Dec 13th 2002
President Hugo Chavez’s misguided attempts to quell the general strike gripping Venezuela have only made a bad situation worse. The economy will pay dearly
THE real victim of the prolonged strike in Venezuela, called by the country’s opposition in the hope of ousting President Hugo Chavez, is likely to be the economy. In September, unemployment reached 17%. After twelve days of strikes and disorder, things may get worse as more businesses face the prospect of having to lay off workers. Instead of quelling the strikes, Mr Chavez’s misguided attempts to restore order and keep the country’s oil flowing have simply fanned the flames of unrest. On December 9th, bank workers up and down the country joined the thousands in the oil industry and in the ports already on strike. In a country used to such things, the stoppage has been the longest and most severe people can remember. With no solution in sight, it is also having grave consequences.
Production of crude oil, on which Venezuela’s livelihood depends, is already down by nearly 70% (or 1.9m barrels of oil a day). Refining has more or less ground to a halt in Paraguana and El Palito, where 70% of the country’s oil is processed. Little or no petrol or fuel oil is being distributed, so domestic flights are paralysed; and foreign airlines are reluctant to fly into Venezuela for fear that their aircraft will be stranded. Gas is being pumped at half its normal rate, which is preventing petrochemical plants from working. What little gas there is has been diverted to homes. Panic-buying since the weekend has also reduced food stocks. Most banks remain closed; the few that are open have seen lengthening queues as people try to withdraw as much cash as they can. To prevent a shortage, the central bank has had to inject several times the normal amount of liquidity into the financial system.
It is not just oil, the country’s biggest export, that is being held up. According to LatinSource, a consultancy, more than $100m-worth of other exports are piling up in Venezuela’s ports because ships are unable to leave. Idle oil tankers are blocking the Orinoco River’s navigation canal, causing problems for several of the country’s aluminium and steel plants further upstream.
Mr Chavez has undoubtedly made a difficult situation worse by trying to break the strike. In an attempt to keep the country’s oil flowing, he ordered government employees to board the tankers and to take over the facilities of Petroleos de Venezuela (PDVSA), the national oil company. So far, neither ploy has worked. Although the government has managed to load one or two tankers, another 40 or so are still sitting idle.
Unsurprisingly, relations between the government and PDVSA have sunk to an all-time low. Outraged at Mr Chavez’s recent attempt to exert his influence by appointing Alfredo Riera, a close associate, to the company’s board, seven other directors of PDVSA resigned en masse last week. Since then, the government has taken the unusual step of sacking four of the company's executives, whom it regards as strike leaders.
The killing of three anti-Chavez protesters by a gunman in Caracas, the capital, at the end of last week has done nothing to cool tempers on either side. As happened in April, when Mr Chavez—the country’s democratically elected president—was briefly deposed by the army before being reinstated, crowds loyal to the president this week surrounded television stations in the capital and other cities, protesting about their anti-Chavez coverage. In reply, thousands of Venezuelans opposed to Mr Chavez's rule have taken to the streets after dark, clanging pots and pans in a noisy protest. On Thursday, police fired tear gas to disperse Chavez supporters who were throwing fire crackers at rival demonstrators.
A danger of the latest disturbances is that Mr Chavez will again (wittingly or unwittingly) place the army between his government and the opposition. Although some army officers have publicly accused Mr Chavez of trying to drag the military into politics, army units have so far remained firmly in their barracks. Elected initially in 1998 and then under a new constitution in 2000, Mr Chavez considers he has a mandate for change. Even though he has fudged the opportunity and allowed many in the country to become poorer, he is still backed by one Venezuelan in four (which is more than any single leader of the fractious opposition). His current term as president lasts until 2006, but the constitution allows for a referendum in August 2003 on Mr Chavez’s progress to date. That is too late for many in the opposition: they want elections in the spring.
A second danger is rising violence. Some 2,000-3,000 members of the Bolivian Circles, a grassroots organisation set up by Mr Chavez, are said to have weapons and are ready to use them. They include men identified as having opened fire on a peaceful opposition demonstration in April, killing 19, the action which led to the president’s brief ouster. Since October, moderates on both sides have been pushing for some sort of a vote, referendum or election before the summer. But the leaders of both sides have made heavy weather of talks arranged by Cesar Gaviria, secretary-general of the Organisation of American States.
Even if the strike were called off today, it could be nearly a week before the flow of oil is up to full strength again. In the meantime, the shortages will continue to build up and the economy will suffer. The government is already trying to cope with a sinking currency, rising inflation and a severe recession. During the nine months to the end of September, the economy shrank by 6.4%. Oil income is down and debt payments are up. That leaves Mr Chavez with little room for manoeuvre. He has already persuaded the central bank to take steps that could stoke inflation. If prices start rising out of control, then even the one in four Venezuelans who would currently give Mr Chavez their vote may be tempted to roll the dice.