Venezuela: Political Conditions and U.S. Policy

Venezuela: Political Conditions and U.S. Policy

Order Code RS20978
Updated December 9, 2003
CRS Report for Congress
Received through the CRS Web
Venezuela:
Political Conditions and U.S. Policy
Mark P. Sullivan
Specialist in Latin American Affairs
Foreign Affairs, Defense, and Trade Division
Summary
After months of OAS-facilitated negotiations, the government of Hugo Chavez and
the opposition signed an agreement in May 2003 to resolve the political crisis that has
plagued Venezuela for over a year. Implementation of the accord could lead to a recall
referendum for President Chavez in March or April 2004. Some observers emphasize
that the accord is an important step for achieving political stability, while others are
skeptical that it will resolve political conflict in the country. Since Chavez’s 1998
election, Venezuela has undergone enormous political changes, with a new constitution
and revamped political institutions. Chavez remained widely popular until mid-2001,
but his popularity eroded significantly after that amid his ineffectiveness in improving
living conditions and concerns that he has been imposing a leftist agenda on the country.
. The United States has traditionally had close relations with Venezuela, but there has
been friction in relations with the Chavez government. The Bush Administration has
expressed strong support for the work of the OAS in resolving the crisis and welcomed
the May 2003 political accord. This report will be updated periodically.
Political and Economic Situation
Background. With his election as President in December 1998, Hugo Chavez
began to transform Venezuela’s political system. The watershed election, in which
former coup leader Chavez received 56% of the vote (16% more than his closest rival),
illustrated Venezuelans’ rejection of the country’s two traditional parties, Democratic
Action (AD) and the Social Christian party (COPEI), that had dominated Venezuelan
politics for much of the past 40 years. Elected to a five-year term, Chavez was the
candidate of the Patriotic Pole, a left-leaning coalition of 15 parties, with Chavez’s own
Fifth Republic Movement (MVR) the main party in the coalition.
Most observers agree that Chavez’s rise to power can be explained by Venezuelans’
disillusionment with politicians whom they judge to have squandered the country’s oil
wealth through poor management and endemic corruption. A central theme of his
campaign was constitutional reform; Chavez asserted that the system in place allowed a
Congressional Research Service ˜ The Library of Congress

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small elite class to dominate Congress and that revenues from the state-run oil company,
Petroleos de Venezuela (PdVSA), had been wasted.
Although Venezuela had one of the most stable political systems in Latin America
from 1958 until 1989, after that period the country became plagued by numerous
economic and political challenges and the power of the two traditional parties began to
erode. When former President Carlos Andres Perez was inaugurated to a 5-year term in
February 1989, he initiated an austerity program that fueled riots and street violence in
which several hundred people were killed. In 1992, two attempted military coups
threatened the Perez presidency, one of which was led by Chavez himself, who at the time
was a lieutenant colonel railing against corruption and poverty. Ultimately President
Perez was dismissed from office by the legislature in May 1993 on charges of misusing
public funds, although some observers assert that his unpopular economic reform program
was the real reason for his ouster. The election of elder statesman and former President
Rafael Caldera as President in December 1993 brought a measure of political stability to
the country, but the Caldera government soon faced a severe banking crisis that cost the
government more than $10 billion. While the macro-economy began to improve in 1997,
a rapid decline in the price of oil brought about a deep recession beginning in 1998.
Under President Chavez, Venezuela has undergone enormous political changes, with
a new constitution in place and even a new name for the country, the Bolivarian Republic
of Venezuela, named after the 19th century South American liberator Simon Bolivar,
whom Chavez often invokes. In 1999, Venezuelans went to the polls on three occasions
— to establish a constituent assembly that would draft a new constitution, to elect the
membership of the 165-member assembly, and to approve the new constitution — and
each time delivered victory to President Chavez. The new document revamped
Venezuelan political institutions, eliminating the Senate and establishing a unicameral
National Assembly, and expanded the presidential term of office from 5 to 6 years. Under
the new constitution, voters once again went to the polls in July 2000 for a so-called
mega-election, in which the president, national legislators, and state and municipal
officials were selected. President Chavez easily won election to a new six-year term,
capturing about 60% of the vote while his opponent, fellow former coup leader Francisco
Arias, received 38%; Chavez’s term will expire in January 2007. Chavez’s Patriotic Pole
coalition also captured 14 of 23 governorships and a majority of seats in the National
Assembly.
From the outset, critics and other observers raised concerns about Chavez and his
government. They fear that he is moving toward authoritarian rule and point to his
domination of most government institutions. Some argue that Chavez has replaced the
country’s multiparty democracy with a political system that revolves around himself, in
essence a cult of personality; others point to Chavez’s open admiration of Fidel Castro
and close relations with Cuba as a disturbing warning sign. Other observers express
concern about the increased role of the military in the government, with Chavez
appointing dozens of retired and active duty officers to key positions, as well as the
mobilization of thousands of army reservists for social projects. Still other critics of
Chavez believe that he is trying to politicize the educational system by making changes
to school curriculums. They fear Chavez’s call for his followers to form political cells
in schools, hospitals, and businesses in order to support his revolution and believe that
such groups, known as Bolivarian circles, could mirror Cuba’s notorious neighborhood
committees.

