The decision of the Senate Foreign Relations Commission to approve Venezuela’s admission to Mercosur has brought the South American country very close to becoming a full member of the regional bloc. With the project having now passed through the Chamber, only Senate endorsement is required for Brazil to approve Venezuela’s membership, which should take place this week. Venezuela’s admission to the bloc has already been approved by the Argentine and Uruguayan Congresses. Paraguay is awaiting the Brazilian decision before voting on the membership protocol.

 

 

Despite the economic benefit of Venezuela’s presence in Mercosur for Brazilian companies, the personal style of the Venezuelan President, Hugo Chavez, raises cause for concern in the member countries.

 

 

Chavez’s political personality is the opposite of Lula’s, which stresses moderation. There are therefore fears that Chavez’s excessive nationalism will bring further challenges to Mercosur.

 

 

Venezuela’s conflicts with Colombia, for example, will demand a stance from Brazil, Argentina, Uruguay and Paraguay as soon as Chavez’s country becomes a full member of the regional bloc. There are also fears that Venezuela may prejudice negotiations for establishing a free trade accord between Mercosur and the European Union.

 

 

Supporters of Venezuela’s entry to the bloc believe in turn that Venezuelan political circumstances cannot be allowed to impede the entry of another country into Mercosur. Furthermore, they believe that leaving Hugo Chavez isolated would be much worse. Despite these arguments it is unlikely that Chavez will not use Mercosur as yet another political platform, as he has done with Alba (The Bolivarian Alliance for the Americas) and Unasur (The Union of South American Nations).

 

 

In Venezuela, the country’s admission to Mercosur is seen under a positive light. Even the mayor of Caracas, Antonio Ledezma, supports membership. The opposition expects that with the country’s admission to the bloc there will be greater regional pressure for the Chavez government to comply with democratic conditions. Although that pressure will initially be somewhat limited, it is better than allowing the Venezuelan president to act independently.

 

 

Despite these political elements, the more important impact of Venezuela’s entry into Mercosur will be economic, especially for Brazil. Last year’s Brazil’s trade balance with Venezuela amounted to US$ 5.7 billion, with a US$ 4.6 billion surplus for Brazil. Since 2007, Brazil has been the country’s second trading partner, behind only the USA, the main consumer of Venezuelan oil. Venezuela imports 70% of what it consumes, mostly from Colombia and the United States. It is therefore possible that Venezuela’s participation in Mercosur will strengthen the bloc’s GDP. It will also extend the bloc to northern South America, with influence in the Caribbean region and benefits for all States in northern Brazil.

 

 

Despite this optimism, Venezuela’s interests in Mercosur will be different from those of Brazil, Argentina, Uruguay and Paraguay. While those countries expect Venezuela to contribute economically to the bloc, Hugo Chavez must be relying on Mercosur to further strengthen his political influence in the region. These contradictory objectives should lead to Venezuela’s incorporation into Mercosur making little contribution to strengthening the bloc in the short term.

 

 

Several analysts and politicians believe that politicization of the bloc is the great negative aspect that will come with Venezuela’s admission. Despite Mercosur being relatively moribund, achieving much less than had been hoped when it was formed, it is still a commercial bloc. And although weak, Mercosur continues to have a commercial aspect, which prevents certain political disputes from being brought within its ambit. One recent example was the situation involving the Itaipu Plant. In this episode the disagreement between Brazil and Paraguay, together with its resolution – which often displayed aspects that were more political than financial – was confined to dialogue between the two.

 

 

Chavez has shown a history of politicizing every area. One clear recent example involves relations with Colombia. This long-term trading partnership with Venezuela was gradually set aside through the personal – and above all political – decisions of Chavez. The aim of exchanging food supply from Colombia with Brazilian and Argentine products is, in a way, retaliation against the Alvaro Uribe government for its political disagreement with Chavez. There are clearly in this case “two weights, two measures”. As soon as there is a commercial retaliation against a neighbor due to a politically opposing position (in that case North American bases in Colombia), there is an intervention in the affairs of another country. Foreign intervention is something totally rejected by Chavez.

 

 

There is a risk that purely commercial issues become the target of “gentle blackmail” for political will to prevail. It is worth recalling that through its president, Fernando Lugo, Paraguay has an “almost carnal” relationship with Venezuela. Just because the Paraguayan parliament has not yet approved Venezuela’s admission does not mean that Paraguay does not support Chavez. In Argentina, the Kirchners have shown that they “dance according to the tune”, and in this case it is Chavez who is closest to the couple’s hearts.

 

 

Within this scenario, should the bloc become politicized, it is possible that Paraguay, Venezuela and Argentina will always be united. Brazil might join the group or be always isolated with the tiny Uruguay. Another very interesting line of argument says that Venezuela is not Chavez and for that reason the country’s admission will be beneficial for the bloc and for Brazil. Except they have forgotten to tell Chavez, who has created a system in which State and government are fused together around his image. Chavez today represents the Venezuelan state, the Venezuelan government, the Venezuelan people (since he controls the National Assembly), the Armed Forces (since his personal forces are greater than the Army) and the Venezuelan press. There is no way of dealing with Venezuelan institutions without them being 100% infected by the personal wishes of Hugo Chavez.

