Venezuela: The Next Liberator?

The Pérez approach to Latin debt worries U.S. bankers

WHEN EIGHT Latin American Presidents met in Acapulco, Mexico, in 1987, they did not invite Ronald Reagan to join them. U.S. diplomats were allowed to attend, but only if they queued up for credentials along with the 800 journalists on hand to cover the historic event: it was the first hemispheric summit that the President of the United States did not attend. “New winds are blowing through our continent, the winds of independence,” Brazil’s President, José Sarney, declared. Other Latin American Presidents talked of refusing to repay the region’s $430 billion foreign debt, though their tough talk has not led to action. The Acapulco meeting set the stage for a dramatic change in U.S.-Latin American relations, but no one among the Latin Americans assumed the leading role. Carlos Andrés Pérez was still waiting impatiently in tiie wings.

Pérez, a former President of Venezuela, won re-election this past December. His country, one of the three largest foreign suppliers of oil to the United States, has been our military ally in the strategically important southern Caribbean and is a showcase nation in Latin America for the democratic ideals that we profess. Pérez has set out to do more than lead his own country; he intends to unite Latin America.

The boom-bust cycles of recent Years, and a succession of American Presidents whose chief foreign-policy interests lay elsewhere, have left a legacy of discontent south of the border. Latin American nations are staggering under the weight of their foreign debts, and high U.S. interest rates have not helped them. The Reagan Administration, however, has kept its distance from the debt crisis. Its one substantial policy initiative was the Baker Plan, a moral appeal to U.S. banks to lend $20 billion to the biggest debtor nations. U.S. bankers, however, resisted the Baker Plan, and U.S. trade barriers persisted, while world prices for such basic Latin American exports as copper, oil, and beef fell and interest payments on the debt siphoned off $25 billion a year that might have gone into economic development. Latin America looks back on the past several years as a time of “de-development.”

As Latin America wallows in its worst depression since the 1930s, a new generation of left-leaning populists has risen up, determined to press for anti-debt action. Cuauhtémoc Cárdenas, who placed a strong second in the Mexican presidential elections last year, argued that debt payments were crippling the economy. Carlos Saul Menem, in Argentina, and Leonel Brizola, in Brazil, became leading presidential candidates by taking similar stands. Pérez is part of this wave of populism. He wants a radical restructuring of Venezuela’s $33 billion debt, but he wants more than that. Pérez believes that for Venezuela to pry a better deal out of U.S. banks requires the leverage of a united Latin America. He wants Latin American nations to join together to get out from under what he calls the “paternalism” of the United States and the “economic totalitarianism” of the International Monetary Fund.

THE FIRST LATIN leader to take a strong stand on debt was the Peruvian President, Alan García. Young and handsome, García was instantly acclaimed in the region when he made the dramatic announcement on the day of his inauguration that he would limit Peru’s debt-service payments to 10 percent of its export earnings. But García never moved to build an international alliance, and ultimately he abandoned his anti-debt crusade under the pressure of economic collapse and the threat of a military coup.

Pérez has a better chance than García of turning rhetoric into reality. Oil-affluent Venezuela offers a more stable platform than Peru from which to launch an international organizing effort, and the sixty-six-vear-old Pérez is better prepared than the youthful and inexperienced García to line up world support. During fifteen years of ceaseless globetrotting in behalf of Third World causes, Pérez has built up a network of national leaders whom he can recruit into his united front against the debt. In short, Perez is the kind of leader who makes foreign bankers fret. They are not reassured by his record as President from 1974 to 1979.

A social democrat, Pérez ran a freespending regime that nationalized Venezuela’s vast oil industry and its huge iron-ore deposits, built tremendous aluminum and steel plants, imposed new controls on foreign investment, and issued hundreds of presidential decrees requiring everything from attendants in public bathrooms to double severance pay for laid-off workers. After the first oil boom ended, in 1976, Pérez turned to foreign banks to finance his spending. In the next two years the government’s foreign debt more than quadrupled, to $7.2 billion. In foreign affairs Pérez took stands unsettling to the United States. He established diplomatic relations with Cuba, lobbied the U.S. Congress to turn the Panama Canal over to General Omar Torrijos, and supplied guns to the Sandinistas while the Carter Administration was mulling over its options during the last days of the faltering Somoza regime. Awash in a flood of oil profits and big loans, and surrounded by a group of high-rolling cronies nicknamed “the Twelve Apostles,” Pérez left office in a storm of scandal that blew the opposition into power. The incoming President complained that he had inherited a “heavily mortgaged” country. Soon thereafter Pérez was accused by the ethics committee of his own Democratic Action Party of “moral and administrative responsibility” for a kickback scheme on a refrigerator ship bought for twice its value and given to landlocked Bolivia. Pérez denies any guilt in the affair and says his sole sin was “being extremely popular.”