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Chavez’s Brief Ouster in April 2002. Although President Chavez remained
widely popular until mid-2001, his popularity eroded considerably after that, amid
concerns that he was imposing a leftist agenda on the country and that his government
was ineffective in improving living conditions in Venezuela — where about 80% live at
or below the poverty line. In late 2001 and early 2002, opposition to Chavez’s rule grew
into a broad coalition of political parties, unions, and business leaders. Trade union
opposition became stronger amid the President’s attempt to replace the Venezuelan
Workers Confederation (CTV) with a pro-government union. President Chavez’s own
Fifth Republic Movement also became plagued with internal dissent.
In April 2002, massive opposition protests and pressure by the military led to the
ouster of Chavez from power for a brief period, but he ultimately was restored to power
with the support of the military. Chavez was ousted from office on April 11, 2002, after
protests by hundreds of thousands of Venezuelans and the death of at least18 people.
Venezuelan military leaders expressed outrage at the massacre of unarmed civilians and
blamed President Chavez and his supporters. On April 12, Pedro Carmona of the
country’s largest business association — the Federation of Associations and Chambers
of Commerce and Industry (Fedecamaras) — proclaimed himself as interim president, but
Carmona quickly lost the support of the military when he took such hardline measures as
dismantling the National Assembly, firing the Supreme Court, and suspending the
Constitution. Carmona stepped down just a day after he took office, paving the way for
Chavez’s return to power early in the morning of April 14. The interim government’s
hardline polices as well as strong support in the streets from Chavez supporters convinced
military commanders to back Chavez’s return. Moreover, some military factions had
continued to support Chavez during his ouster.
Continued Opposition and Strike. Upon Chavez’s return to power, he
appealed for reconciliation and promised new lines of communication with the
opposition, yet his government also purged the military of officers who had supported his
ouster. After his return, some 40 disparate opposition groups united in a coalition known
as the Democratic Coordinator in an effort to remove Chavez from office, focusing on
efforts to hold him accountable for the death of civilian protestors in April 2002 and to
push for a national referendum on his presidency. The opposition demanded a non-
binding referendum on Chavez’s rule in early February 2003, which they believed would
force the President to resign, but Venezuela’s Supreme Court ruled against holding such
a referendum. President Chavez maintained that, according to the constitution (Article
72), a binding referendum on his rule could take place after the halfway point of his term,
which would occur in August 2003.
From early December 2002 until early February 2003, the opposition orchestrated
a general strike that severely curtailed Venezuela’s oil exports and disrupted the economy
but was unsuccessful in getting President Chavez to agree to an early non-binding
referendum on his rule or new elections. At various junctures, there were violent clashes
between Chavez supporters and the opposition, resulting in several deaths. The Chavez
government responded to the oil sector strike by firing some 13,000-16,000 PdVSA
employees. The six-week general strike severely affected Venezuela’s oil export industry