 

 

Yet Venezuela is infinitely greater than Chavez. Its people and its history mean that the country will always be most welcome in any bloc of which Brazil is a member. However, this fusion between an individual who acts according to his mood and antiquated ideology and a country and its institutions brings no benefits to a bloc of which Brazil is a member. Brazil finds itself in interesting international ascendancy, but insists in believing that it can add value with Venezuela and Iran, for example.

 

 

Finally, there are those who just look at the figures. Businesspeople who deal directly with Venezuela are more than happy with its admission to Mercosur.  Yet one should not just look at the figures to justify admission of a country that violates human rights and freedom of the press. Does balance of trade have more value than the basic foundations of democracy? Should arithmetic ignore violations of democracy in another country? Some say yes, others say no. I do not believe that trade benefits are enough to justify disruption to day-to-day foreign policy and Brazilian trade policy. I believe that Brazil, within its stance towards global politics, should uphold certain basic values of democracy above a growth in balance of trade with a highly unstable country with no firm institutions.

The victory of “yes” over the “no” by 54% against 45% in the referendum on the amendment of unlimited re-election shows the consolidation of the so called “Socialism of the 21st century.”

 

Unlike 2007, when the same proposal was defeated, the government managed to control the agenda of the election. Using the popularity of Hugo Chávez, the allies of the president managed to turn the debate around the possible chaos that plunged the country if he had to leave power in 2012. A well-designed strategy was added to mobilize the United Socialist Party of Venezuela (PSUV), especially in the poorest regions of the country, left the opposition with little to do. 

 
From now on, Venezuela tends to move toward socialism. It is no coincidence that shortly after the confirmation of victory, Chávez said: “Today begins the third cycle of history, from 2009 to 2019. Open the door to the future to continue traveling the path of dignity and this path has no other name is socialism. “

Yesterday the Venezuelan people chose their fate in relation to their political leader. Now, if capable of using all his ability to convince the people and neutralize the opposition, Hugo Chavez will be able to remain for a long time ahead of the Venezuelan government. 

A democratic method was used for a non-democratic decision. Sounds paradoxal, but this is exactly what is happening in Venezuela. If for one side we see the flaws of the democratic system itself, on the other we see a general urge for educational development in the continent.

“A nation is worth by the culture of its people”, long said the Brazilian intellectual Miguel Couto, and this could not apply better to Latin America. Yesterday, years of lack of hope for the future was the key ingredient for Chavez`s victory. The blame for the possibility of an eternal president in Venezuela is not of the population, nor of Chavez himself. The one to blame is the Venezuelan elite, that for years drowned themselves in the the thick ponds of oil and could not think of the country as a country for all. 

Chavez, definately is not the solution, on the other hand, the opposition reflects the failure that enabled Chavez to become what he is. The poor population of Venezuela has nothing left, but to dream, and the one that offers the best illusions so far is Hugo Chavez.

The year of 2008 was not a good one for Venezuela. The government victory in most municipalities is far from representing absolute victory, much in contradiction to what president Hugo Chávez thinks and peddles. A careful observer will notice that strategic states, as well as the municipality of Caracas, ended up in the opposition’s control. For the first time ever the Venezuelan opposition showed signs of organization.

 

However, it is unlikely that Chávez will be more quiet and responsive in 2009 as he turned out to be in 2008.

 

Granted, falling oil prices somewhat softened Chávez’s tone of voice both home and out in the continent, but this hardly means that he will cease to brag about as before. It is anticipated that by the end of 2009 or beginning of 2010 a new referendum will be called, by which he will seek to remain in power through perpetual reelections. To cope with the economic crisis, Chávez relies upon a $70-billion fund in hopes to buy himself some time. In addition, the money the country lost that was invested in Lehman Brothers is but another sign of mismanagement and an ideological irony. Chávez, however, has nothing to be worried about; his personal money is invested in bonds of the U.S. government.

After the November 23 regional elections reduced the chance for a new constitutional reform, Venezuelan President, Hugo Chávez, is looking to Plan B, with his eye on the possibility of running for another term.

 

He requested the PSUV (United Socialist Party of Venezuela) to begin the necessary actions to amend the constitution that would allow him to run for unlimited reelection.  As constitutional reform is a slow process, the government strategy is to make the initiative viable by means of a constitutional amendment.

 

The argument being used by Chávez and his allies is that the future of the revolution is at stake. That is why the continuation of the current project is necessary. For this reason, the PSUV wants to make the changes possible through the National Assembly.

 

As Chávez has almost full support from the 167 members of the legislative power, it would be easier to win over the 30% of congress necessary to alter the constitution than to collect the signatures of 15% of the citizens registered in the electoral census, that is, 2,553,160 people.

