Venezuela’s 2012 Presidential Election

1. Venezuela’s 2012 Presidential Election David R. Mares Institute of the Americas Chair for Inter-American Affairs Director, Center for Iberian and Latin American Studies Professor, Political Science UCSD

2. Hugo Chavez

4. 1980s & 1990s “Lost Decades” • GDP avg annual growth rate of 1% 1985–2003 • 1998 real wages were less than 40% of 1980 level • Purchasing power of the minimum wage 1994 is 1/3 that of 1978 • % pop below poverty line: 1984 36%, 1995 66% • % pop in extreme poverty: 1984 11%, 1995 36% • Per capita social spending 1993 60% of 1980

5. “Venezuela is Rich” Economic Inequality • 70% agricultural land owned by 3% of agricultural proprietors (among highest levels of land concentration in LA) • Income share poorest 40% of population • 1981 19.1% • 1997 14.7% • Income share top 10% of population • 1981 21.8% • 1997 32.8% • government’s share of oil revenue • 1981 71% • 2000 39%

6. Chavez’ Rise • 18 months before 1998 election, lagging in 3rd place in polls; adopts pledge to call for a new constitution to end Partidocracia and bring “ revolutionary change” • 1998 Patriotic Pole (Polo Patriótico—PP), an alliance of his own Fifth Republic Movement (Movimiento Quinta República—MVR) and two other leftist parties, Homeland for All (Patria Para Todos—PPT) and Movement Toward Socialism (Movimiento al Socialismo—MAS) 1998 Gets more votes than any other candidate in history 1999 New Constitution ratified by 72% vote 2000 Chavez elected President under new constitution with 60% vote 2001 Begins to implement the radical transformation of Venezuela’s political economy

7. National Strikes, 2001 & 2002 • PDVSA led • AD/COPEI marginalized • Coup attempt April 2002 • US recognize new govt • Street demonstrations raise spectre of ungovernability • Military brings back Chavez • Recall election focus by opposition • Chavez obstruct • US Democracy aid • August 2004 Chavez gets 58% • December 2005 Elections • Opposition pulls out of Legislative elections • Chavistas win all seats Political Polarization

8. Fundamentals of Chavez’ Program • Expensive Goals • Large population with high levels of poverty that have to be reduced • Foreign policy activism against Global Liberalization • Global Liberalization severely limit pace of domestic distribution and redistribution • Program Based on Revenues generated by energy exports • Great inefficiencies increases costs of Program • Political instability at home means need to speed up program; more $ up front

9. Chavez: Domestic Political Strategy • CAUDILLO • Fear implications of institutionalization on his freedom of action • Cabinet/Agencies: Personal, not political, links to Leader • Minimal constraints mean continued policy ‘instability’ • Army • Purge & Politicize • Intelligence & control within bureaucracy • ‘People’s’ Militia • People • Purge & Politicize • Vote • Demonstrate/Counter-demonstrate

10. Domestic Challenge • “Direct Democracy” means need to build & consolidate credibility w/people to sustain loyalty • Ideology – ‘Socialism’ ‘Bolivarian’ • Influenced by International Strategy • Distribution – High Profile & Consistent • Cost to Opposition – Imposed by Chavez; incoherence of opposition

11. Keys to Chavez Electoral Strength • Direct distribution of benefits • Poverty rates have fallen by 50% • Employment and foreign exchange politicized • Missions provide health, education, welfare • Opposition’s lack of legitimacy among lower middle class and the poor • Polls demonstrate that Venezuelans don’t believe in ‘socialism of the 21st century’ and do value democracy.

12. Social Missions • Robinson Mission – Literacy • Robinson Mission II -- Education; primary school • Ribas Mission – Education; high school • Sucre Mission – Education: college; UBV in former PDVSA building • Barrio Adentro Mission – Health; low cost medical services • Mercal Mission – Food; low cost purchases and production stimuli • Identity Mission – Citizenship; identity cards • Vuelvan Caras Mission – Employment; youth job training • Guaicaipuro Mission – Indigenous rights

13. Challenge for Chavez • His health, rising crime rates, inflation and food shortages • Capital outflow rose 58% to USD 33 billion in 2011 • Opposition Candidate Henrique CaprilesRadonski platform of inclusiveness, avoids directly attacking Chávez or his social programs • Wants to emulate former Brazilian President LuizInacio Lula da Silva’s pro-business policies and expansive social programs • Capriles’ image as a youthful, serious and capable politician who will manage the country well for the benefit of all Venezuelans. • VÍCTOR SALMERÓN| EL UNIVERSAL http://www.eluniversal.com/economia/120315/venezuelas-capital-outflow-climbs-to-usd-33-billion-in-2011March 15, 2012

14. Chavez Campaign Needs $$$ • Oil production declining • 1998 3.3mbd • 2011 government claims 3mbd, a decline of 10% • OPEC says 2.37 million barrels a day in December 2011. • In 2011, the government and PDVSA floated $17 billion in bond sales and raised perhaps another $10 billion in Chinese loans in exchange for oil. • According to some analysts, these loans are short term (8 months) and carry a 7% interest rate. • For 2012, Chávez is expected to seek up to $12 billion in bond sales largely to support social programs during the electoral campaign.

15. FDI? • Policy changes, small but reflect this need • PDVSA subsidiary may be opened to private capital through the Hong Kong Stock Exchange • first state divestment offered in Orinoco heavy oil belt since 2008 nationalization • PDVSA will award CITIC (China) a 10% share in the Petropiar JV for US$1bn. • PDVSA 60% Chevron 30% CITIC 10%

16. Chinese Loans? • China provides those to gain preferential access to Venezuelan resources. • If Chavez is doing poorly in the electoral campaign or his health becomes a more active concern, the Chinese will likely start thinking about putting their relationship with Venezuela on a more commercial basis. • If Chávez loses the presidency, the Chinese loans that Chávez has used for political gain provide no advantage • the debt burden for the new government with disproportionately little to show for it could lead Chavez’ successor to favor non-Chinese partners in future projects.

17. Will Democracy Survive? • Should Chávez die or be too ill to run in the October elections, he and those partisans dedicated to the Bolivarian Revolution will have to decide how to deal with a highly likely opposition victory. • Defense Minister Rangel has said in the past that the military cannot accept an opposition victory.

18. Modeling elections

19. Opposition wins the October 2012 Elections and Chavez/successor annuls elections • Domestic and international observers declare that the opposition candidate has won the presidential election. • Chávistas, with or without Chávez, take to the streets, creating chaos. • Government declares that U.S. imperialism has tainted the elections • calls on the Army and Bolivarian militia to restore order • imposes order for a future election at a time to be determined by the government after the ‘sovereignty of the Venezuelan electorate’ has been restored. • Masked people threw firebombs & attempted to steal ballot boxes during the December 2011 elections for student government in the Central University, in which Chávez’ candidate was trounced. • The U.S. government will impose sanctions on Venezuela