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and contributed to a sharp contraction of the national economy by almost 9% in 2002
while a contraction of12.4% is forecast for 2003.1
May 2003 Political Agreement. In October 2002, the Organization of American
States (OAS) Secretary General, César Gaviria, began to facilitate negotiations between
the government and the opposition in order to resolve the crisis through democratic
mechanisms under the Constitution. After months of negotiations, the Chavez
government and the opposition ultimately signed an agreement on May 29, 2003. While
implementation of the accord will not be easy, some observers believe that it could
ultimately help achieve political stability. Others believe that it is unlikely that the
referendum will resolve political conflict in the country. In the accord, the parties agreed
to resolve the political crisis through application of Article 72 of the Constitution, which
provides for potential recall referenda on officials holding elected positions. For such a
referendum to take place, the Constitution requires a petition with 20% of registered
voters (which means 2.4 million voters out a registry of 12 million). For the official to be
recalled, the number of voters must be equal to or greater than the number of votes that
the official received when elected. This means that for Chavez to lose the presidency,
more than 3.75 million votes (the number that Chavez received in the July 2000 election)
would have to be cast against him in the referendum. Observers point out that while
Chavez received almost 60% of the vote in 2000, some 43% of Venezuela’s registered
voters abstained.2 The abstention rate for a recall referendum would likely be much
lower, raising the odds that Chavez might be recalled.
There are numerous steps for a recall referendum to be held. The first was the
selection of a five-member National Electoral Council (CNE) that would oversee the
referendum process. Venezuela’s National Assembly, in which Chavez supporters now
maintain a slim majority, was unable to select the CNE members, so the Supreme Court
intervened and selected the members on August 25, 2003. The next major step is for the
CNE to validate the signatures on a recall referendum petition. Venezuela’s opposition
presented more than 3 million signatures on August 20 for a recall referendum, but on
September 12, the new CNE rejected the recall petition. The CNE rejected it because the
signatures had been collected months before the midpoint of President Chavez’s term of
office (August 19, 2003) and because of other procedural errors. The opposition vowed
to collect new signatures according to the procedures set forth by the CNE.
Signatures for recall petitions were collected nationwide from November 28 -
December 1, 2003, a period set aside by the CNE. Opposition-supported petitions would
recall President Chavez and 33 pro-government deputies in the National Assembly, while
pro-Chavez petitions would recall 37 opposition deputies. As noted above, 2.4 million
signatures are needed to hold a referendum to recall President Chavez. The opposition
maintains that they collected 3.6 million signatures to recall President Chavez, while
President Chavez maintains that they only collected 1.9 million. President Chavez has
alleged there was widespread fraud, and has said that he will not allow the referendum
unless he is convinced that the signatures are legitimate. OAS Secretary General Gaviria
1 “Venezuela Country Report.” Economist Intelligence Unit, Nov. 2003.
2 Mike Ceaser, “Some in Opposition Unhappy with Success; Chavez Recall Vote Too Weak,”
Washington Times, June 1, 2003.

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maintained that he and other international observers saw no evidence of fraud.3 The CNE
has 30 days to verify the signatures on the petitions, and CNE officials have said that both
the government and the opposition must accept the electoral body’s decision.
Once a recall petition is deemed valid, a referendum could be held within 97 days.
If the opposition succeeds in recalling President Chavez in a referendum, the next step
would be for new elections to be held. One of the problems that has plagued the
opposition is that it has not had a well organized or coherent political coalition. As a
result, it could be difficult for the opposition to present a single candidate that could
defeat Chavez in new elections, assuming that Chavez is permitted to run Moreover, polls
indicate that Chavez retains core support of about 30%-36% of Venezuelans who are loyal
and generally from the poorer classes. If for some reason a recall referendum is delayed
until after August 2004, then the country’s Vice President would serve out the remainder
of the Chavez’s term through 2006.
U.S. Policy
Although the United States has traditionally had close relations with Venezuela,
characterized by an important trade and investment relationship and cooperation in
combating the production and transit of illegal narcotics, there has been friction and
tension in relations with the Chavez government. In the aftermath of the September 11
terrorist attacks, U.S. officials became far less tolerant of President Chavez’s anti-
American rhetoric. In testimony before the Senate Foreign Relations Committee on
February 5, 2002, Secretary of State Colin Powell raised questions about Chavez’s actions
and the countries that he had visited (Cuba, Iran, and Iraq).
After Chavez’s brief ouster in April 2002, the United States expressed solidarity with
the Venezuelan people, commended the Venezuelan military for refusing to fire on
peaceful demonstrators, and maintained that undemocratic actions committed or
encouraged by the Chavez administration provoked the political crisis.4 With Chavez’s
return to power, the United States called on President Chavez to heed the message sent
by the Venezuelan people by correcting the course of his administration and “governing
in a fully democratic manner.”5 In contrast, many Latin American nations condemned the
overthrow of Chavez, labeling it a coup. However, the United States did support a
resolution in OAS that condemned the “alteration of constitutional order in Venezuela.”
Amid subsequent opposition protests to Chavez’s rule in June 2002, the State Department
stressed that the United States “does not and will not condone an unconstitutional,
undemocratic interruption in the democratic order by any party in Venezuela.”6
3 “Venezuela: Election Council Stresses Recall Ruling Will be Final,” Miami Herald, Dec. 9,
2003, p. 13A
4 U.S. Department of State, “Venezuela: Change of Government,” Press Statement, Apr. 12,
2002.
5 U.S. Department of State, International Information Programs, “White House Calls on
Venezuela’s Chavez to Preserve Peace, Democracy,” Washington File, Apr. 14, 2002.
6 U.S. Department of State, “Venezuela: June 15 Demonstrations,” Press Statement, June 13,
2002.