CAP, as Pérez is known in Venezuela, is still popular. During frantic campaign sprints through poor neighborhoods he stirred huge crowds into a frenzy. In December he became the first former President to win re-election in Venezuela’s thirty years of democracy. His defeated opponent, a youthful and attractive politician named Eduardo Fernández, tried to sell himself as a fresh alternative to the old politics, but Fernández’s strategy had a fatal flaw. Millions of poor and working-class Venezuelans have fond memories of CAP’s first term. They remember him as the President who doled out billions of petrodollars in the oilboom days. Pérez won’t have that luxury this time around. In the first six months of 1988 Venezuelan oil exports earned $1 billion less than anticipated. CAP’s followers expect him to make a miracle nonetheless.

PÉREZ IS NOT popular with everyone. The more conservative leaders in his party consider him a potentially dangerous demagogue. Executives in the staterun oil industry worry about his meddling in their affairs. Businessmen are uneasy. They recall that Pérez imposed restrictions on firings and hirings and greatly expanded the government’s role in the economy. Businessmen also fear hyperinflation from increased social spending. Bankers are talking about capital flight. Pérez has tried to dispel businessmen’s fears. In frequent preelection speeches to business groups in both the United States and Venezuela he invited new foreign investment and promised that he would not nationalize any more industries, banking included. In fact, he said, state-owned regional banks should be privatized. This may have a free-market ring, but Pérez continues to believe strongly in a command economy. Anything else is hard to imagine in a country that lives almost entirely on the revenues of its governmentowned petroleum industry.

Venezuela is a consumer democracy, and Pérez is a master of its mass-based politics. Voters aren’t attracted to him for his good looks, Tall, balding, and with a spreading nose and a receding chin, he is no movie star. Nor is he a great orator. CAP’s appeal is CAP himself. On the day of Democratic Action’s presidential primary I watched him sweep into campaign headquarters to claim the party’s nomination. Waving his arms overhead like two windshield wipers, Pérez pushed to the podium, grabbed the microphone, and went into a gritty-voiced litany: “Hands to work! Hands to work! Hands to work!" The message was the man, and the crowd loved what it heard. The place shook. Pérez and the crowd— perfect partners in the rumba of Venezuelan politics.

Those who work with him say Pérez is consumed by politics. He sleeps no more than four or five hours a night, getting up before dawn to start another day of endless meetings, telephone calls, and trips around the country and around the globe. What makes Pérez run? Egotism certainly plays a part. His lust for the limelight is legendary. In his public statements he never seems to go more than a sentence or two without falling back on the first-person singular. But Pérez’s unruly ego is disciplined by a messianic sense of mission. Venezuela is the birthplace of the South American liberator Simón Bolívar, and Pérez wants to make history by fulfilling the Bolivarian dream of Latin American unity.

CARLOS ANDRÉS PÉREZ was born on October 27, 1922, in the Venezuelan state of Táchira. Straddling a finger of the Andes, little Táchira has two principal products, coffee and autocrats. It has produced all three of Venezuela’s twentieth-century military dictators— feared men who ruled the country for a total of forty-six years.

Pérez entered politics at the age of fifteen, when, impatient for political pow - er, he gave up on earning a university degree and got a job. Within eight years he was private secretary to Rómulo Betancourt. the patriarch of Venezuelan democracy. After Venezuela overthrew its last dictator, in 1958, Betancourt became the country’s first popularly elected President, and Pérez was elected to the legislature. Betancourt later made Pérez the number-two man in the Interior Ministry. When the Minister resigned unexpectedly, Pérez moved up. At age forty, just when Fidel Castro was inspiring and stirring up revolution in the region. he became Venezuela’s chief of internal security. Castro supported the Venezuelan Communist Party’s armed rebellion, which was aimed at provoking a military coup and preventing another round of democratic elections. Pérez responded with an unflinching repression that made him anathema to the left, including the Marxists in his own party. In 1967 the Marxists split from Democratic Action and formed a separate party, and Pérez himself eventually moved into the leadership of what then became Democratic Action’s left wing.

