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Chavez’s Havana-to-Tehran Alliance at Stake as Venezuelans Vote

October 05, 2012

Chavez's Havana-to-Tehran Alliance at Stake as Venezuelans Vote

A political mural features President Hugo Chavez in Caracas, Venezuela. Photographer: Noah Friedman-Rudovsky/Bloomberg

Venezuelans voting whether to re- elect Hugo Chavez on Oct. 7 will also decide the fate of a regime that forms the linchpin of an alliance from Iran to Cuba against U.S. policies.

Chavez has tapped the world’s largest oil reserves to provide about $7 billion annually in subsidized crude to Cuba and its Caribbean neighbors, more than three times what the U.S. spends in aid in the Western Hemisphere. He ended anti-drug cooperation with the U.S. in 2005 and signed more than 100 accords with Iran even as President Mahmoud Ahmadinejad’s government faces growing isolation over its nuclear program.

In the 58-year-old president’s tightest election yet, challenger Henrique Capriles Radonski has blasted his rival for “exporting revolution” while failing to address a surge in crime and 18 percent inflation. Without Chavez, countries such as Nicaragua and Bolivia would lose their “standard bearer,” said Cynthia Arnson, Latin America program director at the Woodrow Wilson Center for International Scholars in Washington.

“A Capriles victory would dramatically alter Venezuela’s alliances,” Arnson said in an Oct. 1 interview. The loss of Chavez “could further isolate the small number of countries that have considered themselves part of that alternative political vision. Cuba would be a big loser.”

Venezuela receives thousands of Cuban doctors, nurses and sports trainers in exchange for a daily supply of 100,000 barrels of oil that undermines the U.S. embargo against the 53- year-old government of Raul and Fidel Castro. Chavez bonded with Fidel after the Cuban revolutionary supported him during a failed 2002 coup. He has traveled to the Caribbean island to undergo surgery for cancer three times since June last year.

‘Viva Fidel!’

At a campaign event Oct. 2, Chavez said he’d received a letter of support from Castro.

“Viva Fidel!” Chavez told thousands of supporters at the rally in Barquisimeto. “Viva Cuba!”

Officials at Venezuela’s Information Ministry didn’t respond to messages left by Bloomberg.

As U.S. and European sanctions aimed at curbing Iran’s nuclear program send the rial plunging and sow unrest, Chavez has remained a steadfast ally, saying that maintaining ties with the Islamic Republic is a “holy matter.” He’s visited Iran nine times during his almost 14 years in power and secured agreements to help build car and tractor plants in Venezuela.

The U.S. last year imposed sanctions on Petroleos de Venezuela SA, the state oil company, for working with Iran’s energy industry. According to the State Department, it sent two cargoes of gasoline additives worth $50 million to Iran from December 2010 to March 2011.

Assault Rifles

After the U.S. imposed an arms embargo on Venezuela in 2006, Chavez tapped $4 billion in financing from Russia to buy military equipment. Chavez said in June that Venezuela would produce 25,000 assault rifles a year in addition to ammunition, grenades and bulletproof vests with help from the U.S.’s former Cold War foe.

In Nicaragua, Venezuela’s oil and aid program totaled $609 million last year, or almost 10 percent of gross domestic product, according to the Central American country’s central bank. That helped finance agricultural cooperatives and paid bonuses to 150,000 government workers, the bank said in a March report.

U.S. aid to Latin America and the Caribbean totals about $1.9 billion annually, including counter-narcotics programs for Central America, disaster assistance in Paraguay and education projects in Jamaica, according to the Congressional Research Service.

Anti-U.S. Rally

When Argentina was blocked from international credit markets in the wake of its 2001 default on $95 billion of bonds, Chavez stepped in to buy more than $5 billion in debt, helping then-President Nestor Kirchner snub investors such as New York- based hedge fund Elliott Associates LP. Kirchner in 2007 let Chavez host an anti-U.S. rally at a Buenos Aires stadium.

Chavez’s defense of international pariahs such as former Libyan leader Muammar Qaddafi and Zimbabwe’s Robert Mugabe has drawn ridicule by Capriles.

“Didn’t we give Bolivar’s sword to Qaddafi two times?” Capriles said at a press conference Oct. 1, referring to Latin American liberator Simon Bolivar. “Who’s going to want to invest in our country? We want relations with countries we have an affinity with.”

‘It’s Dark at Home’

If elected, Capriles has vowed to review all of Venezuela’s international agreements, saying the country shouldn’t be “giving away” its oil resources. Chavez’s foreign projects are undermining development in Venezuela, he said at his final campaign rally yesterday.

“What has 21st century socialism done for you,” Capriles said to supporters. “He’s given your resources to other countries. Electric plants in Nicaragua, tractors in Honduras, ambulances in Bolivia. He’s turned the lights on abroad while it’s dark at home.”

Still, Capriles said in an Oct. 3 interview on Venevision that he’d maintain relations with countries such as Cuba and China.

Boosted by election-year spending, Venezuela’s economy will expand 5 percent in 2012, according to the median estimate of analysts polled by Bloomberg. The country’s 18 percent inflation rate is the highest among 102 economies tracked by Bloomberg after Belarus, Iran and Argentina. It has the highest borrowing costs among major emerging markets, according to JPMorgan Chase & Co. indexes.

China Ties

Venezuela’s ties with China, which has lent the government $42.5 billion, may even improve in a Capriles administration, said Javier Corrales, co-author of “Dragon in the Tropics: Hugo Chavez and the Political Economy of Revolution in Venezuela.”

“You’re likely to see more attention to efficiency in oil production and ultimately the Chinese might welcome that,” said Corrales, a political science professor at Amherst College in Massachusetts, in an Oct. 1 interview. “I would be surprised to see a major issue between them.”

The eight-member bloc of Latin American countries known as Alba, a political alliance forged by Chavez, risks collapse without the economic and ideological “backbone” of Venezuela, according to Corrales. Members, including Ecuador, Bolivia and Dominica, created the sucre, a virtual currency that is used in some trade between the countries. The bloc was later eclipsed by the creation of the Union of South American Nations, backed by former Brazilian President Luiz Inacio Lula da Silva.

In Decline

“The Alba alliance with Chavez as the leader has already seen a significant decline,” Arnson said. “If Chavez won again, his declining health and a lack of clear successor means that it’s even more weakened as a political force in the region.”

Ecuadorean President Rafael Correa, one of Alba’s founding members, said Oct. 2 at a summit in Lima that he would maintain “excellent” relations with Venezuela even if Capriles were elected.

Regardless of the result, Chavez has changed the region’s political dynamic by championing an alternative to U.S. power and economic policies, said Miguel Tinker Salas, a professor of Latin American history at Pomona College in Claremont, California, and author of “The Enduring Legacy: Oil, Culture and Citizenship in Venezuela.”

“He blazed the trail,” Tinker Salas said in an Oct. 2 interview. “He’s transformed the way that Latin America was viewed.”

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: Philip Sanders at psanders@bloomberg.net


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