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Dutch Disease

-strong international demand for commodity
-national profits boom with soaring int'l prices
-Exchange rate becomes overvalued in good times
-Erodes competitiveness of manufacturing sector
-symptom of resource curse

The Resource Curse

-Countries with abundant natural resources often have slower economic growth and lackluster development than countries with fewer natural resources

Rentier State

-created by resource curse
-gov't mismanage resources amid institutional weakness because citizens are often taxed less and the gov't is therefore less responsible to their needs and interests.
-patronage, rent-seeking, and corruption

Venezuela Case Study

-interesting in how it has differed from rest of LA
-LA has suffered from an over dependence on commodity resources, Venezuela is unique in dependence on oil
-during 1960s and 70s robust democracy among dictators, since '98 has been the poster child for the decline in liberal democracy

Colonial History

-relatively unimportant part of New Granada viceroyalty throughout most of the colonial era
-Caracas became more important city near end of colonial era

Independence: First Bolivarian Revolution

-despite unimportance as a colony, Venezuela very important part of the empire in struggle for independence: Birthplace and launching point for Bolivar
-Along with Argentina, among first centers of open revolt: independence in 1811, overthrown by Spanish in 1813

Independence contd

-emerged from wars as part of Gran Colombia along with Colombia and Ecuador
-Venezuela broke away in 1829


-century that followed independence saw unending stream of strongmen rise to power
-occasional elections and many presidents, only a few men controlled the levers of power in Venezuela until 1950s

Pre Oil Economy

-After independence the economy shifted from cacao production toward coffee
-Coffee production expanded significantly under Paez
-Volatile world prices left many landowners in serious debt and resulted in economic and political instability

Punto Fijo Democracy

-established a power sharing arrangement that allowed a stable and relatively representative democracy to form after 1959
-Set up a system that kept military appeased and out of politics while creating a spoils system among competing political parties

Oil Economy

-discovered in early 1900s, first concessions in 1914
-decline in agriculture, shift of population to cities
-initially was a means for dictators to further enrich and empower themselves

Punto Fijo system and resource curse

-system went from three to two political parties, COPEI and Accion Democratica
-elections were fair and free, system functioned largely on lavishing of oil money across the country: small minority actually had access to power

Oil in the Punto Fijo System

-Romulo Betancourt's gov't one of the drivers of the foundation of OPEC in 1960
-Increased state involvement in oil sector post-war
-established state run corporation to deal with foreign firms in the sector

The Oil Boom

-during the 70s oil prices were high, system functioned very well: Venezuela avoided authoritarian wave and people enjoyed high standard of living
-Perez presidency marked the high point of this system: economic plan "Gran Venezuela" heavy state spending to foster rapid development

Puntofijismo Breaks Down

-early 80s Venezuelan economy entered period of prolonged malaise
-low oil prices combined with debt crisis abruptly ended boom
-WIthout oil revenues, patronage system could not be funded
-real income and investment declined throughout 80s, poverty soared

Punifijismo break down contd

-Perez suddenly implemented austerity measures and neoliberal reforms shortly after 89 reelection, riots broke out
-Caracazo ended with hundreds of protesters killed by military, and regime's legitimacy damaged
-decline further highlighted by series of coup attempts in 1992, the first led by Chavez

Puntifijismo Break Down Contd

-Though Perez's economic plan did succeed in restoring economic growth, it was though to only benefit the wealthy
-Perez forced to resign amid corruption investigation in 93

The Last Gasp

-Rafael Caldera, one of the signers of the Punto Fijo pact, elected president in 94 as an independent: inherited a series of financial crisis
-The persistently bad economy grew worse and inflation became an issue for the first time
-Despite Caldera running on a platform opposed to the IMF, he eventually implements many of their prescribed policies

Revolution Begins

-In 1998 elections Chavez reenters political scene as presidential candidate: wins 56% of the vote
-Immediately convened a constituent assembly to draft a new constitution: strengthened executive, allowed reelection, created unicameral legislature

Bolivarian Revolution

-very popular among some groups, Chavez deeply unpopular among others
-in 2002, opposition march was met with gunfire from still unknown sources: military seized control for two days before protests brought Chavez back to power, US appeared briefly to back the coup

The Bolivarian Revolution contd

-massive strike of PdVSA workers in 2003 brought economy to a standstill and nearly toppled gov't
-Chavez survives recall election in 2004, wins reelection in 2006 with 63% support

Socialism for the 21st century

-following the victory, Chavez radicalized his domestic and int'l agenda
-State involvement in economy through nationalizations increased dramatically
-Becomes even bigger opponent to US

Illiberal or Participatory Democracy?

-Chavez claims that Venezuela now has more participatory and representative democracy
-power has essentially been concentrated to executive, judicial and legislative independence non-existent

Illiberal or Participatory Democracy? Contd 1

- Constitution written by Chavez supported in 1999 often disregarded
-Numerous opposition media outlets have had licenses revoked
- the "rancid oligarchy" that Chavez sought to replace, has simply been replaced by new elite of gov't loyalists

Illiberal or Participatory Democracy? Contd 2

-constitutional amendment package was narrowly rejected in 2007: would have enabled unlimited reelection
-reelection ban and most of the other amendments were eventually passed in different forms

Oil: Lifeblood of Socialism

-Chavez has been the beneficiary of record high oil prices during a large part of his presidency
-Oil revenues have allowed the state to expand public spending hugely on social programs

Oil and Chavismo

-Oil has also provided Chavez with the spending power to have influence abroad: programs such as PetroCaribe sold discounted oil to Central American and Caribbean countries under special financing terms
-Gave Chavez a degree of leeway in the region to openly confront US as well as engage with controversial figures worldwide

Oil and Chavismo Contd

-While oil has greatly benefitted Chavez, the gov't and economy are now more dependent upon it as ever
-Nationalizations have brought private investment to a standstill, gov't investment often fail to spend as intended


- since the beginning of the 20th century Venezuela has been different than the overall trend in LA
-Oil changed economic and political trajectory of the country
-in the 21st century has been a country moving away from market reforms and liberal democracy, even as they gain traction in most other countries

Looking Forward

-Chavez and his program less popular than at any point since 1998
-in nationwide elections for the national assembly in 2010, PSUV, the official party won only 48% of the vote
-Chavez diagnosed and treated for cancer throughout second half of 2011

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