You’ve heard of the butterfly effect, right? Well, what about the Chávez effect?
Venezuelan president Hugo Chávez died early this week, and his absence will probably have ripple effects on the stability of political regimes in several other countries with which Chávez’s was closely tied. Chávez’s international influence had waned in recent years with the exit from the global political stage of his foil, George W. Bush; the re-emergence of Brazil as a regional economic heavyweight; profound stresses on Venezuela’s own economy, wrought in part by evident flaws in Chávez’s “Bolivarian revolution”; and, of course, the decline in Chávez’s health as he struggled with the cancer that eventually killed him.
Even in poor health and diminished political stature, though, Chávez loomed large in the politics of several other countries, and none more so than Cuba. At least in part, that interdependence stemmed from the close personal relationship between Chávez and Cuba’s Fidel Castro. As Victoria Burnett wrote about yesterday for the New York Times, however, there was also a very practical aspect to the close relationship between Cuba and Venezuela under Chavez as well.
Cuba receives more than 100,000 barrels of oil a day from Venezuela, purchased on favorable terms as part of an exchange that has tens of thousands of Cubans working in Venezuelan clinics, schools and ministries. The subsidized oil accounts for about two-thirds of Cuba’s consumption and is credited by many Cubans with keeping the lights on and the air-conditioners running during the brutal summer heat.
It’s possible that Chávez’s successors will indefinitely sustain this generosity, but I doubt it. Venezuela was already struggling to get its own economic house in order. Meanwhile, Venezuela’s oil production has declined in recent years and its domestic consumption has steadily risen, leaving less of the surplus that bankrolled Chavez’s largesse. Even if Chávez’s successors come from the Bolivarian movement he built, it’s hard to see how they will be able to keep subsidizing other regimes when their own has fallen on hard times. And, of course, absent Chávez, Venezuela’s opposition parties stand a much better chance of clawing its way back into government—if not in next month’s special election, then certainly in the ones to follow.
As Venezuelan largesse dries up, the pressure on the Communist regime in Cuba to search out new sources of revenue will sharply increase. It’s possible that Castro & co. will find another great foreign patron, just as they did when Venezuela stepped into the shoes the Soviet Union had filled for so long before its collapse left Cuba in the lurch. Possible, but, I think, unlikely. Following a similar “the enemy of my enemy is my friend” logic, the Islamic Republic of Iran also has an affinity with Cuba, but Iran’s got serious financial troubles of its own. China seems a more capable future patron, but it’s hard to imagine the Chinese government doing something as provocative to the U.S. as flat-out bankrolling the Cuban regime with so little to gain from it. What China is already doing is helping to finance the hunt for oil in Cuban waters. A major oil strike would throw the Cuban government a new lifeline, but as John Sullivan noted in a September 2012 piece for the New York Times Magazine, “So far, though, the wells have come up dry or disappointing.”
If the Cuban regime can’t find a new foreign patron or strike oil, it will be increasingly tempted to try political liberalization as an alternative strategy. I laid out the logic behind this choice in a conference paper I wrote in 2007 and summarized it again in a recent article on North Korea for Foreign Policy‘s Democracy Lab. Quoting at length from the latter:
To understand why a seemingly stable dictatorship would ever give its political opponents an opening, it helps to consider the political economy of authoritarianism. Dictators repress their citizens because it helps them stay in power. Political rivals can’t beat you if they can’t get organized, and they’ll find it very hard to organize if they can’t meet, talk, or reach out for support. Following this logic, we usually think of political liberalization as something that dictators resort to only when forced by restive mobs threatening to end their rule, if not their lives.
What that conventional view misses, though, are the financial and economic trade-offs that harsh repression entails. First, the machinery of monitoring and repression can be expensive, and the information it produces isn’t always reliable, so shrewd autocrats will always be looking to cut costs and improve outputs in these areas. Second, and less obviously, repression indirectly imposes drag on an economy by inhibiting productive exchanges among citizens. These market frictions can create a gap between an economy’s actual growth rate and the growth it might achieve with a freer citizenry.
When a dictator’s revenues depend on the performance of his country’s economy, these trade-offs give him some incentive to loosen restrictions on civil liberties. The question is when that incentive becomes strong enough to outweigh the political risks of reform.
