November 7, 2008

A Policy Memo on Venezuela for President-Elect Obama


To: President-elect Barack Obama
From: Francisco Toro and Juan Cristobal Nagel
Date: November 7th, 2008
Subject: How to prudently engage Venezuelan President Hugo Chávez

Over the next four years, managing relations with Venezuela is likely to be the greatest challenge you will face in the Western Hemisphere. While Venezuela certainly does not present a geo-strategic challenge on a scale comparable to Russia, the Middle East or Afghanistan, your success in handling relations with Venezuela will have strong spill-over effects in the rest of the region.

US influence over Venezuelan affairs is limited. The United States cannot, and should not try to, fix what ails our country. It must, however, heed Galen's old maxim: "first, do no harm." Regrettably, over the last eight years, US policy in Venezuela has failed to clear even this bar. Again and again, the Bush administration had played into President Chávez's hands, not only boosting his hemispheric stature but unwittingly helping to entrench his autocratic control over Venezuelan society.

Your campaign pledge to negotiate directly with leaders such as President Chávez has already laid the groundwork for a departure from the failed Bush approach. In recent days President Chávez has also signaled his willingness to explore a rapprochement with the US. A significant opportunity is at hand, one that calls for a subtle and imaginative diplomatic approach.

In this memo, I'll lay out a brief assessment of the situation in Venezuela today, and propose some broad guides to a policy of prudent engagement able to overcome the shortcomings of the existing approach and serve US interests in the region. The memo proceeds in four parts:
1. The Nature of the Chávez Regime
2. US Policy Towards Venezuela: the Change we Need
3. Prudent Engagement and US Strategic Interests
4. The Risks of Prudent Engagement

1. The Nature of the Chávez Regime
The first thing to understand about Venezuela is that overheated political rhetoric is in the process of overtaking crude oil as our number one export. Egged on by President Chávez's incendiary rhetoric, both the left and the right have seriously overstated the regime's virtues and its vices.

The urge to stuff the Chávez experiment into a mold made understandable by history has been intense and too seldom resisted. But Chávez's Venezuela is not Castro's Cuba. It isn't Arbenz's Guatemala or Allende's Chile, and it is certainly not Social Democratic Sweden. Venezuela today is a hybrid regime: far from a fully functioning democracy, farther still from totalitarian dictatorship.

In essence, Venezuela today remains what it has been for more than seven decades: a populist petrostate. Venezuelans conceive of politics as a competition between political actors for control of the nation's oil wealth, which is under state control. As in other petrostates, political actors in Venezuela use populist rhetoric to gain control of the state. Once they've secured it, they seek to maintain it through oil-funded patronage, all the while appropriating ever greater shares of it for themselves and their cronies both in the public sector and in the rump, state-dependent private sector. This appropriation comes to be resented by excluded constituencies. In time, a new populist challenger emerges, plays on disgust with the existing elite's corruption, and wrests power for itself on the back of a renewed populist discourse.

This cycle has played out, with minor differences, no less than five times in the years since oil came to dominate Venezuela's economy (1936, 1945, 1948, 1958, 1998). It has brought to power governments of the left, right and center. The Chávez Government is best understood as the latest iteration of this cycle, not as a radical departure from it.

Between 1958 and 1998, the governing elite managed to put something of a democratic façade on the basic political economy of petrostate populism, helping create a middle class, and enabling the (very partial) beginnings of the division of powers and of a sense of state accountability to its citizens. Since President Chávez's rise to power in 1999, that tentative advance towards democratic institutionalization has been almost entirely reversed, replaced with an autocratic populism that barely pays lip service to constitutional norms.

Chavismo amounts to an autocratic re-interpretation of petrostate populism. The name of the game is still to allow a new governing elite to appropriate oil rents while relying on populist spending to keep the masses quiescent. The difference is that this is now being done without any meaningful checks on executive power, by a leader who has grown progressively bolder in his willingness to abuse state power to maintain his power. The resulting system is extremely top heavy, with all important (and many not-so-important) decisions being made by an emotional, inconsistent leader facing no significant checks on his power.

