Will Venezuela Be the Next Egypt?

With all eyes on Egypt and the Middle East, we may be forgetting an equally explosive situation in Latin America— Venezuela. Gone are the times of Hugo Chávez seeking to lead the Bolivarian movement and export 21st century socialism. After rounds of setbacks, his regime is just trying to avoid losing the December 2012 presidential elections.

Analysts have already begun planning for the various possible scenarios. What happens if Chávez loses? Would he cede power voluntarily? How much political strength would a government led by the opposition have? The answers to these crucial questions are not exactly encouraging.

Venezuela’s economy is in tatters and its nationalized enterprises are either stalled or operating at mid-speed. Yet, the expropriations continue. Every week, a new sector falls within the government’s sights. The last attack targeted players in the oil industry, who were blamed for their perfunctory exploratory success. There will undoubtedly be new sectors blamed for the failure of Chavez’s revolution. It is only a matter of time for Venezuela’s banking sector to suffer the same fate, considering that banks have been given the impossible task of increasing lending in an economy where the private sector shows little interest in borrowing.

In the political realm, Chávez decided to move forward with the extraordinary capacities granted by him through the Ley Habilitante voted at the 11th hour by the outgoing National Assembly. Chávez will be able to rule by decree until mid-2012 without much regard to the newly-elected National Assembly where the opposition holds slightly over 40 percent of the seats.

The Venezuelan people could use this situation as an opportunity to organize in the name of democracy. For example, student groups in Venezuelan universities protesting for education reform recently placed a lot of pressure on the regime, forcing the government to withdraw a university reform bill. But Chávez has announced that he will declare at least 20 new laws using his special powers. There is a danger that he might increase restrictions on the media and the Internet to further limit the already precarious freedoms of expression in Venezuela.

Despite those political maneuvers the poor economy may ultimately be the downfall of the regime. Stagnant income growth and soaring inflation will force the people of Venezuela to reduce their consumption and spending. Unemployment, inflation and a weaker currency will probably mean less support for the government in the months ahead.

The consensus among analysts is that Chávez and his regime will become more radical and undemocratic in reaction to popular protests. As Javier Corrales and Michael Penfold explain in Dragon in the Tropics: Hugo Chavez and the Political Economy of Revolution in Venezuela, Chávez knows how to manipulate institutions in order weaken the system of checks and balances under an aura of legality. He also knows how to use his control of the economy to alienate the private sector. Moreover, Chávez seems to have an innate ability to turn adverse situations into opportunities to consolidate his power, as was the case during the 2002 coup d’état and the 2003 strike that froze oil production and allowed him to seize full control of oil-giant PDVSA.

Chávez has also managed to keep the international community at a distance. Foreign aid from Venezuela granted to the countries of Petrocaribe, a Caribbean basin oil alliance to purchase oil on conditions of preferential payment, is 10 times larger than aid of the United States to these countries. As a result, this guarantees Chávez a veto capacity in inter-American organizations.

Delaying payments to Colombian exporters, and occasionally shutting the border altogether, has also forced Bogotá to tone down its opinions about the regime in Caracas. Oil contracts with large Spanish energy corporations have weakened the ability of the Spanish government to speak with a loud and independent voice regarding the attacks to the Venezuelan democracy.

But there are some positive signs as well. The Organization of American States (OAS) declared that the recent steps taken by the Venezuelan National Assembly violated the Inter-American Democratic Charter. This represents an important change from the past and shows that the international community is willing to act in response to Venezuela. How far can this reaction will go is yet to be seen. Which Latin American countries are going to stand up and ask the OAS for a fuller debate on what’s happening in Venezuela? Regrettably, there are not too many candidates.

Ultimately, the Venezuelan regime is weakened but not defeated. This is why analysts are weary of forming hasty conclusions. The Mesa Unidad will have to form a cohesive bloc in order to defeat Chávez. They will need to choose candidate early on among the several potential people with promise, including Henrique Capriles (governor of Miranda), Pablo Pérez (current governor of Zulia), and the former mayor of Chacao, Leopoldo López, who is still waiting on the Inter-American Court of Human Rights decision regarding his ban from participating in politics which was arbitrarily imposed by the regime in Caracas.

Even if Chávez were to be defeated in the 2012 presidential elections, he will probably continue to have major power and influence in the National Assembly. This means that the much needed reforms to the Venezuelan economy will take a long time to implement because they will likely be blocked by Chávez followers. A new constitution would probably need to be drafted, adding another round of elections and even more uncertainty.

It is imperative that the United States develop a comprehensive foreign policy strategy toward Venezuela. There has been some speculation by leading members of the U.S. Congress about the possibility of imposing economic sanctions. This will be a grave mistake. By turning Chávez into a hero among his people, Venezuela would become another Cuba at the expense of U.S. influence in the region. Therefore, it is much wiser for the U.S. to let the situation in Venezuela evolve on its own while the political opposition in the country consolidates. Active U.S. intervention would do nothing more than aggravate the problem. Instead, the United States should stand as an advocate for change through support for democracy and not through economic intervention that could further undermine the living standards of Venezuelans.