The conventional view of political liberalization tells us this shift only occurs when dictators face an imminent threat of revolution. If the end already seems nigh, rulers might try to prolong their tenure by meeting their opponents halfway and hoping that compromise satisfies the mobs at the gates. This process is sometimes described as liberalization “from below,” because it’s driven by popular unrest.
Careful consideration of the political and economic trade-offs involved, however, suggests another possibility: Dictators might also pursue “liberalization from above,” gambling on reform when the economy is stagnating and political opposition is especially weak. Under these circumstances, expanded freedoms of speech and movement can open new avenues for economic growth without immediately producing a serious political challenge. There might be plenty of pent-up demand for political change, but revolutions require organization, and organization takes time, so shrewd rulers might attempt to shoot those rapids in search of calmer waters on the other side.
Viewing Chavez’s departure through the lens of this theory, I think the prospects for significant political liberalization in Cuba in the next few years just improved markedly. In fact, there were many signs that the Cuban regime was already leaning in this direction, including moves since 2010 to allow more private enterprise, loosen restrictions on property rights, and, most recently, the decision to end the exit visa requirement for travel abroad. I think those modest reforms reflect the very pressures noted above, and the departure of the Cuban regime’s greatest patron and ally will only turn the screws tighter. Late last month, Raul Castro announced that he would retire when his second term as president ends in 2018. In light of this week’s news from Venezuela, I would be surprised to see Castro’s tenure last that long, and I suspect that transition will go much deeper than a simple change of leadership.
Dart-Throwing Chimp 
Grant
/ March 7, 2013Drezner’s got a piece arguing against any hopes that there will be warmer ties between Venezuela and the U.S. Sadly I have to agree with him.
http://drezner.foreignpolicy.com/posts/2013/03/07/why_post_chavez_venezeula_wont_be_a_us_ally_anytime_soon
dartthrowingchimp
/ March 8, 2013I’m agnostic on that. Best I can tell, the chief feature of Venezuelan politics right now (and for a while) is sharp polarization. Both “camps” are heterogeneous, but many opposition supporters would probably welcome warmer relations with the U.S., and I don’t think Chavez’s sympathizers are as uniformly and vehemently anti-American as Dan argues. So a lot will depend on how the succession struggle works out and how the U.S. behaves. In any case, I think there’s more room for rapprochement than Dan does.
Darius Wilkins
/ March 10, 2013I think that the opposition is both too heterogeneous in terms of groups and homogeneous in terms of which faction among them has power. Moreover, much of Chavez’ support comes directly from the fear that the opposition will bring back the bad old days of tight ties to US oil and security elites. For better or worse, post Chavez Venezuela is almost commanded to take a more nationalist focus…
And speaking of that, I’ve grown to distrust English language analysis of Venezuela, because there is a serious pattern of lying by omission and out of context arguments, particularly arguments that lack any sort of uniqueness to Venezuela as a Latin American country. For instance, virtually every South American country is dealing with serious inflation, and Argentina, for example, has a worse inflation problem than Venezuela (not to mention that much of this inflation is of the good kind, relating to people’s entry into the lower middle class). Many Latin American countries have truly horrendous crime problem, and we talk about Mexico and Brazil often–but with less focus on condemning the political structures and more focus on why it happens. I don’t think many people have noticed just how little study of Venezuelan crime there has been (in English) relative to all the work in Mexico. We talk about the lack of investment and modernization of Venezuelan oil infrastructure when that is sadly typical of every Latin American oil producer outside of maybe Petrobras.
In effect, it’s absurdly difficult to find meaningful critiques of Venezuelan policy and institutional actions in English, because it’s seems like every foreign policy analyst is shilling Sally Quinn sensibilities. That Dan Dreznor article? Good God–I mean, first of all, it’s not really paranoia if there are actually bad guys out to get you. I mean, I just get the mere squeaking over on this side of the language divide, but the whole Argentine bond legal suit has been major news down there for the whole continent. The seizing of national military boats in Africa was major news down there. The idea that the US is an untrustworthy partner is a pretty consolidated concept down there. Whining about conspiracy theories is the opposite of what American intelligentsia ought to be doing, which is talking about how to build much more of a sense of trust with the population of Latin America, and a lot less Fort Benning notoriety. Soft power has eroded tremendously since the Clinton years.
