02 Feb 1989 - 31 Aug 1993 - Carlos Andrés Pérez Rodríguez

In 1989, the prevailing political calm was shattered when Venezuela experienced rioting in which more than 200 people were killed -- the so-called Caracazo, in response to an economic austerity program launched by President Carlos Andres Perez of the social democratic Acción Democrática (AD Democratic Action Party). Subsequently in February 1992, a group of army lieutenant colonels led by future President Hugo Chavez mounted an unsuccessful coup attempt, claiming that the events of 1989 showed that the political system no longer served the interests of the people. A second, equally unsuccessful,coup attempt by other officers followed in November in 1992.

When President Pérez assumed office in 1989, he imposed austerity measures in an attempt to persuade foreign bankers to restructure the old debt and make new loans available to Venezuela. He achieved some initial success; austerity programs, however, have always proven difficult to sustain in the face of political and electoral pressure. Venezuela had a mainly two-party system - Democratic Action (Acción Democrática--AD), which adheres to social democratic line, opposed by Social Christian Party (Comité de Organización Política Electoral Independiente--COPEI). AD and COPEI tended to alternate in presidential elections until 1989, when AD's Pérez succeeded fellow AD member Lusinchi. Differences in ideology between AD and COPEI were slight; both supported generous social programs and state-directed industrialization efforts until Pérez instituted significant reforms in 1989.

In 1989 the second Pérez administration launched profound policy reforms with the support of structural adjustment loans from the International Monetary Fund (IMF) and the World Bank. In February 1989, price increases directly related to these reforms sparked several days of rioting and looting that left hundreds dead in the country's worst violence since its return to democracy in 1958. Ironically, Pérez, who oversaw much of the government's expansion beginning in the 1970s, spearheaded the structural reforms of 1989 with the goal of reducing the role of government in the economy, orienting economic activities toward the free market, and stimulating foreign investment. The most fundamental of the 1989 adjustments, however, was the massive devaluation of the bolívar from its highly overvalued rate to a market rate. Other related policies sought to eliminate budget deficits by 1991 through the sale of scores of state-owned enterprises, to restructure the financial sector and restore positive real interest rates, to liberalize trade through tariff reduction and exchange-rate adjustment, and to abolish most subsidies and price controls. The government also aggressively pursued debt reduction schemes with its commercial creditors in an effort to lower its enervating foreign debt repayments.

The Venezuelan military, the National Armed Forces (Fuerzas Armadas Nacionales--FAN), had developed since 1958. By the early 1990s, the FAN had become a more professional, better- trained, better-equipped, and better-disciplined force than it was under the regime of Pérez Jiménez. Nevertheless, although the FAN was technically removed from politics, it was not an apolitical institution. Members of the officer corps were known by their party inclinations, and the fortunes of careers rose and fell with the tides of the national balloting. By the 1990s, however, the role of the military no longer appeared to be that of political arbiter, even though participants in the surprising and unsuccessful military coup against President Pèrez in February 1992 appeared to be at least partially motivated by a desire to return to such a role. Therefore, the true role of the military was subject to debate. Most signs indicated that the majority of Venezuelans respected military personnel for their professionalism and their traditional image as guarantors of stability and national sovereignty. At the same time, however, the absence of a viable external threat (Venezuela has never fought a war outside its own borders) undercut the FAN's most vital raison d'etre. Although internal security was in fact a mission of the FAN, it was not one about which the institution was particularly proud or enthusiastic. With the waning of the global communist threat and the slow disintegration of Fidel Castro's regime in Cuba, the FAN will be forced to reassess both its strategic assumptions (e.g., the need for maintain a capability to project power in the Caribbean Basin region) and its order of battle during the 1990s and beyond.

Venezuelan society faced a similar reassessment. By 1992, the old assumptions about the nation's future appeared to be no longer valid. Despite impressive reserves, oil-based growth had proved to be as erratic as that based on any other commodity. The social welfare system, adequate under normal economic conditions, proved insufficient to provide for the basic needs of many Venezuelans under the extraordinary circumstances that prevailed under the second Pèrez administration.

President Pèrez returned to the country's leadership vowing to restructure an economic system that had appeared quite prosperous and successful during his first term. True to his word, Pérez proceeded to implement policies aimed at opening the Venezuelan economy and reducing state intervention, control, and subsidies that distorted that economy's performance. As was true elsewhere in Latin America and in Eastern Europe, however, these major policy adjustments, among them elimination of subsidies and devaluation of the currency, inflicted suffering on the majority of the population, especially the poor. Privatization of state- owned industry also entailed hardship for both lower- and middle- class workers whose jobs were lost in the transition to private ownership.

The irony in the domestic economic program lay in the fact that, macroeconomically, Pèrez's policies produced positive results rather rapidly. During the first half of 1991, the gross domestic product grew at a very healthy 10 percent annual rate. The administration actually needed to slow the economy down somewhat by cutting back on public spending in order to avoid boosting inflation. Accordingly, the monthly rate of increase in prices slowed from 3.1 percent in July to 1.9 percent in September. Overall, projections held that the country's oil-related GDP would increase by an impressive 8.7 percent, while non-oil GDP would follow close behind at 7.7 percent. Unemployment figures also showed a positive trend, with overall unemployment dropping from 10.9 percent in 1990 to 10.3 percent during the first half of 1991. One worrisome element in the positive trends was that some portion of the increased growth rate was attributable to a rise in world oil prices.