Along the way, Venezuela's democratic institutions have been almost completely gutted. But what has replaced them is no traditional dictatorship. In sustaining its grip on power, the Chávez government has relied much more often on mobilizing the state's economic dominance to systematically buy the allegiance of key constituencies than on the use of its repressive capabilities. Sporadic violence and selective harassment of dissident voices is a clear and growing feature of the Chávez state system, yet political ideas still circulate quite freely throughout the country, both through the media and in the face-to-face political discussions that have become something of a national pastime. While the state has found ways to disqualify selected opponents from running for public office, thousands of Venezuelan politicians still compete openly against chavismo at all levels in elections that are, if not truly free and fair, not openly rigged either.

Chavista authoritarianism is both real and partial. Its primary means for dealing with dissent is to ignore it and smear those who voice it as imperialist stooges, rather than to jail or murder them. It relies much more on intimidation than on state violence, much more on the abuse of state funds for partisan gains than on systematic repression. In short, the government President Chávez leads always seems happiest operating in that muddled space between outright tyranny and proper democracy. That is Venezuela as it is.

Venezuela as President Chávez talks about it is something else altogether. In official rhetoric, Venezuela is in the midst of a top-to-bottom socialist revolution stalked at every turn by a wide-ranging US conspiracy to destabilize it and, eventually, overthrow it. President Chávez's rhetorical strategy has relied heavily on strident "us vs. them" rhetoric that identifies American Imperialism with capital-e Evil and blames all problems, large and small, on the meddling of an imperial White House terrified by the prospect that his socialist revolution might spread throughout the hemisphere.

There's an unmistakable air of unreality to President Chávez's discourse. It stems from its anachronistic application of cold war categories to a vastly changed geopolitical scene. Needless to say, Venezuela will not be the "first domino". Its petro-dependent political economy simply cannot be replicated in countries that lack Venezuela's seemingly endless stream of natural resource rents. Chavista discourse must not be mistaken for a description of hemispheric politics as they actually are. Instead, it must be grasped clearly for what it is: a source of legitimacy for autocratic policies aimed at internal control.

Anti-US rhetoric has long been President Chávez's preferred means for marginalizing and de-legitimizing expressions of dissent within Venezuela. While, as I'm sure the CIA will tell you in detail when they brief you, US involvement in the Venezuelan political process has been marginal over the last ten years, the threat - real or imagined - of US meddling has proven invaluable to President Chávez in justifying the dismantling of the fledgling democratic institutions the country had built in the years before he came to power.

The most important contribution you could have made to blunting the impact of this rhetorical strategy is the one you've already made: simply by being elected, you have already defused much of the prima facie credibility of President Chávez's anti-US posturing. Anti-imperialist histrionics cannot pass the snicker test in the context of an Obama administration.

In the coming months, President Chávez will have a choice to make. Either he will seek to apply to you the kind of incendiary rhetoric he has long reserved for President Bush, or he will seek to engage you. On the eve of your election, as well as on election night itself, he made public statements suggesting he is now leaning towards engagement. Encouragingly, he appears to be aware that any attempt to run the anti-imperialist playbook against you would simply lack credibility. This presents an opportunity for you to re-define US-Venezuela relations along more cooperative and productive lines by prudently engaging the Chávez government.

The risks of such a strategy should not be understated. Pursuing a rapprochement with the United States would deprive President Chávez of one of his most important legitimizing discourses, and one of his most fruitful rhetorical strategies for justifying autocratic policies at home. In important ways, President Chávez needs the space for autocratic rule that anti-imperialist rhetoric has secured for him.

A key goal of prudent engagement, therefore, will be to raise the costs to him of continuing to rely on anti-US rhetoric as a legitimizing discourse for autocratic governance, while lowering the costs to him of engaging with your administration.

2. US Policy Towards Venezuela: The Change We Need
Since the abortive 47 hour coup against President Chávez in April 2002, the Bush administration has pursued a three-pronged policy towards Venezuela.

First, it has tried to disengage from the Venezuelan government, avoiding becoming embroiled in the wars-of-words President Chávez has tried to provoke over the years, while seeking (mostly unsuccessfully) to maintain low-level cooperation on selected issues such as drug trafficking.

