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Venezuela Takes More Steps Toward Socialist State

January 15, 2007 at 6:30 PM EDT
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MARGARET WARNER: Venezuelan President Hugo Chavez hosted a warm welcome Saturday for a high-profile visitor: Iranian president and U.S. nemesis Mahmoud Ahmadinejad.

The two leaders, both known for their fiery anti-American rhetoric, reaffirmed their anti-U.S. bond. They said their previously announced $2 billion joint investment fund would be used to help developing countries that, as Chavez put it, “are trying to liberate themselves from the U.S. imperialist yoke.”

Venezuela and Iran share a powerful source of leverage: oil. Iran is the world’s fourth-largest oil exporter, and Venezuela the fifth. On Saturday, Chavez said they would push OPEC, the Organization of Petroleum Exporting Countries, to cut production quotas to boost oil prices back up to recent record levels.

HUGO CHAVEZ, President of Venezuela (through translator): One of the imperialist strategies is to weaken OPEC, weaken the oil price. That is why we agree this afternoon to strengthen efforts both inside and outside OPEC, with the big oil producers, to protect the price of our raw material.

MARGARET WARNER: Ahmadinejad went on to visit two other recently elected leftists in the region in Nicaragua and Ecuador.

Latin America has seen a leftward political shift in the past year. In addition to Chavez’s comfortable reelection victory in December, leftist economist Rafael Correa won Ecuador’s recent election. He was inaugurated today.

Former Sandinista leader Daniel Ortega assumed the presidency of Nicaragua earlier this month. Bolivia elected a populist, leftist president, Evo Morales, 13 months ago. And Brazil recently reelected its populist president, Inacio Lula da Silva, by a big margin.

Chavez has gone the furthest towards trying to claim the mantle of Cuba’s ailing Fidel Castro. In a bravado-tinged swearing-in last week, Chavez vowed to speed up Venezuela’s transformation to a socialist model.

HUGO CHAVEZ (through translator): I swear by my people and my country that I will not rest my arm or my soul as we build a new political system, a new social system, a new economic system. I swear by Christ, the greatest socialist in history.

MARGARET WARNER: Specifically, Chavez vowed to: nationalize the country’s largest electric and telephone companies — both are owned, in good part, by U.S. companies and investors; take control of four multibillion-dollar oil development projects being pursued by U.S. and other foreign oil companies; and strip the country’s central bank of its independence.

His nationalization announcement triggered a hefty devaluation of Venezuela’s currency on the black market. The Venezuelan Stock Exchange also plummeted nearly 20 percent, but did recover some of that loss in subsequent days.

President Chavez's goals

Francisco Rodriguez
Wesleyan University
I expect that what we're going to be seeing in Venezuela over the next few months is the strengthening of the state's involvement in society.

MARGARET WARNER: And for more on President Chavez's latest moves, we turn to Michael Shifter, vice president of the Inter-American Dialogue in Washington and professor of Latin American politics at Georgetown University.

And Francisco Rodriguez, assistant professor of economics and Latin American studies at Wesleyan University in Connecticut, he was formerly the chief economist of the Venezuelan National Assembly.

Welcome, gentlemen.

Michael Shifter, what is Hugo Chavez up to, this cozying-up to Ahmadinejad, these sweeping measures that he's announced?

MICHAEL SHIFTER, Georgetown University: Well, he just was re-elected for another six-year term last month. He's feeling very confident, very good about himself. He's got a lot of money, and he's trying to concentrate and consolidate his power at home.

All of the measures that he's taken -- there have been a variety of announcements -- I think what unites all of them is an attempt to secure his grip on control and power in Venezuela. And on the international front, he's pursuing his mission, which is to try to construct and forge an alliance, a coalition that opposes the United States.

The United States is a superpower. He's the underdog. And he wants to show that he's a serious global player.

That accounts for his alliance with Ahmadinejad. And he also sees some developments in Latin America that for him are very, very encouraging. So he's taking advantage of the opportunity of all of these things on all these fronts to try to really push and consolidate his power.

MARGARET WARNER: Do you see it that way, Professor Rodriguez, that this is about tightening his grip on power at home an expanding his influence in the region?

FRANCISCO RODRIGUEZ, Wesleyan University: Well, I agree with both of those analyses. I think Mr. Chavez was very clear on Thursday when he said that he wants to build a society that's based on equality, and equality is incompatible with capitalism, and therefore we must build a socialist society. That's what he said.

And that reflects the way that he thinks. So I expect that what we're going to be seeing in Venezuela over the next few months is the strengthening of the state's involvement in society.

We've seen some announcements, a lot of announcements which are even more important than the nationalization. For example, the minister of labor explicitly stated that they were working to reform the law so as to actively involve community councils in private and in the profits of all private enterprises.

So I think that we're going to see a move towards something that's going to look more and more like a centrally planned, centrally commanded economy, certainly perhaps with not it going all the way, but certainly with a much greater state involvement.

'An evolving phenomenon'

Michael Shifter
Georgetown University
[Chavez] obviously has strong convictions, and he thinks this is the moment where he can really take steps to further consolidate his control.

MARGARET WARNER: And why, Michael Shifter? He's been president now -- this is his eighth year. Why is he now turning to this socialist model? Is it because the economy hasn't performed for most Venezuelans?

MICHAEL SHIFTER: Well, I think he just is trying to do what he can, again, to strengthen. He's an evolving phenomenon, Chavez. It's not like he has a blueprint that he's thought about and he says, "At this point, I'm going to implement it."

MARGARET WARNER: So you don't think he comes to this as ideologically committed and that he always had this game plan?

