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Venezuela: Political Economy

Venezuela: Political Economy. Early Punto Fijo Democracy : 1958 – 75. Legitimacy & Political Economy. Infrastructure Development. Modernization Participation in the international capitalist system Party managed distribution of resources would increase quality of life of all classes.

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Venezuela: Political Economy

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  1. Venezuela: Political Economy

  2. Early Punto Fijo Democracy :1958 – 75 Legitimacy & Political Economy Infrastructure Development • Modernization • Participation in the international capitalist system • Party managed distribution of resources would increase quality of life of all classes

  3. Caracas: Modern & Western?

  4. Caracas: Poor & Primitive

  5. Early Punto Fijo Democracy • Initial economic downturn following transition • Political instability • Oil price downturn • Return to growth 1961 – 1973

  6. First Petroleum Boom (Phase 1) Carlos Andrés Pérez 1973 – 1983 • Yon Kippur war • Threefold increase in the market price of petroleum • Fifty years of development if Five leads to overextension of borrowing capacity

  7. First Petroleum Boom (Phase 2) Luis Herrera Campins 1979 – 1983 • Donde están los reales • From austerity to renewed petroleum boom • Black Friday (February 1983) and its aftermath

  8. Political Legitimacy, Poverty and the Economic decline in the 1980’s Lusinchi government (1984-89) Borrowing: the gamble that failed Thirty years of AD-COPEI governments disappoint expectations • Annual inflation (1988) 40% • General poverty 39% • Unemployment 12% • Real salary levels declined

  9. Carlos Andres Pérez & Neoliberalism • Exhaustion of ISI • Petroleum income falls • Turn to free market think tank (IESA) • World Bank demands belt tightening

  10. Carlos Andrés Pérez II: Economic Dynamics • Flawed implementation of neo-liberal policies leads to rioting (Caracazo) • El Gran Virage • Economic successes • Macro-economic indicators of growth positive • Economic deficiencies • Economic benefits fail to “trickle down” • Political consequences • Bolivarian coup of February 4, 1992

  11. Carlos Andrés Pérez II: Downfall • Bolivarian Coup of February 4, 1992 • Closing ranks fails to stabilize the political regime • COPEI divided • Second coup of November 27, 1992 • Impeachment of Carlos Andres Perez – June/July 1993 • More neo-liberalism under interim government of Ramon Velasquez

  12. Rafael Caldera: Second Godfather of Punto Fijo Democracy • Support from the left (Movement to Socialism) • Promise to return to mixed economy with safety nets • Economic program not feasible given international petroleum market

  13. Agenda Venezuela Further Undermines PuntoFijo Legitimacy • Neo-liberalism returns with a vengeance • CTV fails to defend gains of organized labor • pension privatization • Retroactivity eliminated • PDVSA consolidates its position as a “state within the state” • Informal alliance with AD facilitates control of congress while tying AD to Agenda Venezuela

  14. The Bolivarian Revolution’s Economy: Chavez View (1999 – 2006) OPEC strengthened – more revenue % living below poverty line declines Moderate inflation Entrepreneurial activity – falls out of favor Medical services made more available to poor Foreign investment – limited to Orinoco heavy oil

  15. The Bolivarian Revolution’s Economy: Chavez View (2006 – present) • Petroleum income surges – falls in 2008 • Twenty First Century Socialism proclaimed • “Savage” capitalism’s excesses tamed • Cuban Package – December 2010 • Land expropriation & redistribution • Popular participation in economic policy making (Community Councils)

  16. The Bolivarian Revolution’s Economy: & Election of 2012 - more • Housing • Inflation • 2011 – 25.8% • 2011 – 24.2% • Economic growth • 2.8 % projected for 2011 (IMF)

  17. Opposition view of Chavez’s Economic accomplishments Decrease in level of poverty not commensurate with oil income Inflation – highest in Latin America Deterioration of infrastructure Flight of professional middle class Turnkey projects contribute fail to train local technicians

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