Troubled Nation: Venezuela

RAY SUAREZ:

For 16 straight days, this has been the scene in the capital of Caracas and elsewhere: Business and labor leaders leading a general strike against the government of Venezuelan President Hugo Chavez. Over the weekend, the Caracas protests grew to an estimated half a million.

WOMAN ( Translated ):

We've been here since last night, and we'll be here until Chavez leaves — until Chavez leaves.

RAY SUAREZ:

Yesterday, demonstrators choked off traffic on major routes, and police responded with tear gas and rubber bullets, as they have in recent days. Three people have died since the strikes began. The protesters have demanded that Chavez, whose term expires in 2006, either quit or agree to early elections. But Chavez said the earliest referendum would come in August. His opponents have criticized his left-wing populism, including public support for Fidel Castro and Saddam Hussein.

And Chavez's opponents have said his policies meant to spread wealth to the poor have destroyed the economy. Today, nearly half of Venezuela's 24 million people live in poverty. The work stoppage has paralyzed Venezuela's oil production, helping send world crude prices to their highest level since October. Venezuela is the world's fifth leading oil producer, and the source of 14 percent of U.S. oil. Carlos Fernandez heads the Venezuelan Business Association.

CARLOS FERNANDEZ ( Translated ):

Increasing corruption, impunity, and abuse has forced us to make an important and responsible decision. We demand an immediate change.

RAY SUAREZ:

For his part, Chavez has blasted the striking business leaders as "subversives wearing ties," committing "sabotage." In an attempt to get the oil flowing again, Chavez this month ordered his troops to seize an oil tanker after its crew joined the strike.

PRESIDENT HUGO CHAVEZ (Translated):

The army has finalized plans for the protection of our oil installations. We must guarantee the security of both our oil industry and that of the country.

RAY SUAREZ:

Still, Venezuela's oil output remains a trickle. Oil workers say it's down 90 percent from the normal 2.5 million barrels a day. So far, leaders of the army, in which Chavez once served as an officer and paratrooper, continue to support the President.

Last April, several senior military leaders forced Chavez out after the President's supporters shot and killed 19 anti-Chavez demonstrators. The coup lasted just two days, and Chavez returned to office when the interim government collapsed. Most Latin American governments denounced the coup as anti-democratic. But the Bush administration initially applauded the coup, even while denying involvement in it.

As protests mounted last week, White House Spokesman Ari Fleischer endorsed early elections in Venezuela, which Chavez considers unconstitutional. Yesterday, Fleischer said the administration would support a referendum.

SPOKESMAN:

Your call for early elections on Friday was rejected by the President of Venezuela saying that it's a kind of interventionism by the United States in a democratic way of Venezuela.

ARI FLEISCHER:

If you notice the statement right away in the second paragraph even before it talks about elections, it says the United States calls on all sides to reject violence and intimidation, to act responsibly.

RAY SUAREZ:

Today, the State Department supported a statement from the Organization of American States endorsing a peaceful, constitutional solution in Venezuela.

RAY SUAREZ:

For more, we get three perspectives: Arturo Valenzuela is the director of the Center for Latin American Studies at Georgetown University. During the Clinton administration, he was Deputy Assistant Secretary of State for Latin American affairs, and then senior director for Latin America on the National Security Council. Miguel Diaz is the director of the South America Project at the Center for Strategic and International Studies. And Amy Jaffe is the senior energy adviser for the James A. Baker Institute for Public Policy at Rice University. Miguel Diaz, today demonstrators defied the army and stayed on the streets. Is this a country on the brink of more serious violence?

MIGUEL DIAZ:

This country is on the verge of a civil war. They have been polarized for a long time. But over the last few months Chavez has galvanized the opposition to the point that there are hysterics. And I think they do fear a civil war. They're out on streets asking for Chavez to call for an election, preferably a general election. The constitution provides for a referendum midway through the term of office which would be in August of 2003, but the opposition believes that that's too long to wait.

They're afraid of what Chavez represents. They believe he's on the verge of calling for an auto coup. They are afraid he's trying to take the country and make it another Cuba, and they are protesting. They are fed up; unfortunately Chavez has his support base as well. 25-30 percent of the population are militant supporters of Chavez. They're also willing to support and defend Chavez even violently if required. So because of these two extremes, the militants on one side and the militants on the opposition, we do have the risk here of a civil war.

RAY SUAREZ:

By auto coup you mean in effect overthrow the government yourself and remain in power, take all power unto yourself.

