| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- LATIN AMERICAN BUSINESS
Commentary: This Constitution Could Wreck Venezuela (int'l edition) Imagine a country where stay-at-home moms collect salaries, all children attend university free of charge, and indigenous peoples have full control over their ancestral lands. All of these rights, and more, are enshrined in Venezuela's new constitution, recently completed by the 131-member Constituent Assembly elected to write it. The charter, drafted in 60 days yet containing 350 articles, will be put to a vote on Dec. 15. Chances are that it will be approved. Venezuelan President Hugo Chavez, whose supporters dominated the assembly, calls the constitution ''one of the most advanced in the world.'' But the economic and political model it lays out is an odd mix: part Arab oil kingdom, part European cradle-to-grave welfare state, with a dash of Latin American authoritarianism thrown in. The constitution goes against the trend toward open, market-oriented economies in Latin America and other emerging markets--and it's hard to fathom how it could possibly work. Indeed, Chavez' could be a dangerous experiment: The result could be a ruined economy--and violent social unrest. ''EXPLOSION.'' Even Chavez admits that the government cannot afford the largesse spelled out in the charter, despite oil exports that are expected to bring in $22 billion this year. The former paratrooper may unwittingly be setting himself up for a crisis of expectations. A year after his election, he remains hugely popular, with a 70% approval rating. Yet Chavez will soon have to begin delivering on his populist pledge to rid the country of corruption and raise the living standards of its 23 million people, half of whom are poor. Otherwise, he risks a ''social explosion,'' warns Albis Munoz, president of the National Council of Trade & Services. Already, the economy is expected to shrink 6% this year. And business leaders are deeply worried about the likely consequences of constitutional provisions that vastly increase the role of the state in the economy. The government now controls the oil industry, which accounts for roughly 30% of gross domestic product. But the new charter would go further by giving the state the right to interfere in the management of manufacturing, tourism, agriculture, and small to midsize industry. More than 90% of economic activity would be under state control, according to the Venezuelan-American Chamber of Commerce. Provisions in the new constitution could also push up labor costs. Only a few years ago, Venezuela reformed its restrictive labor laws, which made it expensive and difficult to fire workers. The new charter reinstates the old system. It also specifies that the minimum wage, now $189 per month, should be raised to reflect the cost of a basic basket of goods and services, which runs as high as $1,000 a month. ''The effects are going to be catastrophic,'' says Vicente Brito, president of Fedecamaras, the country's largest business association. There are a few bright spots, however. Chavez' charter bans outright the privatization of state oil behemoth Petroleos de Venezuela. But international companies will continue to be able to enter into joint ventures with the oil giant. Foreign investors may draw comfort from guarantees that put them on equal footing with local investors. NAME GAME. Oddly enough, the item that has inspired the most controversy at home is one that calls for the country's name to be changed to the Bolivarian Republic of Venezuela, in homage to Chavez' idol, Simon Bolivar, who liberated much of South America from Spanish rule. The Constituent Assembly rejected the idea as frivolous and costly, but Chavez strong-armed the body into changing its vote. ''The mailed fist is coming out of the velvet glove,'' says political consultant Eric Ekvall. Yet the majority of Venezuelans who voted for Chavez are not bothered by his authoritarian tendencies. In fact, most cheered him on when he closed down Congress and the Supreme Court earlier this year. Still, how will Chavez react if citizens grow weary of promises and demand results? He hopes to stay in power until 2011, since the new constitution lifts a long-standing ban on consecutive reelection. If Venezuelans grow poor and angry enough, they may reject Chavez' path long before then. By Christina Hoag Correspondent Hoag covers Venezuelan business and politics. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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