QUERETARO, Mexico, Feb. 19 (UPI) -- Political excitement these days is to be found in Venezuela's hotels. It is there that the military launches offensives against the failing regime of President Hugo Chávez.
Monday, in the Best Western hotel in Caracas, a third military officer, the most senior yet, demanded that Chávez resign immediately. The comments by Rear Adm. Carlos Molina, who has just been appointed as Venezuela's Ambassador to Greece -- a position he says was forced on him -- were a broad and bitter condemnation of Chávez and his government.
Molina accused Chávez of violating the Constitution, of manipulating the legislative assembly and the judiciary; of dividing the Venezuelan people; of losing traditional allies at the expense of "links with non-democratic governments;" of a "dangerous relationship with the Colombian terrorist guerrillas;" of "corruption and mismanagement of public resources...to finance totalitarian goals;" of "weakening the armed forces...and trying to form Cuban-style militias."
It was a long list but one remark encapsulated Molina's attack. Chávez, he said, was seeking to form an "extreme left-wing tyranny."
After he had made his statement, reporters asked Molina if he feared reprisals.
"Absolutely not," he replied.
He was doing his duty, he said. Even before beginning his list of Chávez's crimes, Molina had said that his denunciation of the head of state was legitimate under the Constitution and mentioned the relevant articles in it. But it is probably fair to say that his bold attack and his confidence in his invulnerability rest less on an ability to defend his actions legally than on his conviction that "more than 90 percent of the armed forces shares his view." Chávez has lost control of the armed forces. They are now firing at him at will.
Molina's comments are a reliable guide to the reasons for the military's discontent. There is deep discontent within the military about Chávez's links with the Colombian guerrillas, his friendship with Cuban leader Fidel Castro, and his management of the armed forces. Rumors abound that guerrillas from two Colombian guerrilla groups, the Fuerzas Armadas Revolucionarias de Colombia and the Ejército de Liberación Nacional, enter Venezuela with impunity and rest there and there is also evidence that they have practiced extortion and kidnapping in Venezuela.
Speaking at the weekend, Chávez said there was "hyper-sensitivity" about his friendship with Castro. His defense rings hollow. What troubles Venezuelans, in the military and outside it, is that Chávez is seeking to emulate Castro and establish totalitarian power and a communistic economy. Chávez denies this. He said, also at the weekend, that he does not believe in a pure free-market system, which he termed "neo-liberalism," but in a mixed economy with both public and private sectors playing a role. But Molina again pointed to a reality in his statement: that money was flooding out of Venezuela and that the government needed to change policies in order to create "conditions favorable for domestic and foreign investors."
The outflow of money, the resultant drop in Venezuela's reserves and the emptying of the government's own coffers have become so serious that Chávez was persuaded Feb. 12 by his economic advisers to act urgently to address the problem. He floated the currency, the Bolivar, which had previously been held in a band by the Central Bank and which many analysts had judged to be overvalued by 30 percent-40 percent, and he announced a 22 percent cut in government spending.
Devaluation helps the government's finances by making dollar earnings from oil go further in bolivars. The currency has dropped from 795 bolivares to the dollar on Feb. 8 to 947 bolivars per dollar Tuesday: a fall of 19 percent. That and the planned budget cutback will help the government's fiscal position. Currency devaluation will also help Venezuelan industry: its exports will be more competitive and it will be better able to compete with imported competition.
Floating the currency therefore has an immediate benefit for the government's accounts and a medium-term one for the economy as a whole, if companies are able to invest and take advantage of their better competitive position. But this broader benefit will only come after a time and if the conditions are right for investment. They aren't.
With uncertainty so great at present, it is unlikely that anyone is going to commit themselves to investment and fresh production. And devaluation has a downside: an immediate one. Its short-term impact is to impoverish. Venezuelans' salaries have just fallen by a fifth in dollar terms. And the prices of imported goods in this import-dependent country are going to rise. Inflation is going to jump. In the past that has caused rioting by Venezuela's poor.
Devaluation makes economic sense and was essential, but the political costs for Chávez could be high. His remaining support, among the poor, could now be eroded.
After three years in office, Chávez is beginning to reap what he has sown. It is not just foreign investors and U.S. Secretary of State Colin Powell, who spoke out against Chávez last month, who are disturbed by his bizarre choice of friends and his reckless economic policies. Venezuelans have turned against him.
Floating the bolivar was the right thing to do but it has come too late. It seems only a matter of time before Chávez sinks. But the moment and the manner in which the end comes are uncertain, as is what will succeed him.
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