MIGUEL DIAZ:

Well, basically, something similar to what President Fujimori did in the '90s in Peru, basically closed down congress and did not permit the opposition to have protests. Basically close whatever little political space there is in the country for the opposition.

RAY SUAREZ:

That's a pretty serious view of the situation. Do you agree that it's right at the edge?

ARTURO VALENZUELA:

I certainly agree that there's a very strongly polarized country, that the chances of a civil conflict are very serious. It's very, very important that the Venezuelans sit down and come up with a solution under the guidance of the OAS. Secretary General who is there trying to mediate it.

I would disagree with my friend Miguel. I don't think Chavez has any kind of power really to be able to do an auto coup. I think there's a situation where he's been weakened significantly but not enough for him to feel like he needs to step down. We have a really significant stand-off and it's certainly in the interest of the United States to see a peaceful resolution of the conflict. That's where we are being focus.

RAY SUAREZ:

Well, Chavez himself has said he would consider resigning. He used those words, if the country became ungovernable. Is it on that road?

ARTURO VALENZUELA:

It may very well be on that road at this particular point. Unfortunately, the radicals on both sides are maintaining this conflict. The opposition, for example, in my view, has also been extremely irresponsible in trying to demand his resignation rather than trying to seek an electoral solution. In fact, the constitution as I said earlier does make it possible for Chavez to be submitted to a referendum in August of next year. It seems unreasonable not to focus on that. Chavez has said he would accept that as a possible outcome. The problem is that the opposition wants him out now. Chavez says I don't want to leave and the situation is getting worse day by day.

RAY SUAREZ:

Amy Jaffee if the oil spigot is closed, does that make Venezuela eventually ungovernable?

AMY JAFFE:

Well, I think they have a serious problem. Oil represents 50 percents of the government's operating revenue. Chavez is going to face serious issues. He's not going to have funds even to pay salaries of the military that support him. So the oil picture is going to put them under great pressure, and the longer we have a work stoppage in the oil sector, the more and more pressure that's going to be brought to bear on the country in all sectors.

RAY SUAREZ:

Does he have only limited ability to keep the oil moving with the means at his disposal? I mean, can soldiers pump oil and fill tankers or must it be the oil workers?

AMY JAFFE:

Well, you know, they've tried experimenting with having soldiers or they have these sort of skeleton people to go in, but oil is a very technical industry. You need engineers. You need people with technical skills. It's really not something that a lay person can go in and fill someone's job.

RAY SUAREZ:

What about the effect on the United States' market? We're also contemplating the possibility of interruption of supply from Iraq at the same time. Might this be an expensive winter for people who buy oil and oil products in the United States?

AMY JAFFE:

Well, I think it's going to affect everyone because Venezuela was a really big supplier of gasoline to the United States. And there is a major brand of gasoline CITGO Petroleum that was actually Venezuelan owned so I think we're going to see some higher prices. The timing couldn't be worse in terms of the risk of a campaign in Iraq in the sense that oil inventories are sort of on the low end of what we typically see this time of year.

So having the Venezuelan supply come out of the market, it's 3 to 4 percent of world supply. It's going to make the market tighter going into a conflict situation with Iraq and we tend to want to see the opposite really.

RAY SUAREZ:

Miguel Diaz, what do you make of the Bush administration's managing of this chapter in the Venezuelan crisis?

MIGUEL DIAZ:

I have to admit I'm somewhat disappointed. I think as I said before the public in Venezuela, the majority of the population would like some kind of electoral solution to this crisis. I think they're willing to forego or allow for a change in the constitution to speed up some kind of election. I do think that what we're going through in Venezuela is very analogous to what we saw in Nicaragua back in the days of Daniel Ortega.

The only thing that the militants at least on the side of the Chavistas can understand is an election that would get Chavez out of office, so the sooner we make some kind of decision via an election the better we are. The US has been at best awkward in its response to the different crises points in Venezuela. Back in April, they gave the impression based on the lack of information that they were accepting of the new unconstitutional government of Pedro Carmona that came in.

Recently when everybody's focus was on an early election, the State Department, the White House, came out on Friday saying that we support an early election. Yesterday they seemed to backtrack on that saying basically we support the original constitutionally sanctioned provision of a referendum. That's not what a lot of folks understood.

RAY SUAREZ:

Does that represent for you a step forward though– the move from supporting that early election to the latest Bush administration announcement of support for a referendum?

MIGUEL DIAZ:

No, I think it's a step backwards in the sense that ideally it would have been wonderful for the opposition and for Chavez to have been patient enough to allow for the August election to take place. As I said before, the country is on the verge of a civil war. I don't think they have the time to wait until August.

