The ‘informal economy’ is alive and well in the district of Sabana Grande in downtown Caracas, where street vendors congregate daily.

School in La Guaira left in ruins after the devastating floods and landslides of 1999

It was not long ago that President Hugo Rafael Chavez Frias electrified the vast majority of Venezuelans behind his revolutionary rhetoric and the romantic notion of recapturing a nation that seemed to be drowning in a morass of corruption and ineptitude.

Today, only three years after being swept into office, Chavez still finds he has not lost his ability to electrify the citizenry. But the embattled President’s erratic behavior and destructive actions have ignited waves of opposition protests and polarized Venezuelans, the majority of whom have turned against him.

While Venezuela can no longer be considered a fledgling democracy, the situation at present has set the stage for an important political showdown that will inevitably test the country’s democratic, and economic, mettle. Forever optimistic, Venezuelans will prevail through this challenge and emerge wiser.

Whether President Chavez chooses to believe the facts or delude himself, popular support for the maverick leader has completely reversed itself over the course of his term, from unprecedented heights to dismal lows. The President’s approval ratings approached 80 percent when he first took office in February 1999. Since then steady erosion of his support base has taken place in tandem with worrisome economic trends and the administration’s increasingly hostile attitude and defensive posture. Most respected pollsters today put support for the President between 25-30 percent, with hard support dipping just under 20 percent. Meanwhile, disapproval ratings have soared between 60 and 70 percent.

Losing his grip on reform
Reasons for this loss of faith abound, but a base of disenchantment revolves around the President’s inability to stem rising poverty, unemployment, crime, and the perception of high levels of official corruption. Venezuelans have considered these problems, which Chavez declared to be priorities on his electoral platform and subsequent government agenda, to be the country’s most pressing concerns.

Despite the government’s promises to reduce unemployment, the official jobless rate has risen above 14 percent. Poverty has also increased, and it is estimated that Venezuela’s ‘informal’ economy, consisting mostly of street vendors and copy artists, has grown in recent years to the staggering rate of 50 percent.

"As the informal economy continues to grow, Venezuela is losing the best assets for its future – its workers – at an alarming pace," remarked Julio Brazon, President of Consecomercio, the country’s largest commerce and services chamber. "The government has no coherent plan to respond to this crisis," said Brazon.

Besides feeling that the Chavez administration is falling further behind on fulfilling its promises, the growing opposition, and in particular the private sector, has become unnerved by the President’s increasingly autocratic and leftist tendencies. At the crux of complaints is a package of 49 economic laws that Chavez hastily decreed on November 11, 2001, just hours before the expiration of a special Enabling Law, which legally granted the President the authority to enact laws without parliamentary debate.

Absolute secrecy surrounded the enactment of the laws, and many Venezuelans were outraged that the government passed such important legislation without consulting stakeholders. Many critics also contend these laws are unconstitutional, harmful for the industry, and will drive away badly needed foreign investment.

Two such laws, the Hydrocarbons Law and the Land and Agrarian Development Law, forced sweeping and controversial changes in Venezuela’s petroleum industry and land policy. The Hydrocarbons Law effectively imposed heftier royalties rate for foreign companies and decreed that the country’s state-owned oil conglomerate, Petroleos de Venezuela (PDVSA), own a minimum 51% stake in any new joint ventures, which assures the government control in any operation.

"The old [Hydrocarbons] law is far more appealing to investors, regardless of the rationalizing," commented Michael Penfold, Executive Director of CONAPRI, the Venezuelan Council for Investment Promotion, a joint public-private sector organization.

"The state of affairs is totally inconsistent with the arguments put forward by the Ministry of Energy and Mines about the wonders and the allegedly beneficial effects the new law should theoretically have," he observed. Penfold believes the new law lacks flexibility and will be a poor tool for attracting investment in the petroleum sector unless it is altered.

Implementation of the Hydrocarbons law and the affect it has on investment in the oil sector inevitably affects Venezuela’s entire economy, since one-third of GDP and half of government revenues derive from oil exports. Venezuela has been unable to break free from the chains of oil dependency and diversify its economy sufficiently.