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The Bush Administration expressed strong support for the work of the OAS
Secretary General to bring about a resolution to the crisis. With U.S. support, the OAS
approved a resolution on December 16, 2002, that rejected any attempt at a coup or
interruption of the constitutional democratic order in Venezuela, fully supported the work
of the Secretary General in facilitating dialogue, and urged the Venezuelan government
and the Democratic Coordinator “to use good faith negotiations to bring about a
constitutional, democratic, peaceful, and electoral solution...” In January 2003, the United
States joined with five other nations — Brazil, Chile, Mexico, Spain, and Portugal, in
establishing a group known as the “Friends of Venezuela” — to lend support to the OAS
Secretary General’s efforts. U.S. officials welcomed the political accord ultimately signed,
and maintained that the United States would continue to work to facilitate a peaceful,
constitutional, democratic, and electoral solution to Venezuela’s political impasse.
Tensions increased in U.S.-Venezuelan relations in September 2003 when
Venezuelan officials alleged U.S. involvement in the April 2002 attempt to oust President
Chavez; U.S. officials denied any involvement. In mid-September 2003, President
Chavez canceled a U.S. visit because of alleged security concerns and he accused the
United States of harboring “terrorists ... being trained to act against Venezuela.”7
Since Venezuela has been a major supplier of foreign oil to the United States, a key
U.S. interest has been ensuring the continued flow of oil exports at a reasonable and stable
price. In 2001, the United States imported 1.54 million barrels per day (bpd) of crude oil
and petroleum products daily from Venezuela, which accounted for 14.1% of total U.S.
net oil imports, just behind Canada and Saudi Arabia.8 The December 2002 general strike
orchestrated by the opposition reduced Venezuela’s oil exports, but by May 2003,
Venezuelan officials maintained that overall oil production had returned to the pre-strike
level. Despite the friction in U.S.-Venezuelan relations and Venezuela’s opposition to the
U.S. war in Iraq, the Chavez government announced before the military conflict that it
would be a reliable wartime supplier of oil to the United States.
There have been concerns about the guerrilla conflict in neighboring Colombia
spreading to Venezuela, and there also have been long-held suspicions that Chavez has
supported the Colombian guerrillas, although Chavez denies such support. A provision
in the Senate version of the FY2004 foreign operations appropriations bill, H.R. 2800
(section 687), would have prohibited U.S. assistance to Venezuela (except for democracy
and rule of law assistance) if the Secretary of State certified that the Venezuelan was
assisting, harboring, or providing sanctuary for Colombian terrorist organizations. While
the provision ultimately was dropped in the FY2004 Consolidated Appropriations Act,
H.R. 2673, the conference report (H.Rept. 108-401) requested the Secretary of State to
provide (within 90 days of enactment and in a classified form if necessary) a description
of specific actions taken by Venezuela to cooperate with Colombia on counter-drug
matters and a description of the extent to which, if at all, Venezuela has supported or
assisted terrorist organizations in Colombia.
7 James Anderson, “Chavez Demands U.S. Action on ‘Plotters,’” Miami Herald, Sept. 25, 2003.
8 U.S. Energy Information Administration. “Petroleum Supply Annual 2001, Volume 1,” p. 70.