Unfortunately, it's gotten to that point. All sides are armed. All sides are ready in many ways to fight each other out and resolve this in the streets. So before we get to that point I think it's important to raise this possibility of an early election, a general early election.

RAY SUAREZ:

Arturo Valenzuela.

ARTURO VALENZUELA:

I agree with Miguel that there were significant miscues. It's really unfortunate the administration did in a sense drop the ball on this again because of the situation in April. The statements out of the White House on Friday were then contradicted on Monday.

There was less of a coordination than there should have been. However I disagree with Miguel that we should have… that the administration should have stuck necessarily with the view that was expressed last Friday. And that is that the United States should be calling for early elections in Venezuela. That is not the policy of the United States. And I think that the policy of the United States is a correct one. The correct policy is to support the constitutional democratic solution to the problems in Venezuela, not necessarily to support an early election. That's up to the Venezuelans to decide.

And they need to decide so in the mediating table that I mentioned earlier under the tuition of the secretary general of the OAS that's where the effort is, that's what the United States is doing now. To their credit they supported a very strong resolution out of the Organization of American States yesterday, which also reiterated the importance of having a constitutional solution to the problems of Venezuela.

RAY SUAREZ:

Well, why is that important? Is it important because when you're trying to encourage democracy in an area, you end up backing even people that you don't like that much in order to have countries transfer power peacefully, play by the rules that they've set out for themselves, that sort of thing?

ARTURO VALENZUELA:

Well, if there's one achievement that this hemisphere has made — arrived at over the last 20-some -odd years is to make clear that democratic institutions are the fundamental institutions of the hemisphere. The problems of democracy need to be resolved within democracy through constitutional procedures. In the past what would happen in a situation like this, the military would come in and throw governments out. We didn't get a process of consolidation of democratic institutions so it would be very damaging for the hemisphere if the situation in Venezuela were resolved through some kind of a military coups or some kind of a forceful ouster of the President. It sets a precedent for the rest of the region. None of the other countries want that precedent. The United States does not want it either.

RAY SUAREZ:

Very quick response.

MIGUEL DIAZ:

Well, I think the majority of Venezuelans would like an electoral solution. Unfortunately the debate in Venezuela is being driven by the extreme positions. Now the US would have stuck with its position of having an early election I think you would have galvanized some political support in Venezuela from those forces who don't want a civil war, who don't follow the lines of the extremists. It would have helped their position win the day. I think in my view Venezuela doesn't have the time to wait until August of 2003. You see it in the clips. The country is about to explode. And an early election in my view provides an exit that might be able to work.

RAY SUAREZ:

Amy Jaffee as we look to the coming weeks and months, if oil does not begin to flow, do they enter a situation in Venezuela where the fields themselves start to degrade, where refineries that have no crude oil have to start shutting down like chain reaction throughout the Caribbean?

AMY JAFFE:

Well, you know, the most serious issue is really the oil field issue because there is or can be permanent damage to an oil field if it's shut down for a prolonged period of time especially if it's not shut down in a professional manner. So there is a risk. Venezuela's oil productive capacity, in other words the amount of oil it's able to provide to the international marketplace, has fallen by over a million barrels a day since Chavez took office.

He has cut the oil budget for investment and spending on maintenance in the oil sector by 30 percent a way it's almost like cutting a hole in your own life boat. The country needs this industry to perform well, to keep people out of poverty and it's sort of like mortgaging the future by taking assets away. The longer this stalemate continues, the more likely we are to see capacity in Venezuela fall.

RAY SUAREZ:

And large customers like the United States then go out to what, the world spot market and buy oil at slightly higher prices than otherwise? What happens?

AMY JAFFE:

Well, we're seeing that now. Part of the thing that has happened is that companies that were expecting cargos, they know even if the Venezuelans would get the loading, they can't get insurance to load those cargos. They are really being forced to buy replacement supply and depending on what happens over the next six months, it's very hard once a country loses a certain market if other OPEC countries step up and take some of that market away from Venezuela and oil prices, the market wasn't tight later in the year, say, halfway through next year, it will be hard for the country to come back and establish new customers. But basically you have to think of it as like an auction.

RAY SUAREZ:

How do you mean?

AMY JAFFE:

Well, the more the supply stays off the market, the more parties are going to have to pay higher prices to attract the supply to them.

RAY SUAREZ:

Amy Jaffee in Houston, Arturo Valenzuela, Miguel Diaz, thank you all.