PÉREZ DOESN’T CONCEAL his intention to leap from Venezuela’s modest stage to the much larger amphitheater of world politics. During the presidential campaign he promised to make “international policy the foundation of national policy,” and his campaign literature prominently featured his role as a vicepresident of the Socialist International. For years he has been a fixture at global gatherings. His message at these meetings is that the financial system that was set up at the Bretton Woods conference, after the Second World War, has put developing nations in a straitjacket, and that under cover of protecting Bretton Woods, which created the IMF, the industrialized countries pay less and less for Third World commodities, raise tariff barriers against industrial imports, and demand growth-stopping debt payments. This debt is Pérez’s bête noire. He calls it “the greatest threat to our national sovereignty in modern times.”

“The banks interpret him as saying he wants a debt moratorium,” says Beatrice Rangel, a Harvard-educated political scientist who advises Pérez on relations with the United States. “But he’s not saying that the debt shouldn’t be paid. He’s saying that it can’t be paid.”That is, it can’t be paid first. Economic development must come first. After Latin American governments inject enough money into their economies to stimulate growth of three or four percent, Pérez says, foreign creditors can have their due. Alan García pushed for a similar program and failed. Can Pérez succeed? “García didn’t have a project,” Rangel told me. “CAP does.”

Perez’s project is Latin American unity. The banks deal with Latin American countries individually, but Pérez wants the debtor nations to unite. He is not advocating default—at least not yet. If Latin America defaults on its debts, banks won’t grant new loans, and Pérez wants new loans to invest in development. In fact, he wants the banks to promise new loans as a condition for Latin America’s agreeing to repay the ones. That is plank number one in platform. Plank number two is that repayment schedule must be based how much Latin America earns in exports—the García formula (bur though García set a 10 percent ceiling, Pérez has talked about 20 percent). From this follows his third and last plank: the United States must resist protectionist pressure and keep open its markets to Latin American exports if Latin America is to meet its debt obligations. These three ideas form what Pérez calls his “framework for negotiations.”

In effect, Pérez wants to turn the tables on the banks and the IMF. IMF negotiators impose economic-austerity programs on debtor nations as a condition for granting new loans. Pérez is saying that Latin America should use its debt as a bargaining chip to win its demands from the banks. The Pérez paln is not original; similar notions have been circulating for years. What makes the plan significant is that Pérez stands behind it. For the first time since 1982, when Mexico’s near-default heralded the world credit crisis, a chief of state of a major Latin American nation is deeply committed to forming a common front against the debt.

As PÉREZ BEATS the drum for Latin American unity, he has been preceded by profound changes that make his organizing effort easier. The twenty Latin American republics are no longer pastoral societies ruled by military caudillos, lordly landowners, Catholic clerics, and the U.S. ambassador. In a single generation the Latin American countries have switched from being twothirds rural to being two-thirds urban, and along with this shift have come expanded education, more mass media, and stepped-up industrialization. Abraham F. Lowenthal, the executive director of the foreign-policy study group Inter-American Dialogue, says that Latin America’s industrial growth from 1960 to 1980 was comparable to that of the United States from 1890 to 1914, the period of the so-called Gilded Age of industry.

The changes going on south of our border did not fully engage the attention of the Reagan Administration. Preoccupied with the leftist regime in Nicaragua, the administration tended to underestimate the significance of a Latin American challenge coming from outside the East-West context. As the Contadora Group evolved into the Group of Eight, which met in Acapulco in 1987, as Central America developed its own peace plan, and as Washington suffered foreign-policy defeats in Panama and Haiti, the United States became less and less influential with Latin American policy-makers.

Whether the Bush Administration will be more successful in its dealings with the new Latin America remains to be seen. The forecast is for a less ideological and more pragmatic U.S. foreign policy under Secretary of State James Baker. A softening of this country’s reflexive anti-communism would no doubt help.

Toward the end of the nineteenth century the Lnited States promoted the notion of Pan-Americanism to offset the Latin American unity movement inspired by Simón Bolívar. The Pan-Americanists laid claim to Bolívar’s cherished legacy, but the real purpose of their Pan American Union, the forerunner of today’s Organization of American States, was to serve as a forum in which the United States could maintain its influence over individual Latin countries and set the agenda for the region as a whole. That arrangement seems no longer workable. When the Group of Eight got together again last October, in Punta del Este, Uruguay, their speeches were full of ringing demands for a new dialogue with Washington.

What the new mood of militance will achieve is hard to predict. Latin America’s reach has so often exceeded its grasp that most observers remain skeptical. Simón Bolívar died poor and disconsolate after failing to unite Latin America’s disparate, warring republics. Carlos Andrés Pérez, however, is eager to strive once again where others have failed. “CAP is in love with history,”says Clemente Cohen, a longtime political adviser to Pérez. “That’s his last hurrah.”

—. Merrill Collett