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Dec 15, 2015 | 08:56 GMT

Seeking Venezuela's Future in Barrio 23 de Enero

VP of Global Analysis, Stratfor
Reva Goujon
VP of Global Analysis, Stratfor
A general view shows the concrete superblocks in Barrio 23 de Enero in Caracas.
(ALEXIS CARMONA (PROPIO)/Wikimedia Commons)

The heart of Venezuela beats loudly in Barrio 23 de Enero. In this low-income neighborhood of Caracas, long concrete superblocks containing thousands of housing units tower above the streets, their peeling facades of teal, yellow, orange and blue speckling the skyline. In the mid-20th century, when Venezuela's oil economy drove rapid urbanization and European postwar modernist architects extolled the virtues of class-neutral social housing, the military dictatorship of Gen. Marcos Perez Jimenez commissioned architect Carlos Raul Villanueva to address Venezuela's growing housing challenge. Villanueva's blueprints borrowed from Swiss-French architect Le Corbusier's Soviet-inspired Unite d'Habitation communal housing experiment in Marseille. What resulted was not a utopian community that erased the cleavages between the lower and middle classes but a densely populated ghetto where a revolutionary spirit took root.

The superblocks were one of many public works projects into which the corrupt Perez Jimenez poured Venezuela's petrodollars in hopes of pacifying its restless populace. The government named the neighborhood 2 de Diciembre to commemorate the day Perez Jimenez came to power and the progress he claimed to have brought to Venezuela. When Perez Jimenez fled the country following a civilian-military uprising in 1958, 2 de Diciembre was renamed 23 de Enero to commemorate the day Venezuela's last dictator was overthrown and democracy took hold.

23 de Enero has since borne the scars of Venezuela's most severe political transitions. In the 1980s, it produced the powerful Revolutionary Tupamaros Movement, an urban guerrilla group that formed a strategic alliance in prison with former President Hugo Chavez following his failed 1992 military coup. Now, the Tupamaros group is a national movement and one of Venezuela's many colectivos, left-wing armed groups that operate on the streets of Caracas. Members of the group consider themselves the guardians of Chavez's social revolution and are prepared to defend their turf in 23 de Enero at all costs, even if that means going after core chavistas who have allegedly corrupted the revolution.

In February 1989, 23 de Enero was the scene of the Caracazo, a wave of violent protests and crackdowns. A steep decline in oil prices in the 1980s led Venezuela's two dominant right-wing parties — the Christian Democratic Party and Democratic Action — to a desperate attempt to follow an International Monetary Fund plan to devalue the country's currency and liberalize the economy, leaving Venezuela's poorest citizens to suffer the consequences. Carlos Andres Perez came to power in 1989 pledging to end the austerity measures. Unable to cope with the economic pressures, however, he reversed his position, raising prices on oil and electricity by 100 percent, eliminating import taxes and privatizing several state-owned companies. Between 300 and 3,000 Venezuelans died in the popular uprising that followed.

23 de Enero was also the foundation of chavismo — Chavez's leftist populism, a direct reaction to the neoliberal policies that fueled the Caracazo. This is where the Cuartel de la Montana stands, an old fort where Chavez hid out while directing a coup against the Perez government in 1992. The coup failed, but when Chavez was released from jail and then elected president six years later, he enshrined the fort with a giant sign that read "4F" to commemorate the date of the failed coup, the fourth of February. The fort ended up being Chavez's final resting place and has been converted into a mausoleum and museum in memory of the Comandante.

Ironically, 23 de Enero is also where chavismo died. On Dec. 6, voters in Venezuela's poorest districts voted overwhelmingly against the ruling United Socialist Party of Venezuela (PSUV) and gave the opposition a landslide victory, ushering in what is sure to be a volatile transition away from the era of the chavistas.

A Vote Against Chavismo

The Dec. 6 election was not a vote for Venezuela's main opposition coalition, which is bound together by little more than its opposition to chavismo. It was a punitive vote against the inheritors of Chavez's social experiment. There is no real mystery behind the loss. Government officials and entrepreneurs positioned to exploit the country's multi-tiered currency exchange rate and subsidy system have created enormous distortions in the economy. After a decade of record-high oil prices fueling populist agendas, low oil prices over the past year have crippled the country's finances. (Venezuela relies on oil exports for 96 percent of its hard currency and for 40-45 percent of the federal budget.) Violent crime has skyrocketed, and this year inflation is expected to reach nearly 200 percent while the economy is expected to contract by 10 percent. Because the government has prioritized debt repayments amid declining oil revenues, fewer dollars have been left to fund imports, and large-scale hoarding has created massive shortages of basic goods, such as toilet paper and milk, exacerbated by bachaqueros — traders who arbitrage between government price controls and the black market to sell goods and turn a profit. Moreover, there is no charismatic leader to maintain the mystique around the Bolivarian revolution. Chavismo without Chavez is one thing, but chavismo without a healthy supply of petrodollars is another.

