Tense Week in Caracas

Chavez and the Sheikhs

It is Wednesday and all is quiet on the Western front; the Eastern front is quite another matter. Caracas, the divided city, is in a state of suspended animation; the silence eerie, the tension tangible. The black market still functions as do the city transport systems but there are many unexplained closures, many phones left unanswered. Though the army and police are in full force, anarchy is evident in the streets. The system is falling apart at the seams. Opposing factions: the affluent anti-Chavez people in Caracas’ Eastern suburbs and the Bolivarian circles in the slums are preparing for a showdown. In a matter of days the die will be cast.

Last month the Chavez government finally gave in to intense global pressure and allowed a third phase of the Presidential recall process to take place. On Sunday, the polls closed after three days of ‘signature repair’. It is hoped that this will be the last step in a prolonged signature collection procedure. The world will know tomorrow whether the Venezuelan people will have a chance to choose an alternative to Chavez before his Presidential term is complete.

This week I visited a consular office in the Commercial Centre of the Caracas Municipality of Tamano (the CCCT). The office has an excellent view of the military runways below in the Miranda Aerodrome. Once a civilian airport, Miranda is now exclusively in government use. As we spoke, we both cast a wary eye over his shoulder as the jet engines roared below. The conversation revolved round the oil economy of Venezuela; as an economist with over thirty years experience in Venezuela, he said things had never been worse.

The nationalized government oil company the Petróleos de Venezuela (Pvdsa) was recently run by military ex-General Guaicaipuro Lameda Montero . In the recent strike thousands were sacked from their posts in the Pvdsa, replaced with loyal Chavez people. The new regime is tasked with running an industry responsible for thirty billion dollars worth of business annually (at last year’s prices). The challenge has proven immense and the strain is showing; the Pvdsa is a shambles held together by expensive international contractors including Schlumberger and Halliburton. As the New York markets pushes the price of crude to an all time high of $42 a barrel the Caracas downtown looks almost as rundown as Detroit. Where are the $30 Billions in nationalized oil-revenues being spent?

Just this week Chavez donated “about eight” Venezuela air force trainer planes to the new Bolivian government. Meanwhile the city slums encroach and subsume much of downtown Caracas. High rise nineteen seventies boom-time architecture lie partially or totally vacant. The currency markets are voting with their pocketbooks offering a 50% premium for convertible currencies such as USD or Euros. The government is debating making such currency exchange illegal. Two dollar exchange rates are published in the daily newspapers “El Nacional” for both dollars and Euros there is an official and a CANTV rate. The so-called CANTV rate is more than 3000 Venezuela Bolivars to the US dollar, the official rate about 1900.

CANTV is the state phone company. Its stocks list locally on the Caracas Stock Exchange and also lists on the NYSE as Alternative Deposit Receipts (ADRs). Such a listing is not unusual, many non-US firms use ADR’s as a mechanism to increase the liquidity of their public stock. However, what is unusual is the pricing variations seen in CANTV stock. Protective exchange controls have pumped the value of CANTV stock to unreasonable highs as Venezuelan’s buy the stock in Bolivars locally and sell the ADR’s in New York for hard dollars. In the process, the dollars bought at an apparent loss reflecting the discrepancy in the official and the black market currency exchanges.

The CNE (Venezuelan voting commission) has been under strict international scrutiny for this third phase of the long, drawn out recall campaign. When the polls closed Sunday night, international overseers such as the Carter Foundation pronounced the unusually democratic process of vote repair valid and above board. The CNE had found many votes questionable in previous rounds, vote repair offered those whose votes had been discounted a last chance to prove them valid. If the CNE counts enough valid signatures, the recall referendum will go ahead soon. This will offer the Venezuelan nation a chance to decide whether Chavez should complete his six-year term as President. He may find himself in the shoes of Californian ex-Governor Gray Davis, replaced by a populist right-winger. Then again, he may not!

The real intention of the anti-Chavez camp is unclear. Even if the opposition manages to activate the referendum, it is quite possible Chavez might win. It is difficult to select a credible popular presidential candidate. One theory is that that this long, drawn out campaign is about buying time to prepare for a second coup attempt (for both sides). Chavez has been putting by an extraordinary war chest, his opposition include some of the richest people in South America.

Chavez claims that insurgent guerrillas have already infiltrated from neighboring Colombia preparing for a second coup. These claims have yet to be proven false. The newspapers print photographs of the group allegedly captured in the ranch of a leading contra personality. The government presented a stool pigeon who testified about covert meetings of contra leaders in the Country Club city park in central Caracas. Government troops have searched the houses of leading luminaries of the right and rich industrialists. The accusations of human rights abuses are serving only to further polarize this extremely polarized society. As the population awaits the results of the final count tomorrow tensions mount. Venezuela may have a referendum or, as seems equally likely, they may not. Either way what might Chavez face during the rest of his term if he continues with his populist Bolivarian revolution? Assassination? An external threat backed by powerful internal elements possibly utilizing those new tanks just purchased by the Colombian army? Or, is the US government about to open another front in its global oil wars — this time lead by Southern Command?

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