Secondly, it has sought to isolate Venezuela internationally, maneuvering (successfully) to keep Venezuela off the UN Security Council and (unsuccessfully at times) urging other countries in the hemisphere to keep their distance from Chávez.

Finally, it has sought to support Venezuelan civil society, providing direct support to opposition-minded pro-democracy and good-governance organizations through the National Endowment for Democracy and the Office for Transition Initiatives.

This policy mix has failed on all three counts. Efforts to disengage from the Venezuelan government have not prevented Chávez from making a leitmotif of anti-US rhetoric, and counter-narcotics cooperation has broken down completely. Efforts to isolate Chávez regionally have failed because the US has quite simply been outspent, with Venezuela's petro-fueled regional aid initiatives dwarfing the US aid budget for the Latin America by a wide margin.

But the most damaging aspect of the Bush approach has been the final one: its effort to fund Venezuelan civil society groups has backfired catastrophically, boosting the credibility of President Chávez's claims that American Imperialism is out to topple him and undermining the effectiveness of the pro-democracy civil society groups targeted for support.

I urge you to reverse the Bush approach through a policy that engages the Venezuelan leadership directly (in keeping with your campaign promise of tough direct diplomacy), goes head-to-head with Venezuela in the "hemispheric aid race", and discontinues direct support for opposition-minded civil society groups.

i. Engaging the Venezuelan Leadership
The first element in a policy of prudent engagement would be to repair the tattered high-level links between our two countries.

This will require some deft diplomacy. As we Venezuelans have had abundant chance to realize over the last ten years, the president simply will not accept any overture from those who continue criticize him explicitly. President Chávez exhibits clear signs of Narcissistic Personality Disorder and can be expected to respond to any perceived slight or criticism, however mild, with a torrent of abuse. Finding the right mix of words to explain the policy of prudent engagement to the American people without undermining the process by setting off President Chávez's narcissist rage will be one of the key challenges you will face in prudently engaging him. The "entry price" of a policy of prudent engagement will therefore be distasteful but necessary: a moratorium on your part on public criticism of him or his government.

While Chávez is famously intolerant of criticism, he is just as enamored of grand symbolic gestures. Prudent engagement must be cognizant of both of these realities. In symbolically turning the page, you should consider giving a high-profile speech that cites Simón Bolívar, forthrightly disavows any tacit or active US support for the April 2002 coup and stresses the common ground between the US and Venezuelan constitutions. You should pledge to discontinue direct support for Venezuelan civil society groups that the government perceives as subversive, as this may be needed to convince President Chávez of your bona fides. (As we will see, such a move would be advisable for other reasons as well)

To engage the Venezuelan leadership, you will need to reassure President Chávez of your intention to respect Venezuelan sovereignty and conduct a rapprochement on the basis of your personal respect towards him and of our two countries' constitutions and of international law. Through lower-level contacts, you should urge Chávez to reciprocate such gestures by, for instance, re-instating full cooperation with US counternarcotics operations, welcoming a US military attaché to Venezuela's main army base at Fuerte Tiuna, and allowing the FAA access to Venezuela's international airports to conduct safety checks. Such moves could defuse much of the tension that has accumulated in US-Venezuela relations over the last several years.

It bears noting here that the single most powerful symbolic move the US could make in reengaging the Venezuelan leadership has nothing to do with Venezuela itself: lifting or substantially weakening the embargo against Cuba. An assessment of the profound impact such a move would have on Cuba and on the region as a whole, not to mention its implications for the United States itself, is well beyond the scope of this note. Within Venezuela, however, it would be greeted as a dramatic demonstration that your administration is absolutely serious about re-engaging the region.

ii. Taking Venezuela on in the Hemispheric Aid Race
Venezuela's growing influence in the Americas over the last six years has been built on the twin pillars of the Bush administration's overall disinterest in the region and Venezuela's petro-funded largesse. Latin American leaders hard-pressed to balance their budgets can hardly be faulted for accepting the substantial sums in aid and easy credit that President Chávez has spread around the hemisphere, and have not failed to note the contrast between Venezuelan largesse and US thrift.

