Share this story
Close X
Switch to Desktop Site

Venezuela's presidential candidates shy away from austerity

Amid a deepening economic crisis, with mounting foreign debt and a dramatic slowing of their oil-based economy, Venezuelans this weekend choose a new president.

They are likely to pick Jaime Lusinchi, the quiet, moderately leftist candidate of the Accion Democratica party, who promises ''to get things going again.''

About these ads

But that will be no easy task for whoever wins Sunday's vote. Mr. Lusinchi's main rival is Dr. Rafael Caldera Rodriguez of the Social Christian Party (COPEI).

The oil-rich nation has slumped into a deep recession in the past two years. And during the five-year term of outgoing President Luis Herrera Campins, Venezuela has gone from one of Latin America's strongest economies to one of its most troubled.

Two-thirds of its $25.3 billion foreign debt comes due either this year or next. And oil, the mainstay of the economy, is no longer the economic panacea it once was.

''We no longer can rely solely on oil,'' says Pedro A. Palma, an economic forecaster. ''The new government, whoever wins, also has to move fast.''

Many in Caracas say the next president needs to initiate a Franklin D. Roosevelt-like first 100 days in office. ''Without such momentum, the new president won't convince Venezuelans that this country is in deep economic crisis,'' banker Antonio Solis says.

Many Venezuelans seem oblivious to the storm clouds on their economic horizon. They know they have oil in abundance, and they find it hard to realize that the ability to engage in freewheeling national spending - such as that of the 1960s and 1970s - is gone.

Venezuela's problem is that the international oil market is glutted and will probably remain so for several years at least. Its oil industry also needs new, costly equipment to keep up with Mexico. In fact, the oil that Venezuela pumps these days earns less because it is increasingly expensive to mine.

About these ads

One result is that shortages of consumer and industrial goods are becoming commonplace and unemployment (now about 17 percent) is edging even higher.

Both candidates' formulas for meeting these problems and are vague. Mr. Lusinchi, who claims he has more economic savvy than President Herrera, talks of boosting wages to stimulate the economy.

Dr. Caldera, a former president of Venezuela, says he would create a million new jobs with government-sponsored investment programs.

But neither supplies specifics for his plans. And some economic commentators in Caracas say that a Lusinchi social program could cause a wave of deficit spending reminiscent of the late 1970s, when the country went on a wild spending and borrowing binge.

What Venezuela needs, these commentators suggest, is austerity. That is also what the International Monetary Fund suggests. But neither of the top presidential candidates advocates austerity - nor does the third candidate, Socialist Teodoro Petkoff.

All three emphasize that Venezuela still earns about $14 billion from oil sales annually. They say that sum is enough to get the economy moving.

The problem, critics say, is that this overlooks a variety of other factors. Take food: The country imports 70 percent of the food it consumes. Venezuela has the rich agricultural land needed to grow its own food. But past governments argued it is cheaper to import food than to develop agriculture in Venezuela.

Those governments also allowed the existing farm economy to wither away. So now, Venezuela uses much of its declining oil revenues to import food.

The next president also must straighten out a financial mess with the state oil monopoly, Petroleos de Venezuela. The Herrera administration nibbled at the autonomy the industry once had.

In one much-criticized move, the Herrera government took control of a $5 billion reserve fund the monopoly had built for oil investment needs. That seizure is one reason the oil industry is increasingly dated.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.