Venezuela’s new Land and Agrarian Development Law is also seen by many in the private sector as an attempt to gain government control over industry. The law gives tremendous discretion to local officials within the National Land Institute to determine whether private land is being properly exploited, and limits the rights of owners by introducing certain expropriation proceedings. It also establishes a crop plan that could force field producers to plant what the government decides should be planted.

These and other articles in the law are clouded with legal uncertainties, and many critics contend they violate property rights consecrated in the Bolivarian Constitution of 1999. If nothing else, they are certain to deter investment and undermine trust between the private and public sector.

Indignant in his isolation
If new, high-handed laws unilaterally decreed by Chavez failed to rile Venezuela’s business community and labor force, the President’s incendiary speech-making and uncompromising style have succeeded tremendously in collapsing public trust in a Chavez-led vision for Venezuela.

The President has relentlessly pilloried his critics and alienated friends – including leaders in politics, business, labor, the Catholic Church, and media – by lumping them together as self-serving, squalid, rich, corrupt or unpatriotic "oligarchs."

His only base of support lies among Venezuela’s poor and uneducated class, particularly in the rural areas. Chavez uses his unmatched charisma and forums such as "Hello President," a weekly Sunday morning broadcast for the masses, to plead his case to his followers. "Some are saying that it’s me who is dividing the country. But it’s not. It is our terrible history that has divided the nation between a privileged minority and a majority of neglected poor," Chavez remarked in a recent address.

The recent and surprisingly public dissension by a handful of senior officers in Venezuela’s armed forces, who peacefully called for the President’s resignation, serve as further confirmation of the fissures that exist among the President’s traditional base of support.

Chavez, a former lieutenant colonel and paratrooper who led a failed coup against the government in 1992, has surrounded himself at the top with brass – currently 5 active or retired military officers are serving in his cabinet. He has repeatedly counted on using military muscle to implement social programs that enhance his political agenda. Grumbling from within the ranks has become audible.

Air Force Colonel Pedro Soto’s surprise announcement calling for Chavez’ resignation two months ago sparked wide-spread celebration among the opposition, and inspired other military men to break ranks with the President.

Soto demanded Chavez release control over national institutions and the judiciary. "If there are no independent powers there is no democracy," he said. Soto and other military officers have urged an end to Chavez’ "left-wing tyranny," his belligerent style and "calls to war, violence and class struggle" in the President’s speeches.

On the international level, Venezuela’s president has taken deliberate steps to irk top U.S. officials and temporarily isolate Venezuela from America, its most important ally and trading partner, at a significant juncture in history.

Venezuela, which holds the largest oil reserves outside of the Middle East, supplies the United States with 1.5 million barrels of oil per day. The Bush administration had hoped Venezuela would become a more reliable ally and oil supplier to America, in light of the war being conducted against terrorism and the powder keg politics in the Middle East that make the assurance of a steady flow of Gulf region oil elusive.

But Chavez’ confrontational style has exhausted the Bush administration’s patience, and U.S. officials have lost nearly all hope for a productive relationship with Venezuela’s leader.

Chavez alarmed U.S. officials on October 29 of last year when he publicly displayed photographs that he claimed showed Afghan children killed by allied bombs. He drew parallels between allied air strikes in Afghanistan and the September 11 terrorist attacks on the World Trade Center.

Senior U.S. officials, including Secretary of State Colin Powell and CIA director George Tenet, have publicly questioned Chavez’ understanding of democracy. Washington’s concern is justified; Venezuelans cannot make heads or tails of Chavez’ intentions.

Chavez’ invective laced speeches, confrontational style and left-leaning politics, combined with his peculiar visits to ‘despotic’ regimes and the close ties he has forged with Fidel Castro in Cuba, as well as with members of the Revolutionary Armed Forces of Columbia (FARC), a terrorist movement, has left America wondering – What are Chavez’ intentions toward the United States?

A twist of irony
Ironically, the most remarkable political achievement over the past year has come not on the President’s behalf, but at his expense. Chavez has succeeded in uniting an opposition movement against him like never before.