At less than $1 billion per year, US AID's development aid budget for the region has been a mere fraction of the $30 billion that, by some estimates, Venezuela has pledged to support friendly governments since 2002. Venezuelan aid has meant not just big money, but easy money as well. It comes with no strings attached, no demands for oversight or accountability, and is extended discretionally, on the president's orders, bypassing the usual bureaucratic holdups implied by parliamentary control over public spending. Venezuelan aid is highly attractive in part because it carries minimal hassle for recipients and offers handsome opportunities for corruption by the officials charged with handling it.

Honduras' president Zelaya's decision to join Chávez's "Bolivarian Alternative for the Americas" scheme earlier this year underlines the failure of the US to keep even moderate governments on side in the face of the chavista spending spree. The road to leadership in the hemisphere passes through its leaders pocketbooks, and the US has been AWOL from this competition over the last several years.

A substantial increase in development aid to the hemisphere would quietly underline the reality that Venezuela does not have the monopoly on cocern over the region's development prospects. Coming at a time when falling oil prices will pinch Venezuela's own foreign spending, your administration could find it relatively inexpensive to match Venezuela in the Hemispheric Aid Race.

iii. Disengaging from Venezuelan Civil Society
The final plank of a policy of prudent engagement would reinvigorate Venezuela's pro-democracy movement as well as serving as a powerful symbol to sustain its first plank: ending support for groups that the Venezuelan government views (fairly or unfairly - mostly unfairly) as subversive.

The policy of funding opposition-minded civil society groups through the NED and the OTI has been worse than ineffective, it has been deeply damaging. The meme that such funding is part of an imperialist conspiracy to destabilize the Chávez government is now deeply entrenched among the president's followers. The government has whipped up and exploited this interpretation as a way to delegitimize and marginalize not only those organizations that in fact receive US taxpayer money, but every organization that dares criticize President Chávez, on the theory that publicly reported NED and OTI funding must be the tip of the CIA destabilization iceberg.

In short, the policy has allowed President Chávez to attack as treasonous any and every expression of dissent, from bus drivers' unions striking over rampant crime to neighborhood groups protesting for better access to drinking water. The strategic use of anti-yanqui paranoia to justify the government's failures has been stretched to truly belief beggaring extremes, such as the recent statement by Venezuelan public health officials that an outbreak of dengue fever in rural Zulia State may have been part of a CIA biological warfare plan. Such accusations may strike you as far-fetched - and indeed they are - but within Venezuela they gain some measure of verisimilitude from the fact that the United States truly has supported civil society groups that are alligned with the domestic opposition.

The State Department is well aware of the problems that NED and OTI funding have caused for recipient organizations, so much so that the US Embassy in Caracas has gone to some lengths in recent years to downplay its own role in funding civil society groups. It now habitually advises aid recipients to solicit at least small donations from a wide range of other developed country aid organizations as well, to protect recipients from the perception that they amount to Imperialist fronts. These efforts have met with very limited success in deflecting the government's delegitimizing discourse.

The downside of the current NED-OTI approach is plain, but the upside hard to pinpoint. The trickle of funding that has in fact been made available to Venezuelan civil society groups has come nowhere near bridging the massive funding gap between pro-government organizations - which are on the receiving end of literally billions of petrodollars - and opposition-minded civil society groups receiving a tiny fraction of those sums.

So while NED and OTI funding has suited chavismo quite nicely, it has served neither the US interest, nor the interests of Venezuelan civil society. Instead, it has created a cohort of aid-dependent NGOs that are increasingly decoupled from their "natural" sources of funding in Venezuelan civil society itself.

There is no reason why Venezuelans could not fund our civil society groups ourselves. Venezuelan capital fled the country en masse in the immediate aftermath of President Chávez's rise to the presidency in 1999, and today sits in brokerage accounts controlled by displaced members of the former elite in US and offshore accounts. It is this resource pool that should be funding the activities of opposition-minded NGOs. The easy availability of foreign funding has left Venezuelan civil society groups with relatively little reason to exploit such funding possibilities. If these groups do not command the respect it would take for Venezuelans ourselves to invest in them, it is not at all clear why US taxpayers should be left to pick up the tab.

