Chávez Races to Hold Off Economic Catastrophe Before Referendum in Venezuela

Venezuelan President Hugo Chávez (image: AFP/Getty via Telegraph.co.uk)

Hugo Chávez, the autocratic and loudly anti-American president of Venezuela, is on the verge of securing his position as head of state indefinitely, unless the effects of falling oil prices foil his plans.  On Sunday, the people of Venezuela will vote on a referendum that Chávez called in which they will endorse or reject his proposal to remove term limits on all elected positions in the country, including the presidency.  Chávez has been campaigning aggressively in favor of the referendum, and the vote is expected to be extremely close, according to the British news source Telegraph.co.uk.

Chávez is continuing his efforts to fend off a protracted economic crisis in his country brought about by low oil prices, hoping to maintain his popularity long enough to bring about a victory in Sunday’s referendum.  With government revenues evaporating as oil prices remain in the gutter, Chávez has used $12 billion of Venezuela’s foreign currency reserves (a third of the nation’s total reserves) to maintain social programs such as food giveaways and free healthcare that have kept his popularity relatively high.  At the same time, dire circumstances such as food shortages, huge inflation, and rising crime rates are hurting Chávez’s popularity and damaging the prospect of the referendum’s passage.  Chávez has spent billions of Venezuela’s considerable oil revenues to secure his power domestically and internationally by enacting huge social programs at home and donating oil and other resources to friendly leftist regimes in Cuba, Bolivia, and Nicaragua.  In what might be his best-known public relations coup, Chávez has sent $400 million worth of free or discounted heating oil to needy families in the U.S., his declared political enemy and “imperialist” scapegoat for many of Latin America’s ills.

But he may be wishing he had kept more of that money at home, as low oil prices have decimated his country’s economy in recent months.  The nation’s 2009 budget is based on oil prices of $60 a barrel, almost double the current market price of crude.  To make matters worse, Venezuela is also producing less oil than planned, missing a target of 3.6 million barrels per day by over a million barrels.  These problems have put the once-mighty national oil company, Petróleos de Venezuela, S.A. $8 billion dollars in debt, forcing layoffs.

As the day of the vote approaches, pro- and anti-referendum groups have clashed violently on the streets of Caracas, the capital city, underscoring the intense feelings surrounding the term limits issue.  While most economic experts emphasize the severity of Venezuela’s economic problems that are a direct result of Chávez’s aggressive spending and low oil prices, poor citizens remain loyal to the President who has provided them with free food, services, and other lifestyle improvements.  The desperate state of affairs and divided electorate in the country have intensified fears that Chávez may resort to illicit tactics to ensure the referendum’s passage.

Whatever happens, Sunday’s vote will be a crucial historical moment in the history of Venezuela and Latin America, as well as a key development that will influence the tenor of U.S.-Venezuelan relations for years to come.  Win or lose, Chávez will remain president until 2012, and will most likely continue his signature combination of combative language with giveaways to the poor all over the western hemisphere.