power had fallen correspondingly.
Secondly, unemployed population had grown due to neoliberal adjustment. Although neo-liberalization paved the way for industrialization and was expected to create job opportunities; and in fact, the unemployment rate decreased in time; the number of unemployed people in absolute terms had risen significantly. According to neoliberal dogma, the best industrial policy is no policy. (Iranzo, 1992) That is, the more freedom provided for a creative and competitive market, the more economic growth a country would catch. However, this economic liberation ended up with a mixed-up national economic structure. In fact, it did not work in favor of the business sector either. In the past, important decisions were taken by the mutual consent of the business and the working class, with the state mediating it. Obviously, this curtailed the productivity of the economy; but increasing productivity brought bigger costs for the firms. Therewith, the tax regulations during the neoliberal era increased such costs even more. In order to balance their finance, the business sector mostly compensated itself by reducing the wages and taking advantages of the labor flexibilization provided by the neoliberal agenda. The works intensified, many people was pink-slipped -leading to informal labor- and the net incomes decreased immensely. In other words, the unpredictability of future costs for the industry under a liberated, unregulated market paid off with decreasing life standards for the working and middle classes.
Thirdly, according to neoliberal approach, for better growth rates, the sectors that provide bigger portions in the economy should be favored while the smallest ones should be eliminated to create spaces and workforce for the former. Therefore, neo-liberalization brings ‘income concentration’ and deepens income inequality. In fact, this is where the neoliberal policies contradict with itself. While it seeks to establish more democratic states in which the general level of prosperity increases and income equality would be better provided; it acquisitively tries to expand the economy, favoring certain groups in the society and increasing the income inequality, at the same time.
Finally, violence increased on the Venezuelan streets in tandem with the economic deterioration. Throughout the 1990s, crime had been the number one concern for the people and the opinion polls had proven it many times. Concerns over safety outstripped economic problems and unemployment in especially poor neighborhoods. Private security services flourished and even personal bodyguards had become common for the upper-classes.
The developments in this process also revealed the fact that the governability of Venezuela; which was believed to be an exemplary case for consolidated democratic governance, was only a hollowly constructed establishment. The partyarchy in Venezuela eventually came to an end when the people realized the way that the political and economic affairs used to work in their country. Only after the imposition of an austerity program that the Venezuelan society questioned the administration in their country and got rid of their numbness they used to justify with a Venezuelan exceptionalism.
In conclusion, the prosperous life style of many Venezuelans for decades and the illusion of Venezuelan exceptionalism had hit a harsh reality first with their economy collapsing and then with the efforts of Pérez government to make up for it under a neoliberal agenda. The days of “¡Tan barato, dame dos! (So cheap, I’ll take two!”) were over and Venezuela would never be the same after 1989. (Hellinger, 2009)
COLLAPSE OF PUNTOFIJISMO
The inconsistency between the election rhetoric of Carlos Andrés Pérez and his unheralded imposition of el Paquetazo received immediate reaction from the Venezuelan society. These reactions gradually escalated in the 1990s and a few major events sometimes even led to bloodshed on the streets of big cities, particularly in Caracas, the capital. What basically prepared the end of Puntofijismo was the loss of credibility towards the state and the partyarchy that was colonized in all parts of administration and even in social life. In this part of this work, the emergence of the political power vacuum and the dissolution of the Pact of Punto Fijo is examined and the general picture of the political environment in Venezuela before the 1998 elections in which Hugo Chávez, the pioneer of the so-called Latin American left turn prevailed, is drawn.
As noted earlier, the reaction to neoliberal package was immediate. Due to the increase in the oil prices and the relative increase in the cost of public transportation sufficed to pour masses on the streets which later caused a serious of events called the Caracazo. The first spark was the decline of many commuters in Caracas to pay the increased fees of public transportation. The movement was in fact not organized and very spontaneous; yet, it spread to whole country within hours. Nonetheless, the movement was more intense in the capital city where almost all the main roads were blocked by barricades and squares were filled with angry masses. Just as in a massive movement’s nature, a simple protest against a public policy had a snowballing effect and turned to be a general protest against the whole neoliberal agenda and within months; and even in the following years, led to an ongoing series of events against the whole system.