 

The PSUV expects the discussion about the first amendment to take place in December, with the second to follow in January. The referendum will take place in February.

 

As the government has no alternative candidates to Hugo Chávez in facing the opposition, which showed a strong capacity for unity in the regional election, the PSUV will be relying on the constitutional change that would allow Chávez to run for another term.

 

If the government wins the referendum, the opposition will have a hard time constructing a name that carries the same political weight as that of the president.  They could only hope that the economic crisis makes the government impracticable. If, however, he is beaten, the possibility of losing the important quota of his constituency initiated in 2007 will become much clearer. 

The biggest mystery is getting to know what the relationship will be like between Barack Obama and the president of Venezuela, Hugo Chávez, who stated his preference for the Democrat during Obama’s campaign.  Different to Republicans, who have a confrontational stance in relation to the Venezuelan Head of State, Obama talks of sending a message of democratic values to Caracas, not through interventionism, but through means of cooperation.

 

Democrats believe that the mistakes made by the George W. Bush in the region gave ground to anti-democratic views expressed by Hugo Chávez in Venezuela. 

The president of Conindustria, the Venezuelan Industry Confederation, Eduardo Gómez Sigala, has said that the 15% inflation target set out by the government for 2009 is not compatible with the nation’s reality. In an interview with a local newspaper, he said that inflation will reach 35% by the end of the year. Therefore, it would be very difficult for the projected reduction to occur next year.

 

Sigala revealed that, based on the institution’s projections, Venezuela will keep relying on imports. He also questioned Finance Minister Ali Rodríguez Araque, who has projected a 6% economic growth for 2009.

 

He said that the manufacturing industry accumulates only a 3% expansion, whereas in 2007 it reached 7.5%. He also revealed that business people are convinced that the economic situation will get even more complicated and difficult by next year. According to him, growth will not be achieved unless domestic production is increased in all industries.

 

Respect to private ownership is also seen as fundamental by business people for the nation to recover. “While there is talk of investments, the government is questioning ownership rights”, said Sigala.

As the political success of the so-called “21^st century socialism” is associated to the expansion of oil exports in the latest years, international oil price drops may bring trouble to Venezuelan President Hugo Chávez. According to Financial Times, a question for those following Venezuelan politics is with which intensity oil price drops may jeopardize the nationalization-based economic model implemented in the nation.

 

Petroleum, which accounts for 95% of the country’s export income, finances half the State expenses. Thus, Chávez relies on such funds to keep his social programmes running and make up for the lack of private investment. Consequently, the Venezuelan Chief of State’s popularity depends on these programmes. According to think tank Ivad, Chávez approval rates have improved after an increase in expenses last month.

 

Financial Times quotes a presidential source as saying that basic social expenses (food, health, education) will not be reduced. If necessary, medium and long-term projects (less politically sensitive) will be diminished. 

Three engineers of the State Electric Power Company were arrested for “unjustifiable favoritism to sabotage” in the blackout which hit Venezuela last week, informed the prosecutor-general Luisa Ortega. According to sources, at press conference she said that an extensive investigation showed the responsibility of three officials from Edelca (Electrificación del Caroní). Adán Ramos, Honny Vasquez and Rodolfo Ortega, accused of “crimes of interruption of services and goods, favoring negligence to sabotage or damage,” were determined to be held at the Command of the National Guard.

Local entrepreneurs anticipate that local politics, specially in the economic area, will hurt because of the dismaying external scenario. Forecasts indicate that the financial crisis will reduce the influx of foreign currency from oil sales as a result of declining oil prices in international markets. This is likely to worsen Venezuela’s fiscal deficit.

 

In addition, local entrepreneurs anticipate a throttling supply of food in the domestic market. As if such scenario was not enough, data compiled by the Venezuelan Central Bank (BCV) show an annual inflation already at 21.8%.

 

This gloomy scenario has already caused grief in the local industry. In a recent survey launched by the Venezuelan Chemical and Petrochemical Industry Association (Asoquim), respondents stated that the industry’s production plunged by 40%.

 

The 100 companies comprising Asoquim evaluated that restricted access to foreign money, administrative bureaucracy and legal uncertainty all have negative implications on production.

 

With regard to export forecasts for the second semester, 50% of the respondents believe that exports will decrease, 27.3% said that exports will improve and 22.7% stated that export performance will remain the same. A vigilant observer of this new international environment, president Hugo Chávez has called the financial system a target and locked on it.

 

According to the Venezuelan leader, the International Monetary Fund (IMF) is to be blamed for the crisis. For that reason, says Chávez, the IMF should “dissolve itself”. 

 
Welcome! Latin America is becoming consistently more important for the world. As the region becomes more stable, the world sees Latin America as a potential business area. In order to understand te potential Latin America has to offer, the world must understand the unique dynamics that the local politics function. This blog already exists in Portuguese since 2005 and is widely read. I believe it can be an important instrument to understand this amazing region. Suggestions, criticisms and opinions are welcome. + learn more

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