Change will come in Venezuela when Venezuelans ourselves learn ways to fund and sustain a vibrant pro-democracy movement able to mount a robust challenge to autocratic petrostate populism. No amount of US money can substitute for that process, and instead, may well short circuit it.

In short, direct US support for Venezuelan civil society is a failed policy. Prudent engagement with the Venezuelan leadership demands that such funding be discontinued, and be seen to be discontinued.

3. Prudent Engagement and US Strategic Interests
There are four reasons for the US to be concerned about what happens in Venezuela: energy, Colombia, the US's standing in the hemisphere, and support for Venezuelan democratization. Prudent engagement would further US interests in all four areas:

i. Energy.
First the good news: Venezuela is virtually certain to continue to supply oil to the world market, even in the most extreme circumstances. Threats to suspend shipments of oil to the US ring hollow: with 94% of the country's export earnings coming directly from oil sales, Venezuela has no viable alternative. The question for the US is whether Venezuela will supply increasing quantities of oil to the world market, and how much of the new production will be carried out by US firms.

The Chávez government has already announced it will auction off rights worth up to 30% of a series of ventures in the Orinoco Tar Belt holding some 62 billion barrels. Prudent engagement could help ensure US firms obtain at least some of those partnerships, which are absolutely vital to expanding Venezuela's production capacity over the next 10 years. Securing increased participation by US firms in the Venezuelan oil sector could be both an outcome of prudent engagement, and a guarantee against chavista backsliding from it. But even if prudent engagement fails, it is very likely that other firms - most likely state owned enterprises from nations politically aligned with President Chávez - will take up the slack, ensuring those additional barrels reach world markets anyway. In terms of energy, then, there is relatively little for the US either to gain or to lose from a policy of prudent engagement.

ii. Colombia
Sharing a long and porous border with Colombia, what happens in Venezuela has a direct impact on US interests in that country, including fighting FARC guerrillas and narcotics trafficking, and supporting Human Rights in Colombia.

Encouragingly, the FARC appears to be on the verge of collapse, unable to adapt to the new techniques employed by the US aided Colombian counter-insurgency effort. However, it will remain almost impossible for the Colombian government to finally end the FARC's four-decade long insurgency so long as the rebels are able to melt back across the Venezuelan border for training, supplies, narcotic export routes, R&R, racketeering and kidnapping revenues, and to escape military pursuit. Venezuelan support is FARC's last remaining lifeline, and it will be impossible to secure Venezuelan cooperation in the fight against FARC so long as Colombia is perceived as a US pawn, and the US is perceived as a hostile power.

Prudent engagement with the Venezuelan leadership could help alter this dynamic, by leading to sustained Venezuelan cooperation in both the fight against FARC and against drug trafficking more generally. In this regard, it helps that President Chávez's relationships with a weakened FARC appear to be strained at the moment, after the disastrous failure of his attempt to mediate to free FARC hostages earlier this year. Like many outsiders before him, President Chávez has found dealing with FARC an exercise in frustration, and the Colombian intelligence community's substantial advances in infiltrating FARC, disrupting its internal communications, provoking mass defections and killing or capturing its top leaders has left President Chávez leery of "backing the wrong horse" in Colombia.

Prudent engagement could provide the political cover President Chávez needs to cooperate earnestly with Colombia's counterinsurgency efforts, a pre-requisite to finally defeating FARC. Moreover, the final defeat of FARC could have major implications for the dire human rights situation in Colombia, where Human Rights abuses have typically been a byproduct of the military's frustration at its inability to finally defeat the rebels.

