The bill for years of mismanagement has come due just as crucial elections loom. The president’s response has been to start locking up opponents.

From Parque Central station in Caracas a cable car silently speeds workers, residents and schoolchildren up the hill to Hornos de Cal and then down again to San Agustín, connecting these areas of self-built slum housing to the city’s metro system. The bright-red cars bear the names of Venezuelan states or of uplifting notions, such as “social duty” or “socialist morality”. Hugo Chávez, Venezuela’s leftist president, opened the metrocablein January, proclaiming: “A socialist revolution has the essential aim of giving to all men and women the greatest possible happiness.”

The metrocable, of just 1.8km, took three years to build and cost $318m—over ten times as much as a longer line opened in Medellín, in Colombia, in 2004. But the local leaders of communal councils—the grassroots groups that Mr Chávez conceives as the driving force of his “Bolivarian revolution”—are indeed happy. “I never thought we would have such a big project in my community,” said María Eugenia Ramírez. “I thought it was just a dream.” Ms Ramírez now has a paid job informing passengers how the system works.

The metrocable is not the only improvement Mr Chávez has brought to San Agustín. Near Hornos de Cal station there is a primary health post, staffed by Cuban doctors, though it is open only in the morning, and a second-tier health clinic, complete with an intensive-care unit. Some of the shacks on the hillsides have had a recent coat of paint, in the regulation colours of another government project (red, yellow, blue or pink). Others were knocked down to make way for the lavish metrocable stations. Their residents were rehoused in new blocks of flats built by Misión Hábitat, yet another government scheme.

The communal councils—there are 27 of them in San Agustín, one for every 500 families or so—have given people “a sense of belonging”, says Ms Ramírez. Each council has half-a-dozen subcommittees and a wish-list of projects, ranging from football pitches to the installation of sewage systems or walls to prevent mudslides. Ms Ramírez and her fellow leaders say that it is often hard to get residents to attend council meetings, and to get ministries to respond to their needs. Nevertheless, she remains a committed supporter of Mr Chávez. “I like his message and the firm way he gives it,” she says.

For five years or so—after he saw off a brief coup in 2002 and then survived a prolonged general strike—this formula of lavish social programmes and make-work schemes in poorer areas, as well as an unequalled ability to communicate with ordinary Venezuelans, served Mr Chávez well. When he was first elected in 1998, the price of oil, Venezuela’s main export, was around $10.50 per barrel. As the price soared, he benefited from a huge windfall. Public spending increased massively. Much money went on subsidies, state job-creation schemes and social programmes, many of them designed by Cuban advisers. As the economy boomed, the share of Venezuelans living in poverty fell from 49.4% in 1999 to 27.6% in 2008, according to the United Nations Economic Commission for Latin America.

By contrast, the opposition’s shortcomings had been cruelly exposed when it governed in an era of low oil prices in the 1980s and 1990s. Because ordinary Venezuelans felt a rapport with Mr Chávez, they did not blame him for the steady rise in violent crime which has turned Caracas into the most violent capital in South America, nor for the corruption that has flourished unchecked under his rule.

Mr Chávez’s star reached its apogee in a presidential election in 2006, when he easily won another six-year term. He gained 63% of the vote; Manuel Rosales, for the opposition, managed only 37%. Mr Chávez took this as a green light for radicalisation. In the first seven years of his rule he behaved like a traditional Latin American populist caudillo, such as Argentina’s Juan Perón. (Like Perón, Mr Chávez is a former army officer turned civilian politician; he himself led a failed military coup against a democratic government in 1992.) From 2007 onwards, Mr Chávez has claimed to be installing “21st-century socialism”.

Two setbacks followed: he narrowly lost a referendum on constitutional reforms that, on paper, would have taken Venezuela close to Cuban-style communism; and in regional elections in 2008 the opposition recovered to win 46.5% of the vote and important mayoralties, such as Caracas. Mr Chávez fought back, calling and winning another, narrower, referendum early in 2009 abolishing term limits.

From boom to slump

But for the time being the Bolivarian revolution (named after Simón Bolívar, South America’s independence hero) faces unprecedented difficulties. Everyday life is getting harder for Venezuelans. While the rest of Latin America is recovering strongly from the world recession, Venezuela is slumped in stagflation. The boom came to an abrupt end when the oil price plunged in the later months of 2008. Although it has since risen again strongly, Venezuela’s economy has not (see chart). Mr Chávez last month accepted that it “could” shrink again this year, confounding earlier official forecasts of growth. The IMF projects a contraction of Venezuela’s GDP of 2.6% this year, after a fall of 3.3% last year. By March, average wages (allowing for inflation) were 15% below their peak of 2007.

In January Mr Chávez unexpectedly ordered a devaluation, after five years in which the bolívar had been officially fixed at 2.15 to the dollar. Under a new multiple exchange-rate system, priority imports of food and medicine are paid for at 2.60, with 4.30 for other officially authorised imports and a “parallel” (ie, market) rate for the rest (now around eight bolívares to the dollar). This will increase inflation, which is now over 30%—prices shot up by 5.2% in April alone. But it provides a temporary boost to the state’s finances, since hard-currency revenue from oil exports instantly became worth twice as much in bolívares. And that gives Mr Chávez the chance to throw money around: pay rises for the army, for example.

