January 23, government opposition demonstration
Posted on 01/27/2002 3:09:34 PM PST by RedWhiteBlue
January 23, government opposition demonstration
By Charles Roth Dow Jones Newswires Journalist As he lamented the downfall of Argentina's government last month and praised the troubled country's decision to default on its public debt, Venezuelan President Hugo Chavez may just as well have been thinking about what the future holds for him.
Some 250,000 people marching Wednesday in protest of the government's policies gave him much food for thought.
The estimate provided by the event's organizers may run high, but accounts on the ground confirmed that the opposition march was several times larger than the 30,000 Chavez was able to muster for his own support rally.
The parallel demonstrations took place on the 44th anniversary of the toppling of Venezuela's last dictator. Previously, Chavez disparaged the celebration of Jan. 23 as the birthday of the country's "false democracy." Instead, he preferred to fete Feb. 4, the date on which the former army paratrooper co-led a failed but bloody coup in 1992.
But after three years as the country's democratically elected president, Chavez has little to show by way of results. His greatest achievement has been his ability - through a belligerent, bullying style - to unite business and union leaders, the vast majority of middle and upper classes and a healthy dollop of the country's many poor against him.
The latest poll by local firm Datanalisis put his popularity at 34%, down from around 80% shortly after the populist president first took office. Another one by Consultores 21 found that 54% of Venezuelans polled would vote Chavez out of office were a referendum held today.
Signs Of Chaos On The Horizon
Although former Argentine president Fernando De la Rua was forced out of office by a population weary from four years of recession, the austerity required to service Argentina's foreign debt and the imposition of capital controls, protesting Venezuelans have faced no such hardships. Indeed, the Andean nation grew 2.7% last year.
But 2002 holds little promise for economic growth. In the face of a looming recession, 67% of Venezuela's business leaders said in a Venezuelan-American Chamber of Commerce poll this week they expect the government to resort to foreign-exchange controls this year.
Thanks to a slump in crude prices and output cutbacks required to meet its Organization of Petroleum Exporting Countries' quota, oil revenues will fall far short of what's needed to keep the country afloat. Venezuela's crude basket has averaged about $16 a barrel so far this year, less than the $18.50/bbl baseline built into the 2002 budget, and far below $20.18/bbl average last year.
Domingo Maza Zavala, a central bank governor, said Friday the federal budget would have to be cut 20% given current economic conditions. Oil accounts for half of government receipts and four-fifths of exports.
It's unlikely Venezuela will be able to drum up much external financing, thanks to its high-risk image. After Argentina, Venezuelan debt is Latin America's worst performer, with yields at more than 11 percentage points above comparable U.S. Treasurys.
The domestic financial system, already up to its neck in public debt, isn't much of an alternative. Recessionary budget cuts, further monetization of fiscal deficits, or most likely both, can be expected.
It's true the government has $6.23 billion in a windfall oil revenue fund, but it's also true that international reserves have fallen to slightly more than $11 billion from $16.6 billion a year ago. Capital flight last year was estimated at just shy of $10 billion.
Hollow Revolution Grows More Radical
As the economy deteriorates, social pressures are also building. Crime is growing ever more rampant. And private sector estimates put unemployment at nearly 20%, while almost 60% of the workforce toils as undocumented workers without benefits.
Given the grim economic outlook, Chavez could undertake an about-face and dump his poorly-respected socialist Economy Minister, Jorge Giordani, and try to mend his ways with the business community, the media and the Catholic church, all of whom he's antagonized.
But that's improbable.
In Wednesday's wake, Chavez announced an acceleration of the "revolution" supposedly sweeping Venezuela.
A slew of Wall Street research reports Friday warned of the growing "radicalization" of Chavez's cabinet, which he shuffled Thursday. Luis Miquilena, who wore the mantle of cabinet moderate, was replaced as interior minister, by Ramon Rodriguez.
Rodriguez, also a botched-coup participant, was Chavez's emissary to deal directly with leftist Colombian guerillas.
Chavez also sacked Luisa Romero and appointed Adina Bastidas as the new minister of production and trade. As vice-president, Bastidas was responsible for drafting 49 laws that Chavez decreed under a special powers act. The business community, which Bastidas failed to consult, has protested vociferously against the laws, which include a controversial land reform.
In fact, Wednesday's massive opposition march was the second in less than two months. The first, Dec. 10, was also a nationwide, day-long general strike that paralyzed the country in protest of Chavez's authoritarianism.
Chavez would be wise to think hard now about the events in Argentina before it's too late. Foreign investors who hold Venezuelan bonds might do the same.
By Charles Roth, Dow Jones Newswires;charles.roth@dowjones.com
NEW YORK, Dow Jones-25-01-02 2133GMT
(Charles Roth was Dow Jones Newswires' Caracas bureau chief from January 1999 through May 2001.)
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