Now, towards the direct point of this blog post. Venezuela aid to Cuba should not be quite seen as gifts, but as barter-in-kind. Venezuela’s political elite, once Chavez, now Maduro and his folks, got Cuban doctors, Cuban institutional expertise, and Cuban intelligence services in return for that oil. Chavez sending heating oil to cold Americans are a gift. The Cuban relationship was not like that. Moreover, say, in terms of expanding health care, this was virtually the cheapest Venezuela *could* expand services. If they could import policemen of the same quality as the doctors, then crime might not be as horrible…or something. With that in light, I do have to assume that a secure Maduro will continue the Cuban policy as he tries to develop the institutional and physical infrastructure of Venezuela. One would hope he’s more interested in doing that than the Congress Party politicians of India.
As for Cuban liberalization itself, this has been an ongoing process, and I think it has far more to do with a quietly better and more trusting relationship with the US than anything to do with foreign sugar daddies. Many of these reforms seems to have gathered pace a year or two after Obama was inaugurated, like the discussion process over private housing and otherwise creating incentives to build more. I wouldn’t count on Castro dying before I see the corpse, though.
Grant
/ March 10, 2013I’m not quite sure where to start with your post because it goes over a lot (and some of it is a bit confusing). The criticism of Venezuelan economics is mostly because it’s so blatantly obvious that this was going to happen, we’ve got decades of data on what happens when you do these things and, unsurprisingly, nothing was different this time.
On Cuban reforms I personally suspect it has more to do with Fidel Castro unable to hold power and the uncertainty in Venezuela than anything to do with Obama. There were serious considerations of ending the U.S. embargo on Cuba during the 90s that Fidel (and the vital Floridan Cuban vote) helped scupper. Now the previous patrons are gone, Venezuela’s politics are too uncertain to trust your nation’s future to, there is at least some hope for dictators that they can economically open up while retaining political control and Fidel is out of office with Raul in control.
Darius Wilkins
/ March 10, 2013I don’t think Elian Gonzalez materially changed foreign policy, Grant.
Also what is the “this” that’s so blatantly inevitable about “Venezuelan Economics”?
Grant
/ March 11, 2013Nationalization, especially nationalization as widespread as what was done in Venezuela, will seriously decrease production.
Nationalizations as widespread as this will also make investment scarce because no one outside the country will dare put any money into the country.
Price controls have been seen to both dampen any motivation to improve* and also increase scarcity of the food staples that they were supposed to ensure that the poor had easy access to.
If you focus on funneling money from nationalized industries into big (and disturbingly often unfinished) public projects instead of maintaining and improving industrial infrastructure you’re going to get accidents and disasters.
Focusing on the oil industry above a more diverse economy is risky and means that in bad times you have little to fall back on.
Massively increased public spending prior to elections means that both the projects are politically motivated and not focused on pragmatism and that every government will feel the need to do the same every time before election, exacerbating the problem.
Then there are the more political aspects that are also damaging Venezuela’s economic outlook and at the same time meaning that corruption hasn’t been fought so much as moved to different groups and that there isn’t much interest in democratic government with transparent spending and decision-making**.
And, to my complete lack of surprise, this is what happened. We aren’t seeing anything in Venezuela that is new or not behaving like it should. Quite the opposite in fact. What we’re seeing is both old and occurring exactly as you should expect it to with those facts.
For more reading I suggest this Reuters article on Venezuela and Fonden (and incidentally unless I’m mistaken I think that commenter xynz666 is only partly correct).
http://www.reuters.com/article/2012/09/26/us-venezuela-chavez-fund-idUSBRE88P0N020120926
*For example an Egyptian landlord in Mubarak’s Egypt couldn’t increase rents on his apartments, so obviously he never had any incentive to make the apartment’s elevator work.
**And before you bring it up, while I would prefer that the U.S. be more transparent in some areas it still actually is fairly so, as are most of the North American/Western European governments.