On narcotics more generally, the potential payoffs from prudent engagement are dimmed by reports of involvement by Venezuelan military personnel at the highest level in trafficking operations. The DEA will certainly be able to brief you on this aspect in much more detail than I am able to. Nonetheless, prudent engagement could lead to a loss of "official cover" for Venezuelan military personnel currently engaged in drug trafficking, and could help reduce the flow of narcotics along increasingly active Colombia-Venezuela-Caribbean-US trafficking routes.

iii. US leadership in the Americas
As an incoming US president, you will inevitably inherit over a century's worth of resentments and old historical grudges accumulated throughout the long and inglorious history of the Monroe Doctrine, particularly in the aggressive form it took during the Cold War. In the wake of the almost universal distaste with which your predecessor has been viewed throughout the region, your election to the presidency has already significantly changed the atmospherics of Latin America's relationship with the United States. Your administration will have a unique, even historic, opportunity to rehabilitate the US's image and renew its leadership in the hemisphere. Needless to say, however, your image alone will not be enough to close these old wounds.

Prudent engagement with the Venezuelan leadership will help defuse the us vs. them, anti-US mindset long peddled by Castro's Cuba, and more recently by Chávez's Venezuela. This vision, pitting north vs. south, remains one of the dominant frames through which Latin Americans interpret their historical experience. The sight of a working relationship between the hemispheric hegemon and its erstwhile number one scourge would go a long ways towards defusing the influence of that frame. Together with a new commitment to development aid and a symbolic break with the US's interventionist past in the region, prudent engagement with the Venezuelan leadership could greatly enhance the US's standing and influence in the region.

iv. Supporting Venezuelan democracy
As a Venezuelan, this is the aspect that matters most to me personally. Prudent engagement would blunt the effectiveness of the Chávez government's preferred battering ram against Venezuela's constitutional democracy and its champions. By lifting the generalized veil of suspicion with which chavismo now views any and every expression of dissent, disengaging from Venezuelan civil society could help bolster the credibility and effectiveness of Venezuelan civil society organizations.

By taking the "pawn of empire" card out of the government's rhetorical repertoire, it could allow for a gradual recovery of the Venezuelan public sphere, de-escalating the destructively polarized atmosphere that has come to dominate Venezuelan public life. If relations improve sufficiently, the US could gain enough leverage by 2012 to exert meaningful pressure for President Chávez not to seek to amend the constitution to seek a third term, helping nudge the country back towards some version of democratic normality. And by bolstering the US leadership role in the hemisphere, relative to chavismo's, it could diminish the chances that other Latin American people will have to live through the trauma of seeing their democracies trashed at the hands of a populist autocrat.

4. The Risks of Prudent Engagement
While the Chávez government has recently expressed some openness to dialogue and engagement with your incoming administration, his governing style remains highly volatile, emotionally driven and erratic. There is a significant chance of policy reversals on his part. Anti-US rhetoric has become a central meme for Chavismo, and it is not immediately clear whether the president will be prepared to give it up, or able to maintain control over society if he does.

Venezuela faces a serious fiscal squeeze over the next several years, as falling oil prices hit public sector revenues directly. In the past, the "bust" part of the oil commodity cycle has typically been associated with sharp rises in social conflict in Venezuela, as various constituency jockey to maintain their share of a shrinking resource pie. President Chávez could find it hard to manage this rising tide of social conflict without recourse to his old habit of delegitimating dissent by pegging it to US destabilization plots. It will require considerable diplomatic skill to talk President Chávez off the ledge when old habits reassert themselves, and there is a real possibility that he will finally reject any engagement overtures, most likely by manufacturing a reason to histrionically storm out of an engagement process.

However, President Chávez will be aware that such an approach risks an outcome that 6 years of diplomatic maneuvering by the Bush administration failed to secure: international isolation. Inartfully done, rebuffing a good faith overture from a popular new democratic president could fatally undermine his own credibility within the country and throughout the region, putting an end to his longstanding ambition for hemispheric leadership. A key goal the policy of prudent engagement, therefore, is to ensure that its failure would be more costly to President Chávez than to yourself.

In closing, I urge you to be aware of the very real limits of US influence over Venezuela. The US cannot, and should not try to, influence Venezuelan internal affairs directly. Your administration can, however, adopt policies that raises the costs to President Chávez of casting the US in the role of all-purpose villain and cause of all of the nation's ills. If successful, it would deprive President Chávez of a key source of political legitimacy and his chief rationalization for autocratic policies, easing the way to Venezuela's return to democracy while helping realize the US's strategic goals in the energy sector, in Colombia, and in the hemisphere as a whole.