The short-term fix of devaluation only underlines the deterioration in the economy. That recession has become slump is mainly the result of years of government mismanagement. The problems start with PDVSA, the national oil company, which Mr Chávez has turned into a social-development agency. Not only is its budget raided for social projects; it has also set up subsidiaries to produce, import and distribute food. More than 100,000 people are now on PDVSA’s payroll, up from 37,942 when the government seized control of the company after the 2003 strike. But oil output has fallen, from a peak of 3.5m barrels per day in 1998 to perhaps around 2.8m now, reckons Tamara Herrera of the Venezuela office of Global Source Partners, a consultancy. That is less than the government says, but more than OPEC calculates.

Venezuela is still sitting on 100 billion barrels of oil, the largest reserves outside the Middle East, according to research by BP, a British oil company. Having scrapped deals under which multinational oil companies partnered PDVSA, Mr Chávez has this year signed contracts with China and Russia for investment in the Orinoco heavy-oil belt. These could boost production in the next few years. But it is unclear how much cash will in fact be invested.

The private sector is increasingly persecuted. Since the 2006 election Mr Chávez has nationalised the main telecoms, steel and cement companies, the Caracas electricity distributor, and a string of oil-service and food companies. The latest is Exito, a Franco-Colombian chain of hypermarkets taken over in January. Other private firms have faced more aggressive regulation, including price controls and difficulties in getting dollars for imports. Unsurprisingly, few are investing. Many of the nationalised firms are poorly run.

The most dramatic sign of government bungling is electricity rationing. Since the start of the year many towns and cities have suffered daily power cuts of two hours or more, as well as unscheduled blackouts that sometimes last several times as long. Mr Chávez has spared the capital power cuts, apparently out of fear of social unrest. Instead, businesses and homes must reduce their electricity use by 20% on pain of higher charges or loss of supply. Many government departments close in the afternoons to save power.

Mr Chávez rightly points out that the immediate cause of the electricity rationing is a severe drought brought about by the El Niño weather pattern. This has cut output at three hydroelectric dams on the Caroní river in the south-east. But, in past droughts, thermoelectric plants came to the rescue. The difference is that Venezuela now depends on hydroelectricity for around 70% of its power, and most of that comes from the vast Guri dam.

The president claims that his government has invested $16.5 billion in electricity generation since 2002. But thermal generation capacity has barely risen. According to Víctor Poleo, a former official in the energy ministry, only a fraction of the money has actually been spent. He blames the rationing in large measure on “the misappropriation of funds.” The biggest thermal plant—Planta Centro at Morón, on the Caribbean coast—is in bad shape. Only two of its five generators actually produce electricity. The national grid is so rickety that it would in any case be unable to cope were the power stations to produce at full capacity. Lack of gas (due partly to lower oil production) means new thermal stations will have to run on fuel oil or diesel, cutting PDVSA’s export earnings.

As the water level in Guri’s reservoir dropped perilously close to the point at which the plant would have to be shut down, opposition politicians warned that the country faced “collapse”. Mr Chávez responded in March that it would rain “because God is Bolivarian”. Maybe so; for it began to rain in April, and the threat of a total shutdown of Guri seems to be receding. The government is now scurrying to increase thermal generation, but electricity supply will not get back to normal before the end of the year, concedes Roy Daza, a member of the National Assembly for the ruling United Socialist Party of Venezuela (PSUV). Much economic damage has already been inflicted. State-owned iron, steel and aluminium plants in the Guayana region have cut output—by 37% in the case of Venalum, an aluminium producer.

State harassment

Not surprisingly, all these problems have taken a toll on Mr Chávez’s popularity. According to Luis Vicente León of Datanálisis, a polling firm, the president’s approval rating fell from around 60% in February 2009 to 43% a year later—its lowest level since 2003. For the first time since then slightly more people say they identify with the opposition than with Mr Chávez, though 45% support neither side. Awkwardly for the president, this comes as he faces legislative elections on September 26th. In a normal democracy the opposition might be expected to cruise to a majority in the National Assembly. But Venezuela is not a normal democracy.

The opposition chose to boycott the previous election for the National Assembly, in 2005. It now recognises that was a costly mistake. Even before that, Mr Chávez had seized control of the courts. Since then he has been able to pass laws almost at will. The result, in the careful prose of a recent report by the Inter-American Commission on Human Rights, is “the absence of due separation and independence between the branches of government in Venezuela”. It notes that more than half of judges lack tenure, and so can easily be removed if they rule against the government. The commission says that “the state’s punitive power is being used to intimidate or punish people on account of their political opinions.” And it adds that harassment and intimidation of journalists and media outlets have restricted freedom of speech. The government’s response to all these criticisms is that the courts are independent and that the Inter-American commission is biased.