MICHAEL SHIFTER: I don't think he always had this game plan. I think he is improvising to some extent. But certainly the thrust of where he wants to go is clear, which is power. That, I think, is what we need to -- that's the key to understanding what Chavez is about.

He really has -- this has happened over a period of eight years, as you said. He's been able to gain control of different spheres of society. And whether you call it socialism or call it militarism or call it nationalism, I think these terms are pretty nebulous. I don't think they have very precise meanings.

But he really is serious about forging ahead. I think what we can say about Chavez is that we do have a sense of where he wants to go. Whether he'll be successful in achieving that is a different question.

But I do think -- I think he's quite sincere. He obviously has strong convictions, and he thinks this is the moment where he can really take steps to further consolidate his control.

The nationalization of companies

Francisco Rodriguez
Wesleyan University
I don't think that [Chavez] can pull off anything like what he's trying to do without the type of oil market that we have right now and the type of oil prices that we have right now.

MARGARET WARNER: So, Professor Rodriguez, how essential is the oil industry, the high price of oil currently, to Chavez's ambitions and to his ability to maintain this direction that he wants to take?

FRANCISCO RODRIGUEZ: I think it's basic. I don't think that he can pull off anything like what he's trying to do without the type of oil market that we have right now and the type of oil prices that we have right now.

And Venezuela last year ran a fiscal deficit of 2.3 percent of GDP, despite the fact that oil prices, which constitute more than two-thirds of Venezuelan state revenues, were five times as high as when Chavez got to power. So there's been a huge expansion in state expenditures; there's been a huge expansion in handouts to other countries.

And I think that he's not going to be able to keep that up, if oil prices even decline a little bit. He might even run out of money, even if oil prices don't decline, because they're spending and increasing spending at impressive rates.

MARGARET WARNER: And let me stay with you, Professor. Take these American companies that are invested in some of these targeted industries. I mean, Verizon in the telecommunications company -- there's a firm called AES here in Arlington, Virginia, that is involved in the electric company. Of course, some big oil companies, Exxon-Mobil and Chevron being two.

How much exposure do they have now? What do they risk losing here?

FRANCISCO RODRIGUEZ: Well, a lot of these firms are very highly diversified, so when the announcement of the nationalizations came through, Verizon's stock was not affected. AES did go down by about 4 percent.

But generally, these are relatively well-diversified firms, so I don't think that, if you're looking at the effects, you should concentrate so much on those firms.

But you can think about the future repercussions that this is going to have for Venezuela's credibility, for the $21 billion in bonds of Venezuelan debt that are apparently being negotiated in markets. And even Venezuela's nationalization announcements were able to force a decline, not only of the 20 percent that it did in the Venezuelan stock market, but of between 1 and 2 percent in other Latin America markets, like the Argentina and Brazilian markets.

So I think that there is a force, particularly with the political consolidation of other friendly movements, for this to destabilize even the region economically.

MARGARET WARNER: Michael Shifter, what is the theory behind this that he is pursuing, in terms of nationalizing these companies? What does it actually do for either the people of Venezuela or the economy of Venezuela if he takes over, say, the phone and the electric companies, which were only fairly recently privatized?

MICHAEL SHIFTER: Right, right. Well, I think the principal motivation, again, is political. I think it's hard to find an economic rationale. He wants to assert the sovereignty of Venezuela. That's a very big part of what he's all about, of what he's trying to push. He feels that the Venezuelans need to own their own industries.

And a very important part of why he got 63 percent in the election last month is because that people want to feel included, not the elites that ran the country before him, that it was their country. He's giving people a sense: This is your country.

And his theory is that if he conveys that sense through these moves and announcements and decisions of nationalization, a variety of other things, that people are going to feel that it's their country and it doesn't belong to somebody else. And for him, that's enormously powerful politically and will provide and will lay the groundwork for his long-term rule.

Chavez's relations with the U.S.

Michael Shifter
Georgetown University
Latin America is the most unequal region in all the world. There's a lot of frustration. And [Chavez] wants to represent the alternative. And to do that, he feels he needs to stand up to the United States.

MARGARET WARNER: And then, just staying with you, what do you think his objective is here more regionally? In other words, he wants to be the sort of center of the anti-American axis or club in Latin America. But to what end?

MICHAEL SHIFTER: Well, I think he wants to challenge the hegemonic power of the United States. I think he wants to -- the end is some broad notion of greater social justice, greater equality.

Latin America is the most unequal region in all the world. There's a lot of frustration. And he wants to represent the alternative. And to do that, he feels he needs to stand up to the United States.

MARGARET WARNER: But let me close by asking you both briefly -- and, Professor Rodriguez, beginning with you -- so how much of a threat is Hugo Chavez to American interests in the region?

FRANCISCO RODRIGUEZ: Well, I think that Chavez has been somewhat overestimated politically. Yes, Chavez did win an election by a very high margin, but that's because he's riding on a wave of economic growth that's caused by the expansion in oil prices.

I think that, as we see oil prices stabilize and fall, Chavez is going to lose some of his power, some of his political appeal. And he's going to turn out not to be that high a threat.

MARGARET WARNER: How do you see it?

MICHAEL SHIFTER: Well, I don't think he's a threat, but I also don't think that we can dismiss him as the showman on the regional stage. He does, I think, pose a real challenge to the United States.

He's got a very seductive agenda, very seductive rhetoric. I think the United States should respond to that rhetoric by trying to be more engaged and more committed to Latin America than it has been. I think that would be the best way to respond to what Chavez represents.

MARGARET WARNER: Michael Shifter, Francisco Rodriguez, thank you both.