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Another Mexico? Venezuela on the Verge

Government tries to head off another 'social explosion' reminiscent of 1989, when unsettling riots and coups sparked by price hikes rocked this Latin American nation

WHEN sales are slow at Pedro Torres's mobile snack stand where he hawks penny candies and five-cent bags of chips, the one-time plumber contemplates the economic decline around him and wonders how much more the people of Venezuela can take.

''There's no work, people are shifting to any informal activity they can think of, selling contraband clothes or gadgets just to put food on the table. And everybody talks about 1989 happening all over again,'' Mr. Torres says.

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Any talk of 1989 sends shivers up the government's spine. That year, Venezuela experienced riots touched off by gas and public transport price hikes. The instability fomented two unsuccessful military coups that rocked the country in 1992.

But as Venezuela muddles through what some analysts, like Venezuelan writer Arturo Uslar Pietri, call ''the worst crisis in the country's history,'' references to a looming ''social explosion'' become more common. Facing a second year of crippling inflation (last year's rate was 70 percent), rising unemployment, and worsening crime in the wake of the economic tailspin, a people raised on the fat of oil revenues and government largesse are thought to be on the brink.

Earlier this month, officials said they had uncovered a ''plan'' designed by students and a nationalist organization with military ties to use mounting street demonstrations opposing the country's harsh economic conditions to destabilize the government. The director of the intelligence police described the plan as an attempt to foment riots similar to the 1989 disturbances, when more than 300 were killed.

''It's a worrisome trend that becomes clearer in every survey we do,'' says Alfredo Keller Roche, a prominent political analyst here. Forty percent of Venezuelans surveyed by his Consultores 21 consulting firm said they knew someone who was ready to take part in violent street protests to vent their anger. Twenty-two percent said they were prepared to participate.

''Expectations for this year are quite different from 1994,'' says Mr. Keller. ''Last year the top concern was corruption, which people wanted cleaned out. But now they want government to govern, to take action on the cost of living, inflation, unemployment, and security issues worrying them.''

Topsy-turvy economy

Torres fits that description. He says Venezuelan President Rafael Caldera Rodriguez continues to benefit from strong support because he is seen as an ''honest man'' in a ''swamp of high-level corruption.''

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But railing against corruption isn't enough -- especially with the worsening economy, he says. ''I make just about enough each day to eat, but where's the future in that?''

Mr. Caldera took office in January 1994, only days before Venezuela's worst-ever financial crisis broke, bringing down 16 banks and exposing widespread corruption among bankers and many former government officials.

The banks were nationalized at great -- and still mounting -- public expense. Then Caldera, considered a skeptic toward free-market reforms, implemented price and currency controls that some analysts believe saved Venezuela from a Mexico-style crisis. But the controls now are hampering foreign investment and stalling any recovery of confidence.

In addition, he suspended many consitutional rights in the ''higher'' interest of catching corrupt bankers and boosting security. But with the bankers having fled the country, the police have shifted their focus to poor and high-crime neighborhoods where they are increasingly accused of unwarranted arrests, torture, and sometimes killings. In that atmosphere, opposition parties are calling for the rights to be restored.

Government officials agree Venezuela is in a deep crisis, but tend to describe it in terms of a long-term refashioning of society rather than an economic crisis requiring strong measures.

''We are a country having to break a dependence on one industry, oil, and that is changing everything -- our economy, our mentality, our approach to government,'' says Guillermo Alvarez Bajares, minister of communication. This year, for the first time in decades, less than 50 percent of total government revenues will come from the oil industry, he notes. ''That is a milestone for Venezuela.''

Oil made big government possible in Venezuela -- the national budget tripled in one year when oil prices jumped from $2 to $12 a barrel in 1974. But even the country's very successful Petroleos de Venezuela, the second largest oil company in the world, couldn't shoulder the expanding Venezuelan state. As the government regularly increased spending, the external debt blossomed. Today, 35 percent of the national budget goes to pay it off.

''We know we have to reduce the size of the state, but it can't be done overnight,'' says Mr. Alvarez. ''We'd have riots.'' The government estimates that at least 30 percent of the country's 1.2 million public workers are in dispensable jobs.

'Militarization' sets in

The government has unveiled a project for a 20-year plan, and is holding public forums around the country to involve individuals and organizations in its fine-tuning. One emphasis of the plan is education reform -- after Education Minister Antonio Luis Cardenas declared the country's education system a ''gigantic fraud.'' Government officials say the young especially need to be educated to be productive citizens, and not just depend on the state.

For some analysts, however, fear is hampering the Caldera government. ''If privatization and anti-inflation measures and severance-package negotiations with the public workers' unions aren't going ahead any faster, it's because the government is frozen over the possible consequences,'' says David Anderson, an editor at VenEconomia, a Caracas newsletter and economic consulting firm.

The government's unwillingness to act has led to what some here call a ''militarization'' of Venezuelan society. The military is assuming tasks normally undertaken by civilians. For example, the military took over the country's airports during a recent air traffic controllers' strike, and has assumed greater responsibility in prison and immigration matters.

Political void

Other observers worry that a vacuum is being created into which populist and charismatic, but untested, leaders might step -- if the military doesn't first.

Two examples they offer are Irene Saez, a 1981 Miss Universe who is now mayor of a wealthy Caracas district; and Lt. Col. Hugo Chavez Frias, a leader of the February 1992 coup attempt and, officials say, the recently uncovered plan to destabilize the government. Mr. Chavez is leader of a rising populist political movement touting ''the fatherland'' and opposing privatization.

''Right now, the two most popular leaders after Caldera are a former coup leader and a former beauty queen,'' says Gustavo Garcia, an economist at the Institute for Advanced Adminstration Studies. ''It's worrying to say the least,'' he adds, noting that important local elections will take place before year's end.

The government could raise Venezuela's extremely low gas prices, he says. But since that is what started the 1989 riots, he doesn't expect it to happen.

Torres, meanwhile, says that if there is an ''explosion'' it will be worse that 1989. ''Back then living was really easier, things were cheaper, and more people had good jobs,'' he says.

Noting that two of his brothers who used to work in banks are now out on the streets selling what they can, he adds, ''Now things are worse. I think people feel they don't have so much to lose, but maybe something to gain'' by protesting.

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