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Caught between Chavez and Bush

Prepared by: Stephanie Hanson
January 18, 2007

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Venezuelan President Hugo Chavez jolted investors last week with a plan to nationalize (NYT) his country’s telecommunications and electricity industries, sending the Caracas stock exchange down 19 percent in a single day. Yet the move was just one in a series of recent measures to consolidate economic and political power in the hands of an increasingly bold Chavez. The nationalizations represent a “smokescreen” for his aggressive actions, says Wesleyan University’s Francisco R. Rodriguez in a CFR.org Podcast.

Over the past two weeks, Chavez has dismissed his moderate vice president, assumed control of the central bank, and announced the government will not renew the license of RCTV, the largest opposition-run television station. Oil-funded social programs helped Chavez sail to reelection in December, even as polls show Venezuelans do not want Cuban-style communism (Economist). The opposition—which boycotted 2005 legislative elections—has little ability to counteract Chavez’s consolidation.

Venezuela’s upheaval coincides with the ascension of two of Chavez’s regional allies—Ecuador’s Rafael Correa and Nicaragua’s Daniel Ortega. Analysts wonder if the two new presidents will follow in the footsteps of Chavez and Bolivian President Evo Morales, or hew closer to center-left leaders in Brazil and Chile, both of whom maintain amicable relations with the United States.

Latin America’s people have high expectations (Miami Herald) for economic change. This has certainly proven true in Bolivia, where President Evo Morales—after his risky gas nationalization gambit paid off—faced a five-month political stalemate over voting rules for the constitutional assembly. He backed down (AP) last week, but opposition protests continue in the central Bolivian city of Cochabamba. The Democracy Center’s Blog from Bolivia says the growing opposition will demand that Morales answer the question: “Who owns Bolivia’s mineral wealth and how can it be used to advance the future of the whole nation?”

Ecuador’s Correa hopes to revisit his nation’s constitution for possible amendment as well, a popular proposition, polls suggest. Yet protesters there have thrown out three presidents in the past ten years, leading many to say just staying in office will be Correa’s biggest challenge (McClatchy).

Correa and Ortega also will encounter tough fiscal realities. Neither can rely on the vast influx of oil wealth that Chavez uses to broker power at home and within the region. Correa speaks of prioritizing poverty reduction over servicing foreign debt, but how he plans to enact such a promise remains unclear. Most think Ortega will avoid Chavez-style economic reforms. “Any foreign investor that wants to see Daniel Ortega today is welcomed into his office,” regional expert Richard E. Feinberg told a recent CFR meeting.

Unfortunately for the United States, one of those investors is the Venezuelan government. A recently announced agreement with Nicaragua could amount to billions of dollars in aid and investment, reports the Financial Times. This is a far cry from the $175 million (PDF) the United States has promised Nicaragua through its Millennium Challenge Corporation. Washington can retain influence in Latin America by “attacking the root causes of inequality that fuel Chavez’s involvement in the affairs of fragile states,” says a recent Council Special report. It will now face a new competitor in its efforts: Iranian President Mahmoud Ahmadinejad (IRNA), fresh from a four-state trip to Venezuela, Bolivia, Ecuador, and Nicaragua, says he plans to prioritize boosting economic and cultural ties with the region.

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