If many Venezuelans complained privately about economic conditions and the performance of the government, groups such as labor unions and university students took their grievances to the street. Some of the worst of these disturbances took place in November 1991. On November 7, the main labor confederations called for a twelve-hour general strike to press their demands for a repeal of gasoline price increases, approval of a wage increase equal to 30 percent of inflation, a reorganization of the social security system, and a halt to the planned dismissal of 300,000 government employees. The actions were effective, slowing transportation and economic activity in Caracas, Aragua, Bolívar, and Carabobo. Rioting reportedly broke out in Bolívar. Confrontations between police and student protesters in Caracas on November 20 left three dead.

Another assumption about Venezuelan society--that drugs were strictly a Colombian problem--also fell victim to the events of the 1990s. It remained true that the major drug organizations operated out of Colombia. By the early 1990s, however, their encroachment into Venezuela, an encroachment that Caracas once viewed as no more than a minor irritant, had become significant. Colombian drug traffickers, under increasing pressure at home, began to expand their operations into Venezuela. The porous frontier region between the two countries had always facilitated some level of smuggling, illegal immigration, and guerrilla movement. The intensity of transshipment and money laundering activity, however, rose dramatically as the Cali Cartel, allegedly with the assistance of Sicilian organized crime families, began to exploit the infrastructure of Venezuela's export-minded economy. The drug dealers also reportedly benefited from contacts with corrupt Venezuelan politicians. As a result, estimated annual cocaine exports to the United States through Venezuela rose from 88 tons in 1990 to perhaps 220 tons in 1991. In addition to the possibility of increased domestic drug consumption, the rapid expansion of this illicit commerce threatened to eat away at the foundations of a society already suffering from the effects of the government's economic shock program.

Despite domestic criticsm, Pérez continued, during his second term in office, the foreign activism that had marked his first. The president was a prominent voice in the debate over what policy approach Western Hemisphere nations should take with regard to Fidel Castro's Cuba in light of the collapse of communism in Eastern Europe and the Soviet Union. Pérez argued in favor of expanded ties with Cuba in order to promote democracy in the island nation. Pérez also sought to expand economic cooperation with Colombia and moved to allow tariff-free imports into the Venezuelan market from the islands of the Caribbean. The president's most visible gesture took place in late September, 1991, when he accepted as an exile the ousted president of Haiti, Jean-Bertrand Aristide. The administration strongly supported Aristide, a Roman Catholic priest and a devotee of liberation theology (see Glossary), and helped push for the embargo of Haiti eventually adopted by the Organization of American States (OAS).

In the immediate aftermath, it was not clear what factors exercised the most influence over the participants in the attempted military coup of February 4, 1992. The first news of the uprising came as a shock to observers outside of Venezuela. Coup rumors apparently had been circulating for some time in Caracas; most Venezuelans had heard such talk before, however. Shortly after midnight, troops from at least five army units attacked key sites in the capital and three other cities. One objective of the attacks was to assassinate the president. Reportedly, some small arms rounds did strike the president's office, even leaving bullet holes in his desk. The high command and the overwhelming majority of FAN units remained loyal to Pérez, however, and quelled the uprising within twenty-four hours.

In many ways, the aftermath of the coup attempt proved more interesting than the insurrection itself. Although not supported by the majority, the conspiracy apparently had attracted a significant number of mid-level officers (captains through lieutenant colonels) officers. Some of these young officers were considered to be the "best and brightest" in the FAN. The conspiracy's leader, Lieutenant Colonel Hugo Chávez, seemingly struck some resonant national chords with his post-capitulation statements condemning the corruption and indifference of the government. Some of the residents of Caracas's ranchos, or slums, expressed sympathy with the rebellious soldiers. Some members of the middle class echoed those sentiments. Just as the population at large resented perceived corruption among the government leadership and the bureaucracy, so too did military personnel harbor bitterness toward those at the top. The tightening of the defense budget, combined with the general economic woes, also had had an impact on the military. Lower- ranking officers and enlisted personnel, who once had believed that their comparatively comfortable standard of living was secure, increasingly objected to the prosperity of their general officers, a prosperity allegedly based on corruption. If nothing else, the coup attempt almost certainly will prompt heightened attention from the government to military pay and perquisites.

Pérez publically vowed to maintain his economic policies despite the coup attempt and marked absence of public support for this government. It appeared likely, however, that government spending on social programs would increase in an effort to respond to popular discontent. The return to prosperity, if it can be achieved, will have to accomplished with some degree of equity. As of the early 1990s, however, that appeared to be a daunting, difficult, and demanding task.

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. While President Carlos Andreas Peres was awaiting trial, he was isolated from political developments in Venezuela. There was an interim President - Ramón José Velásquez Mujica - who was basically an academician, well respected and a member of Congress, but who lacked a strong political base. There were six months of almost drifting where the interim President was charged with taking care of the day to day business, but did not have the mandate to embark in any new initiative. So, none of the serious problems of Venezuela were addressed. He had been selected by the Congress. He was simply to take care of the business of the President until such time as elections could be held. They were held that fall. Rafael Caldera was elected.