Before the regional elections 260 candidates (nearly all from the opposition) were arbitrarily disqualified. Several prominent opposition figures have faced criminal charges. This month General Raúl Baduel, a former army commander who restored Mr Chávez to power after the 2002 coup, was jailed for eight years for corruption—charges he denounced as politically inspired. Mr Rosales has also been charged with corruption and is in exile in Peru. In March Oswaldo Álvarez Paz, a former opposition governor, was jailed and Guillermo Zuloaga, the manager of Globovisión, the last remaining opposition TV station, was charged, both for making critical comments about the president. Scores of radio stations sympathetic to the opposition have had their licences cancelled.

Other kinds of opponents face bullying. Óscar García Mendoza, a banker who is critical of the government, was hauled off for six hours of questioning after he launched a campaign to defend private property last year. Cecilia García, the rector of the Central University in Caracas, told El Universal, a newspaper, that the university has suffered more than 20 violent attacks since late 2008, and the powerful student movement that has emerged to defend democracy faces intimidation either from the police or from chavista gangs.

After the opposition’s strong performance in the 2008 regional elections, Mr Chávez curbed local government. In some cases this was done crudely. Antonio Ledezma, who was elected as mayor of Caracas, found his offices occupied by chavista activists, and most of his functions transferred to a government-appointed official. Much the same has happened to the state governor of Táchira. All state governors, whether chavista or from the opposition, have lost powers and money to the centre on the one hand, and to the communal councils on the other. A decree of March 2009 stripped state governments of responsibility for ports, airports and roads.

Pablo Pérez, opposition governor of the western state of Zulia, says that his budget has been cut by a third in real terms. His administration was building a motorway from Maracaibo, the state capital and Venezuela’s second city, eastward towards Caracas. This now ends abruptly after 30km. The only thing the government has done is abolish the tolls on the motorway.

Mr Pérez, a young lawyer, is one of a new breed of opposition leaders. They are more pragmatic, and less identified with the discredited pork-barrel politics of the pre-Chávez era. After years of squabbling, the opposition has also made a big effort to unite for the legislative election. This month it used primaries to put the finishing touches to a single slate of candidates.

Motherland, socialism or death

Unusually, chavismo now looks more divided than its opponents. In February Henry Falcón, the popular chavista governor of Lara state, left the ruling PSUV. Mr Falcón objects to the centralisation of power and to the arbitrary expropriation of an industrial site in his state.

His defection points to tensions within chavismo. One is between social democrats, such as Mr Falcón, who defend the constitution, and authoritarian socialists who are happy to ride roughshod over it. Another is between civilian leftist idealists and the “boligarchs”—a group of leading chavistas, many of them former army officers, who have profited from Mr Chávez’s rule and from his government’s corruption. Such tensions may grow if money remains scarce in Venezuela. Mr León, the pollster, points out that Mr Chávez is trying to change “an instrumental relationship with the masses”—based on handouts and economic growth—into an ideological one.

Government buildings are now adorned withPatria, socialismo o muerte (“Motherland, socialism or death”), adapted from a slogan coined by Fidel Castro in the early years of the Cuban revolution half a century ago. Last month Mr Chávez presided over a parade by some 35,000 members of a militia he has organised, and called on them to defend his revolution with their lives if necessary. In the penumbra of chavismo, there are several small armed ultra-left groups of more or less lumpen character.

All this may intimidate, but it also alienates. “Venezuelans are naturally left-of-centre,” says Ibsen Martínez, a novelist and writer of soap operas. “They think the state should do a lot, because it has lots of oil money, and because they are egalitarian. But they don’t like confrontation or threats to everyone getting along together.”

Mr Chávez’s authoritarianism is carefully calibrated. “This isn’t a conventional dictatorship,” says Teodoro Petkoff, a newspaper editor who was a guerrilla leader in the 1960s, founded a socialist party and is now an opponent of Mr Chávez. “It’s an authoritarian government with a strong military element that doesn’t hide its intentions to control society behind a democratic façade.” But public opinion still matters, he adds, and society holds strong democratic values.

So it is hard for Mr Chávez to dispense with elections, or openly rig them. But the government will use “all manner of tricks” to sway the legislative ballot, says Eduardo Semtei, a former member of the electoral authority who is also a former chavista. These include exploiting the resources of the state, the captive vote of 2.8m public employees (in an electorate of 17.5m), the possible disqualification of opponents and, already, a change in the electoral rules and boundaries that favours the PSUV. On top of that, Mr Chávez is a formidable campaigner, and he has his war-chest of devalued bolívares at the ready.

The opposition also faces obstacles of its own making. “There are a lot of discontentedchavistas but they don’t come over to us because they are sceptical of the opposition,” admits Mr Pérez, the governor of Zulia. “To rebuild the country we need that chavistaworld.” All this means the opposition may not win a legislative majority in September. But if it can offer a positive alternative to Mr Chávez’s gradual destruction of his country, it will knock a large dent in his near-monopoly of power.

Source: The Economist (UK)