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02 Feb 1994 - 02 Feb 1999 - Rafael Caldera Rodríguez

Since the overthrow of Gen. Marcos Perez Jimenez in 1958 and the military's withdrawal from direct involvement in national politics, Venezuela has enjoyed an unbroken tradition of civilian democratic rule. This earned Venezuela a reputation as one of the more stable democracies in Latin America. Until the 1998 elections, the Democratic Action (AD) and the Christian Democratic (COPEI) parties dominated the political environment at both the state and federal level.

In 1993, Congress impeached Perez on corruption charges. Deep popular dissatisfaction with the traditional political parties, income disparities, and economic difficulties were some of the major frustrations expressed by Venezuelans following Perez's impeachment. Elections were held in the fall of 1993, and Rafael Caldera (president, 1969–74 as a Christian Democratic (COPEI)) was elected on the Convergencia Nacional (National Convergence) ticket, a center-right party which split from the Chritian COPEI in 1993. President Caldera sought to restore confidence in a government previously riddled by scandal. An emerging oil industry was rapidly absorbing U.S. investment and produced more oil for U.S. consumers than any other country. Through fiscal and monetary discipline, Venezuela is beginning to tame corruption and inflation.

He had been President during the early seventies. He was immensely popular because during his earlier incumbency as President, he had successfully undertaken public works like the autopistas, schools, transportation, education, all sorts of public works programs that were still considered to be landmarks in terms of the economic, political, and social development of Venezuela. So, he was the grand old man of Venezuelan politics. He won the election that fall in the expectation that he would turn things around, bring Venezuela back to a state of prosperity and equilibrium. In March 1996, an epochal event occurred, hardly creating a ripple in the world press. In its third plenary session, the members of the Organization of American States (OAS) adopted the Inter-American Convention Against Corruption. The convention is often referred to as the Caldera Convention, after the President of Venezuela who was one of the driving forces behind it. The United States played a major part in developing the document. The major leadership, however, was provided by the Latin American countries who contributed direction and energy in ensuring the document would be written and approved. President Caldera used his personal influence to get broad agreement throughout the Americas.

Unfortunately he didn’t get more popular support. He was probably moving too quickly for the political system to stand. His previous record as President in the early 1970s reflected statist kinds of ideas where the government should get involved in major economic activities and have a strong hand in promoting development through the public sector. This was the time when a lot of the major public sector enterprises were conceived. He was the one who was credited with the establishment of PDVSA, the public sector petroleum enterprise that produced, refined, marketed, and exported crude and product from Venezuela.

The administration of Carlos Andreas Perez was perceived as relying too much on technocrats in key positions in the national bank, the petroleum industry, the Ministry of Finance, and so on. Perez was often criticized for relying too much on these people and not enough on the political experts who had a better handle on how rapid a pace Venezuela would tolerate in terms of economic reform. These technocrats had a strong influence on Carlos Andreas Perez. But to a man like Rafael Caldera, it seemed as though a lot of what had gone wrong in Venezuela under Carlos Andreas Peres could by laid at the doorstep of these technocrats, who had undue influence over the course of events in Venezuela.

Once Caldera was elected he immediately instituted a number of initiatives that were designed to address the problems that made the Venezuelan public unhappy. He instituted exchange and price controls. He also promised the Venezuelan people that their interests would be taken as the highest priority. He signaled that there would be a period where he would digest what had happened and decide what elements, if any, of the reform program to pursue.

In effect, however, he didn’t continue the reforms. The result was inflation, a run on the Bolivar, and a decline in foreign exchange reserves. At the beginning of Caldera’s administration Venezuela had between 12 and 13 billion dollars in reserves. Within seven or eight months, the reserves had declined to about seven billion dollars worth of reserves, of which a lot was gold and not really useable for paying Venezuela’s obligations. They had a billion or two billion dollars in reserves that could actually be drawn upon on short notice. This caused a major crisis and the government responded by tighter controls on currency exchanges. The result was bureaucratic chaos. The rules and regulations had been drawn up hastily and weren't clear. There were any number of ways that people could get around the restrictions. A black market in currencies developed. The economic situation deteriorated. Caldera’s efforts to deal with the financial crisis had failed.

Eventually, he had to reverse some of his policies. The Bolivar became freely exchangeable at a floating rate and was quickly devalued. It quickly went about 65 Bolivars to the dollar down to 270 or 280 to the dollar, practically overnight. By mid-1997 the exchange rate was around 470 bolivars to the dollar, and the inflation rate was between 30-40% a year and real interest rates were negative. With the lifting of price controls, the shock on the economy was tremendous. In the first year after the lifting of price controls, the black market disappeared. The consumer price index as measured in Venezuela went up by something like 45 or 50 percent. At the same time, people on Venezuela's social security system and other pensions suffered greatly because suddenly a 3,000 Bolivar monthly pension was worth little. So, there were a lot of complaints. Caldera’s performance was a disappointment to many.

In February 1992, a group of army lieutenant colonels led by Lieutenant Colonel Hugo Chávez Frías, an outspoken paratroop commander, had mounted an unsuccessful coup attempt, claiming the political system no longer served the interests of the people. In 1994 public disaffection with the political system compelled President Rafael Caldera to pardon Chávez, who had attained folk-hero status while in prison.

Until the elections of December 1998, the president had always been a representative of one of the two so-called traditional parties—the AD, which is social democratic; and the Social Christian Party (Comité de Organización Política Electoral Independiente—COPEI), which is Christian Democratic. By 1998 the AD and COPEI had become largely discredited because of their association with corrupt and inept governments. Exploiting the popular desire for new leadership, Chávez ran for president in the December 1998 elections as the candidate of Patriotic Pole (Polo Patriótico—PP), an alliance of his own Fifth Republic Movement (Movimiento Quinta República—MVR) and two other leftist parties, Homeland for All (Patria Para Todos—PPT) and Movement Toward Socialism (Movimiento al Socialismo—MAS). He won a landslide victory, garnering more votes than any candidate in Venezuela’s history.

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