Venezuelan Threat? Not Really

I have been asked to comment on the question of “whether President Hugo Chavez of Venezuela poses a threat to regional stability and how his critics, including the Bush administration, should respond.” This is an easy one.

One may agree or disagree with any of President Chavez’s policies or statements, but the idea of him or his government posing a threat to regional stability is ridiculous. In fact, a far more reasonable argument can be made that his government has contributed to stabilizing the region.

It has done so by using its $50 billion dollars of foreign exchange reserves to act as a lender of last resort, and provide other forms of financial aid to countries throughout the region. This is what the International Monetary Fund was alleged to have done in the past but almost never did. It is especially important now that Latin America is going through a major historical transition, where governments of the left now preside over about half of the population of the region.

Latin America is emerging from a long period of failed economic reform policies, known as “neoliberalism” there, which resulted in the worst economic growth performance in more than 100 years. From 1980-2000, regional GDP (gross domestic product) per capita grew by just 9 percent, and another 4 percent for 2000-2005. By comparison, it grew by 82 percent in just the two decades from 1960-1980. As a result of the unprecedented growth failure of the last 25 years, voters have demanded change in a number of countries, including Argentina, Bolivia, Brazil, Ecuador, Nicaragua, and Uruguay.

Venezuela has loaned more than $3 billion to Argentina, and has loaned or committed hundreds of millions of dollars to Bolivia, Ecuador, Nicaragua, and other countries. It also provides subsidized credit for oil to the countries of the Caribbean, through its PetroCaribe program, and provided many other forms of aid to neighboring countries. These resources are provided without policy conditions attached – unlike most other multilateral (IMF, World Bank, Inter-American Development Bank) and bilateral aid. By providing these resources, Venezuela is helping other countries to bring their policies more in line with what voters have demanded, and greatly reducing the threat of economic crises in the process of doing so.

For example, before the Nicaraguan elections last November, US government officials made many threats to the voters of that country that if they elected Daniel Ortega, they would suffer greatly from cutoffs of loans, aid, and even the remittances that many Nicaraguans depend upon from their relatives in the United States. None of these threats have been carried out. This is partly because Washington knows it would be useless and counterproductive to do so, since Nicaragua would simply replace US-controlled funding sources with more borrowing from Venezuela. The same is true for Bolivia, which has vastly increased its hydrocarbon revenues, and is in a stronger bargaining position knowing that it has an international lender that will not try to interfere with its domestic political agenda. The new progressive president of Ecuador, who faces a number of important political battles to deliver on his promises of governmental reform, pro-poor and pro-development policies, is also strengthened by having Venezuela as a lender. When the Argentine government decided to say goodbye to the IMF in January of 2006 by paying off their remaining $9.9 billion in debt, Venezuela’s loan of $2.5 billion helped that government to avoid pushing its reserves down to dangerously low levels.

In all of these cases and more, Venezuela’s financial support is helping other governments to deliver on their promises to their own voters, thereby contributing not only to stability but to the strengthening of democracy in the region. Washington-sponsored aid, by contrast, has often had the opposite effect – provoking “IMF riots,” and sometimes economic crises (e.g. the 1998-2002 Argentine depression), by trying to impose policies that were deeply unpopular and, as we now know, economically flawed.

No other government in the region accepts the Bush Administration’s charge that Chavez is a threat to regional stability – not even President Alvaro Uribe of Colombia, which shares a 1300 mile conflict-ridden border with Venezuela. When Uribe met with members of the US Congress last year, he refused to criticize Chavez – reportedly even in private. The vast majority of Latin American governments also supported Venezuela’s bid for the UN Security Council last year, even after he called President Bush “the Devil” at the UN, and despite all the pressure that the United States – whose economy is 67 times the size of Venezuela’s – brought to bear on them.