MercoPress. South Atlantic News Agency

Hugo Chávez tightens the state's grip on politics and the economy

The autocrat of Caracas

Last July 31st. Venezuelan president Hugo Chavez extraordinary powers came to an end but it was also a day of great announcements. Twenty six decrees were signed including several of the autocratic reforms the former paratrooper wanted to impose with a referendum last December and were decisively rejected by voters. This is interpreted as a strategy to help contain the country's inflation, shortages and economic disarray in anticipation of the coming city and state elections of November plus. A piece from The Economist summarizes the evolution of the eclectic leader who is loosing much of his allure in spite of the affluence from oil revenues.

FOR much of the past eight months, since suffering defeat in a referendum on changing the constitution, Hugo Chávez has seemed to be on the defensive. Abroad, he repaired strained relations with Colombia's president and with Spain's King Juan Carlos. At home, he back-pedaled on unpopular measures, such as a new socialist educational curriculum and a draconian intelligence law. He met local businessmen in June and urged them to invest, in the hope that increased production would damp inflation of over 30%. But with Mr Chávez moderation rarely lasts, and he has now veered left again. On July 31st he announced that the government would buy the country's third-biggest bank, Banco de Venezuela, owned by Spain's Grupo Santander. Days later, the government published 26 decrees, many of which mimic the constitutional changes rejected in the referendum. Some of them will further tighten the state's stranglehold on the economy. This has been growing stronger since Mr Chávez won a second six-year term in an election in December 2006. Since then he has taken over the telecoms and electricity companies, as well as other businesses. In June he told the local businessmen that he had no more nationalization in mind. But Banco de Venezuela was on offer: Santander was reportedly close to completing its sale to a local private bank. The first the bank's manager knew of Mr Chávez's intention to purchase was when he announced it on live television during a speech about education. Spain's government, which had hosted him in Madrid days previously, was also kept in the dark. Bankers have done well from Mr Chávez's "Bolivarian Revolution". They have profited by arbitraging exchange controls, and from the government's penchant for issuing debt (despite its record oil revenues). But banks face increasingly onerous regulations. These set interest rates, and require around half of loans to go at subsidized rates to favored purposes, such as farmers and housing. Alí Rodríguez, the new finance minister, has ordered banks to cut their holdings of some government paper, on which they are likely to make a loss. On top of all this, growth is slowing. "What is it that Banco Santander is seeing that makes it want to leave Venezuela when it is making so much profit?" asked José Manuel González, the president of the employers' confederation. Mr Chávez has promised Santander a "friendly" deal. His oil wealth has allowed him to pay for the businesses he takes over, avoiding the friction that would be prompted by expropriation. As proliferating controls make doing business in Venezuela harder, more firms may fall into the government's lap. "I don't think this will be the last bank to end up in state hands, and it's going to be happening in other sectors too," says Gustavo García of IESA, a business school. The takeover of Banco de Venezuela will make the state the biggest banker in the country. The president wants to turn his new acquisition, which has a big branch network, into a "socialist bank", which will administer social security and welfare payments. This change of status may not be to the liking of the bank's workers. The government often obliges state employees to attend political rallies, and regularly sacks those who show signs of political dissent. Some 2 million of the 6.5 million Venezuelans with formal jobs are now employed by the state. The decrees will further increase the state's powers, hobble opponents and limit the scope of private enterprise. Because the opposition boycotted the last legislative election, Mr Chávez's supporters dominate the National Assembly. Nevertheless, after his re-election he obtained the power to pass laws on his own for a period of 18 months. The latest crop of decrees was issued on the day before this power was to expire, in such a rush that their full texts were not published until later. Under one decree, a chavista militia will become a new branch of the armed forces. Another tightens state control over food production and distribution, threatening those accused of hoarding with up to ten years in jail. A third makes it easier for the government to take over private companies in general. Another creates powerful new regional officials. They will rival state governors, who are due to be chosen in November in an election in which the opposition hopes to dent Mr Chávez's near-monopoly of power. Several of these measures violate the constitution of 1999, which Mr Chávez himself sponsored. "Here we have no constitution, no law and the president does exactly what he wants" Luis Miquilena, a former ally who broke with the president, told the Wall Street Journal. Mr Chávez says anyone who disagrees with the new laws should complain to the Supreme Court. But the court is beholden to the president. This week it upheld a decision by the auditor-general to ban hundreds of candidates from standing in the state and municipal elections for alleged corruption, even though none has been convicted by the courts. The main apparent target is Leopoldo López, the opposition mayor of Chacao, a district in the capital. Opinion polls had given him a strong chance of being elected as mayor of Caracas. Those polls suggest that a small majority of Venezuelans still support Mr Chávez. But voters showed in the referendum eight months ago that they do not want his autocratic socialism. They may have to show him that once again. (The Economist)