Chavismo without Chavez is one thing, but chavismo without a healthy supply of petrodollars is another.

Those Venezuelans who spent hours upon hours standing in lines outside markets under the watch of armed guards had a lot of time on their hands to imagine a different life under a government other than the PSUV. Their votes evidently went to the Venezuelan umbrella group the Democratic Unity Roundtable, which collectively holds a 112-member supermajority in parliament and won the election by about 2 million votes. With that power, a unified opposition vote can recall the president in a referendum by mid-2016, remove Cabinet ministers and supreme court justices, overturn presidential vetoes, and abrogate international treaties, effectively cutting the legs out from the government of embattled President Nicolas Maduro.

A Test for Venezuela's Institutions

Given the possibility that the election could lead to a worst-case scenario for the chavista political elite, many speculated that the vote would be called off or the results annulled altogether. Venezuela's political institutions may be battered after years of chavismo, but they did hold up at a crucial inflection point for the country. A rumor circulated in the wake of the vote that a dispute broke out between Venezuelan Defense Minister Vladimir Padrino Lopez and National Assembly President Diosdado Cabello over the latter's attempt to rig the result and preserve the PSUV's control over the National Assembly. What was remarkable about this story was that Cabello, who has long used his leverage with factions of the military to protect his own interests, was exposed. Instead of allowing Cabello to use the military to insulate himself, Padrino Lopez defended the military as an institution of the state and refused to engage in electoral fraud. The defense minister's decision made sense, given that the military would have had to deal with the expected riots should the election results have gone unrecognized.

The question is whether Venezuela's political institutions will hold together in this new phase of the country's political history. There is a tendency in the West to look at the populist governments in Latin America that have prevailed in the past decade through a neoliberal lens and criticize them for not responsibly managing their economies. But if we recall the violence of the Caracazo and combine that memory with years of high oil prices to buoy spending in the name of oppressed peoples, the rise of chavismo is an entirely logical evolution. The defeat of the PSUV in the Dec. 6 election does not point to an immediate and sharp turn to the right under an empowered opposition capable of saving the country with sounder economic policies. In fact, much darker days are likely in store for Venezuela as it undergoes this transition.

Political gridlock and fragmentation will define the coming months in Venezuela, leaving little room for painful and inevitable economic reform. Divisions within both the PSUV and the Democratic Unity Roundtable will grow as some members lean toward negotiating with their political adversaries while more hawkish elements try to dig their heels in for a confrontation. It should be borne in mind that several members of the PSUV elite, including Cabello, Aragua state Gov. Tareck El Aissami and national guard chief Nestor Reverol, face potential prosecution and extradition to the United States on drug-trafficking charges should they lose political office. For those PSUV elites trying to strike deals with the opposition and with Washington, these wanted officials could be valuable bargaining chips. That said, there is no guarantee that any of them would go quietly.

As low oil prices continue driving inflation, the government will try to compensate for a shortfall in hard currency by cutting imports. This will exacerbate the shortages while the threat of default persists. As Venezuela is forced to unknot 15 years of foreign exchange controls and economic distortions, waves of social unrest can be expected.

This presents a formidable challenge for the Venezuelan military. Chavez understood the power of the armed forces but never fully trusted them. As an insurance policy for his revolution and his government, Chavez imported Cuban intelligence operatives to keep tabs on his colleagues and strengthened colectivos to act as an auxiliary security arm of the state. The idea was that anyone contemplating an uprising from within the armed forces would not be willing to deal with hordes of gunmen on the streets. During the current political transition, the colectivos could hold considerable sway with both the PSUV elite and the opposition leadership simply because they could create chaos that no one wants to be responsible for cleaning up.

Mariano Picon Salas, one of Venezuela's most celebrated writers and intellectuals of the 20th century, had an obsession with maps and an incredible knack for capturing the soul of Venezuela during its most transformative times. In summarizing his native country, Salas encouraged his readers not to reduce the history of Venezuela to a simple alternation between dark days and glory days. He urged his countrymen to undergo a deeper introspection and examine their "battered souls." This critique is reflected in a number of Venezuelan artworks that lament the country's tendency to search for quick and magical solutions to its problems — a condition driven at least in part by Venezuela's oil riches. Venezuela's emerging and deeply divided leadership may or may not take this advice to heart. As Salas put it, "To invent the future, we must rethink the past." Given its role in the fall of a dictator, the violence of the Caracazo, Chavez's revolution and the frustration that led to the Dec. 6 vote, 23 de Enero will be the place to watch for the first signs of convulsion as Venezuela enters a new and unavoidably tumultuous phase.

Reva Goujon is a leading global strategic analyst who keeps her finger on the pulse of emerging trends across the world. Ms. Goujon leads Stratfor's team of analysts and plays an integral role in applying a forward-looking, strategic lens to Stratfor's coverage of global events. She is also a prominent speaker, regularly addressing executives and investors at events across the world in a variety of industries, including energy, finance, commercial real estate and agriculture.
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