Economic Woes, Political Gridlock Are Seen Likely to Linger

By Mary Beth Sheridan
Washington Post Staff Writer

CARACAS, Venezuela, Aug. 17 -- President Hugo Chavez is riding high after his overwhelming victory in a recall vote this week, but analysts say his triumph may have limited impact on the deep economic and political problems threatening this major oil-producing country.

Chavez, a charismatic former army officer, emerged with greater legitimacy from the balloting, in which nearly 60 percent of voters rejected a bid by the political opposition to end the president's term two years early. Chavez also is benefiting from a growing economy and soaring oil prices.

Although the opposition initially alleged the recall referendum was tainted by fraud, international observers said they detected no irregularities. On Tuesday, the U.S. government and leaders of 10 countries in the region publicly recognized the result. "The people of Venezuela have spoken," said State Department spokesman J. Adam Ereli.

Nonetheless, the country's political gridlock appears likely to continue. And even with oil prices at record highs, analysts question whether Venezuela will be able to adopt a course leading it out of a quarter-century of economic decline.

"It's very difficult to develop a country with two clashing visions of its future," said Ana Maria Sanjuan, a social psychologist at the Central University of Venezuela.

Since he was first elected in 1998, Chavez has sought to tighten his control over key institutions and use the country's oil wealth to benefit the poor. His critics, who include much of the country's business establishment, have been unnerved by Chavez's fervent support for Cuba's Fidel Castro and what they call Chavez's authoritarian style.

The opposition has tried to oust president through a variety of means, including a short-lived coup in April 2002and a three-month general strike starting in December 2002 that temporarily crippled the oil industry.

The Bush administration is no friend of Chavez, who has launched frequent anti-American tirades. But the U.S. government is concerned about possible instability in Venezuela, the third-ranking supplier in total of crude oil and refined products to the United States, after Canada and Mexico. Oil prices on the New York Mercantile Exchange dipped after Chavez's victory was declared on Monday.

"The market has reacted positively to Venezuela for one reason: They see a little more stability. They know Chavez will likely continue," said Roger Tissot, director of the PFC Energy consulting firm in Washington.

While nervousness subsided in the energy markets, analysts questioned when Venezuela's state-owned oil company will be able to recover from the general strike that began in 2002. The government says production has returned to its previous level of 3 million barrels of oil a day, but analysts say they believe output is about a half-million barrels below that. They noted that Chavez's government fired thousands of striking oil workers and diverted hundreds of millions of dollars from the oil company to support social programs in the past year.

Petroleum is the mainstay of the Venezuelan economy, the industry that fueled the country's rapid development from 1940 to 1980. But declining per-capita oil revenue and economic and political mismanagement have contributed to a decades-long slump in this country of 25 million.

Key to economic growth is a resolution of the country's severe political turmoil. Venezuela was once considered a model in Latin America, with a two-party democracy founded in 1958 that endured while much of the region was under military dictatorship.

But that system collapsed as the economic decline pushed a growing number of people into poverty and desperation. Hoping for a golden era when the country was nicknamed "Saudi Venezuela," many citizens decided that traditional politicians had botched the country's development while enriching themselves.

They turned to Chavez, a failed coup leader. He had a common touch and exhorted Venezuelans to reject the country's "false democracy of elites" and join his "revolution of the poor" aimed at helping the downtrodden and building a Latin America strong enough to stand up to the United States.

In the short term, Chavez should reap political benefit from the recall vote, analysts said.

But Chavez has done little to create a new political system with institutions capable of replacing the old order, analysts said. Opposition leaders complain that he is uninterested in negotiation and has weakened institutions with his strongman style. His loosely organized party is largely built around his image.

"For Chavez, there aren't political adversaries. There are enemies. And the enemy, you destroy," said Humberto Calderon, a leader of the opposition coalition.

For his part, Chavez complains that his opponents are not seeking to compete politically but to destabilize his government -- as they did with the coup and general strike.

"What is the goal of the opposition? To destroy the institutions. They are using democracy to destroy democracy," said Samuel Moncada, a top aide to Chavez.

The fury unleashed by such confrontation is evident in the streets of this capital, where the poor and moneyed classes are more separated than ever. On Tuesday, a riot nearly erupted in the upper-middle-class neighborhood of Palos Grandes when a well-known actor and Chavez supporter, Fernando Jaramillo, entered a French cafe. Immediately, patrons started banging on the tables and yelling, "Get out! Get out!"

Diners leaped up and surrounded the actor, shouting and tossing glasses of water at him. Finally, a security guard escorted him out.

© 2004