Distinct sectors of society have found common ground to achieve shared goals, and groups such as Venezuela’s middle class, which has traditionally opted out of political participation, have become engaged in the public debate. This has intensified the opposition’s resolve and laid the groundwork for democratic processes in Venezuela to mature.

At no time was this unified stance more evident than last December 10, when Venezuela’s most prominent business association, FEDECAMARAS, led Venezuelans on a 12-hour work stoppage to protest the government’s belligerent attitude toward democratic institutions and
processes.

In a remarkable alliance of habitual antagonists, the Confederation of Venezuelan Workers (CTV), the country’s largest labor federation representing 1.3 million public employees, teamed up with FEDECAMARAS and other organizations to bring country-wide business and production to a stand-still for the day.

"December 10 showed respect for the rule of law in Venezuela, and proved the power of the people," said Brazon, of Consecomercio, which also participated in the strike.

Business, labor and other representative institutions of Venezuelan society have kept this powerful alliance intact since December. Tens of thousands of supporters flocked to the streets January 23, February 4, February 27 and on other historic Venezuelan dates to peacefully march or demonstrate against Chavez policies and tactics. Venezuelan patriots who oppose Chavez will undoubtedly amass on the streets April 19, the anniversary of the signing of Venezuela’s independence in 1810.

In a further show of strength designed in part to unnerve the President, the leaders of FEDECAMARAS, the CTV, and Venezuela’s Roman Catholic Church unveiled a ‘Governability Pact’ in March that would provide the basis for a transition government in the post-Chavez era.

Light at the end of the tunnel?
Politically, Venezuela is coming to a crossroads, and Chavez’ days in power are numbered. The president is elected by popular vote to a 6-year term, and elections are not scheduled until July 2006. But very few pundits predict Chavez will survive his term in office, let alone the next year or so.

The nation’s political healing will take far more time. In just three years the majority of Venezuelans have run the gamut of emotions over their president and have witnessed the rise, and now freefall, of their proud leader. A post-Chavez scenario will not erase the sour taste left in their mouths from years of inadequate governance any time soon.

Naïve onlookers who hope that, by offering the right olive branch, Chavez might reconnect with the sectors of society he has alienated, or at least placate his harshest critics, need only see that Venezuela’s leader has proven unable to concede ground when engulfed in controversy. The besieged President has estranged every walk of society minus the very poor, but even this group will soon desert him as they begin to feel the sting of a recent currency devaluation.

Dissatisfied Venezuelans have begun to take control of their own destiny, though, and are reshaping their political landscape in an impressive and democratic manner to force the government to compromise. In recent months the balance of power in the National Assembly, Venezuela’s legislature, has nearly evened out between supporters of the administration and opposition. This is a healthy sign of checks and balances, signaling that the government will need to invest more time in discussion and negotiation prior to passing new legislation.

On every occasion Chavez’ adversaries have sought only peaceful means of protest, and they seek to remove the President from office within the framework of the country’s constitution. Opposition leaders will likely attempt to remove the President by a legally binding national referendum. Under the Constitution this cannot be called until January 2004.

Discontent among the armed forces has further galvanized Chavez’ growing list of opponents, but prospects for military revolt are extremely slim. In Venezuela’s modern history the military has generally respected civilian rule and taken a back seat role in politics, that is, until President Chavez was elected. The conditions surrounding military dissent thus far have lent further credence to the notion that Venezuelans are uniting against Chavez under democratic auspices.

"Some are talking about a Venezuela without Chavez. I don’t feel as though I’m indispensable," Chavez said when downplaying the significance of the opposition’s pact. "I’m one of those who believe that there are no indispensable people, but there are (indispensable) moments."

The President deserves ringing endorsement for ushering in constitutional reforms to overhaul Venezuela’s decrepit political institutions and for freeing the country from a 40-year grip of corrupt, two party politics. Chavez’ legitimacy has vanished, though, in large part because he has manipulated his constitutional license to become little more than an elected dictator.

President Chavez’ vision of democracy may be blurry, but Venezuelan society is using courageous and visibly democratic means to clear a path through the fog that temporarily engulfs it. When this fog lifts, Venezuela will emerge a wiser, mature nation.