The response from the state came later than it would be expected; but came vicious, in the form of force against its own citizenry. The efforts to suppress the movement marked the first drift from the populist approach of Puntofijismo. With such a response, Pérez was now “a president without the people”. (Coronil & Skurski, 1991) The escalating conflict between the state and the masses on the streets turned into a bloodshed and according to many resources, more than a thousand people were killed by the Venezuelan security forces.
The implications of Caracazo require a careful reading to comprehensively understand the mistrust of Venezuelan public against the politics in their country. Even though the whole system did not collapse at once in 1989, it signaled the end of it and started a domino effect. The following events were not only led by civil society but the status-quo was questioned by the Venezuelan military; especially buy the junior officers, leading to two failed coup attempts in 1992.
1992 Coup Attempts
If the bullet was triggered in Caracas in 1989, it entered deep into the heart of Venezuelan politics in 1992 when the unsuccessful coups were carried out, causing the start of now inevitable collapse of Puntofijismo. Many who considered Venezuela a consolidated democracy were caught off guard by coup attempts in 1992; but those familiar with the deterioration of its democratic regime were surprised that the coups failed. (Trinkunas, 2002)
Why was the military so quiescent in Venezuela up until 1958, while in most other Latin American countries the military regimes had held the political power; or at least remained an important political actor? The belief of a consolidated democratic regime and military’s compliance with it after 1958 would be a very naïve reason to believe. The civilian control had put some effort to cut military’s intervention into politics in the early years of Punto Fijo system. Approaching in an institutional perspective, the integration between the military command structures was eliminated and an autonomy was granted to each branch of the armed forces. Thus, in the case of a dissatisfaction among the military officials, an intervention was hard to carry out. In the meantime, the military officials were kept satisfied with their financial status. Even during the economic decay in the 1980s, Venezuelan military officials were among the highest earning soldiers in the world. Along with the corruption, especially at the highest ranks, the military was silenced until a new generation of junior officers; who received their education at the newly established military academies and blended with nationalistic sentiments graduated. These junior officers, including Hugo Chávez who later formed an insurgency group named as Movimiento Bolivariano Revolucionario 200 (MBR-200) within the army, started to advocate a Bolivarian democracy against the political corruption and the neoliberal policies of the civilian government.
The preparations of the first coup attempt in 1992 virtually went undetected. It was only the day before the operation started, a high-ranking military general informed the government and with the necessary precautions, the coup attempt was prevented to succeed. However, what was more notable here was the incapacity of the military officials who carried out the coup to improvise and succeed anyway. This failure also meant the success of civilian government’s divide and conquer tactic in the beginning of the Punto Fijo system. The second attempt also failed since the original members of MBR-200 were already jailed and the remaining dissatisfied army officials abstained from losing their career; then could not take serious steps.
After the failure of the first coup attempt was now obvious, as the leader of this operation, Hugo Chávez wanted to avoid further bloodshed and surrendered. Later he gave a speech on the television which lasted less than a minute; but the impact was so powerful. His reference to this end as “por ahora” (for now) signaled his ultimate comeback in 1998 as a presidential candidate and asserted his dedication for a change in Venezuela.
Despite the failure, the coup attempts asserted the deterioration of the Punto Fijo system and the leaders of the coup, primarily Chávez received the support of people afterwards. The civilian administration took measures to eliminate any military opposition in the following years and obviously succeeded since there were not any other attempt for a military coup. However, the members of MBR-200 later appeared in the political scene when a more moderate president, Caldera came to office and pardoned the insurgents of the 1992 coup in 1994.
The End of Puntofijismo under the Second Caldera Administration of 1994-1999
Neither the Caracazo nor the coup attempts had managed to bring the end of Pérez administration; however, the surfacing of corruption scandals one after another finally ousted him from the office with an impeachment in 1993. Considering the political environment in Venezuela before the 1993 elections, the second term of a co-founder of Punto Fijo system seems unlikely; yet, the supportive attitude of Rafael Caldera for the coup attempts and his open stance against the neoliberal agenda granted him a second term in 1994. Nevertheless, Caldera’s anti-neoliberalism had its limits and his five-year term in the office showed no tangible improvement. Privatizations continued and most importantly, the autonomy of PdVSA grew leading to “Oil Opening” that was discussed above.
During Caldera’s administration, the political environment in Venezuela had gone through severe changes. First of all, this period clinched the distancing from Puntofijismo since no other political actor was now supportive of the existing system. Even though the parties turned to advocate neoliberal agenda for economic concerns, they were dedicated to end the coalition that had paved the way for democratic deterioration and corruption. Therefore, the 1998 election campaigns had passed quite differently, with new actors in the Venezuelan politics claiming to change the faith of their country. Among those, Hugo Chávez prevailed with a convincing majority.
For the purpose of this paper, the developments after the 1998 elections are not examined. However, the voter behavior in electing Chávez and the support he took from the business sector requires further attention to better understand the unofficial collapse of an unofficial system. Until this point, the developments and the examinations of them reveals the story behind how a political environment emerged in Venezuela in which a politician like Chávez could be influential in politics. However, as Leslie Gates prescribes it, without an explanation of the unlikely election of Chávez, the final dissolution of Puntofijismo would be incomplete; since his election totally turned the page on Puntofijismo. If he would not be elected, the system would have continued, albeit perfunctorily.
How did Chávez receive financial support from the business sector; while the business tends to stand together with leaders favoring a corporatist and neoliberal approach? Since Chávez claimed to establish a new republic with a socialist approach in his rhetoric, the assistance from the business was unlikely. The explanation to this was quite simple. Most of the people who supported Chávez for his campaign were on a state-dependent sector. That is, their business depended on the government policies; hence, assisting a leader who would probably be in the office after the election seemed logical.
Nevertheless, considering the other candidates in the 1998 elections were also outside the traditional party circles and had quite similar discourses, why did the voters chose Chávez and the state-dependent businessmen concentrated their assistance on him is another issue to be discussed. First of all, the anti-establishment and anti-corruption rhetoric would not be enough to explain since the other candidates shared this view. Yet, while Salas Römer, the other leading opponent who is thought to be more moderate presented an image of change; while Chávez promised to bring a far radical one. (Molina, 2002) Also, Römer’s organic ties with some of the political parties and the last minute endorsement of traditional parties for him effected the result from the ballot box. Nonetheless, what was more decisive was the social polarization in Venezuela, that pushed the economically marginalized masses to support a radical game changer. In short, Chávez’s victory in 1998 was a result of an already changed status-quo and he was tasked with fulfilling what was demanded by the people, at least at the initial phase of his administration.
The process that brought Hugo Chávez as an important political figure, not only to the Venezuelan political scene; but to the world political history, had been quite noteworthy to take lessons from. The emergence of the political power vacuum that enabled him to become a suitable candidate for the presidential office was interesting to the extent that Venezuela was evaluated as a consolidated democracy from which a collapse of the system would not be expected. However, the alienation of the Venezuelan society from the politics and the political system eventually brought a chain of events and ousted the traditional parties. During this process, neither the military; nor any other political actor’s oppositions was in fact the determinant of the inevitable end. It was rather the society itself who suffered from the neoliberal policies and realized the fact the maintenance of the system meant the continuation of corruption in their country.
Despite the governability, the deterioration within the system and the obsession of the two major parties with control led to corruption, command of personal interests and the lack of opposition; therefore, curtailed the level of success of this very governability. Ultimately, governability in Venezuela was proven to be a notion that was empty inside. Combined with the economic failures and the capital flight from the country in the late 1980s and the 1990s, a reaction from the society was no surprise. The Caracazo movement was the first step towards taking Puntofijismo down. Then, the involvement of military into politics decades after, with the failed coup attempts 1992 marked the end of the system in Venezuela. President Caldera’s second term in the office merely prepared the country for what was obviously on the door for the last decade. Nevertheless, what mostly contributed to the post-Puntofijismo politics was his decision to open the oil industry for foreign investment. Hugo Chávez used the oil politics in his campaign rhetoric to claim that he could provide a fair redistribution of wealth in the country and came first from the ballots in 1998. Nonetheless, despite his leftist arguments, his election should not be evaluated as a “left turn” in its nature; since he benefited from the need for a leader like him, instead of dragging masses for his action.