In 2001, on one of his many foreign trips, Hugo Chavez visited the editorial offices of The Economist in London. Over coffee and biscuits, he expounded on his globetrotting diplomacy aimed at sustaining the oil price, which had only recently climbed from the low levels of the late 1990s. Asked for his response to criticisms in Venezuela that he was concentrating all power in his own hands, he suddenly unleashed a lengthy diatribe, accusing his enemies of lying and his questioner of being an opposition propagandist. Already running late, he stopped on the way out to chat up the receptionists, two young black women, as if they were Venezuelan voters. Across the road, in Lancaster House, several hundred people were waiting for him to give a lecture. By the time Chavez arrived, more than half an hour late, the British foreign-office minister deputed to welcome him was already halfway through his speech.

Hugo Chavez is a man of many contradictions, and remains so after eight years in power. He is a compulsive communicator, a seducer of audiences in the manner of a televangelist, as Cristina Marcano and Alberto Barrera, two Venezuelan journalists, point out in a perceptive biography.1 He has been compared to Zelig, the protagonist of a Woody Allen film who assumes the characteristics of whoever he is talking to.2 Chavez can be cordial, warm and amusing. But he is also arrogant, prickly and paranoid - he was so even before a coup attempt against him in 2002. He believes in the accumulation of power through systematic confrontation. Even more than his bête noire, George Bush, Chavez takes the view that people are either with him or against him.3 He is tactically reckless, but strategically calculating. His rhetoric is incendiary, but his actions are sometimes surprisingly timid. Some of these ambivalences were noted by Gabriel Garda Marquez, who interviewed Chavez shortly before he became president in 1998. He concluded that there were 'two Chavezes'. One was a potential savior of his country. The other was 'just another despot'.4 As Teodoro Petkoff, a newspaper editor and former planning minister, has noted, Chavez also enjoys that most precious of qualities for a politician - luck. This has notably included the upswing in the oil price since 1998. It has also been his good fortune to be consistently underestimated by his opponents.5

Chavez is the most controversial figure in contemporary Latin America. He claims that his 'Bo1'tvarian Revolution' has replaced a corrupt representative democracy with a superior 'direct democracy', and is substituting 'twenty-first-century socialism' for  'savage capitalism'. His supporters argue that Chavez is not only successfully challenging globalization and the hegemony of the United States but offering a better life to his country's poor. According to one foreign propagandist for his regime, 'a slow-burning revolution is now underway in Venezuela ... Latin America is witnessing the most extraordinary and unusual political process since the Cuban revolution nearly half a century ago.' 6 On the other hand, many of his opponents see Chavez as a dictator, albeit an elected one, and they have repeatedly tried to oust him. Some of them also draw the parallel with Cuba - though they are horrified rather than inspired by it. In Venezuela and in Latin America, Chavez's opponents are by no means confined to the right. Carlos Fuentes, the Mexican novelist and a persistent critic of George Bush, has said of Hugo Chavez that 'he passes himself off as a governing leader of the left when in truth he is a tropical Mussolini, disposing benevolently of oil wealth while sacrificing the sources of production and employment'7 One of Chavez's leading critics at home is Teodoro Petkoff, who was a guerrilla leader in the 1960S and went on to found a socialist party. Chavez, he says, 'represents a significant regression for democracy'. Outside Venezuela, his government 'is seen as a government of the left because it faces up to the gringos. But it has fascistic elements and practices, such as the use of selective violence and repression to corner the opposition in a ghetto.' 8

Chavez himself claims that his 'Bolivarian revolution' is continental in scope. Certainly, he embodies the sharpest challenge to liberal democracy in Latin America. Whatever the defects of the prior regime in Venezuela - and they were many - Chavez's rule is less democratic, open and pluralist than that of his predecessors.9 There are many reasons to believe that the effect of Chavez's policies, though masked by windfall oil revenues, will be to accelerate his country's long-term decline. Contrary to his claims, the 'Bolivarian revolution' does not form part of a seamless web of revolutionary nationalism enveloping Latin America. In countries such as Chile, Brazil and Mexico, governments are following other models, which combine elements of social democracy with market liberalism. Their policies look far more effective, progressive and sustainable than the Bolivarian revolution. But Chavez shouts louder than his neighbors, and his voice is heard abroad. So it is important to assess why he came to power in Venezuela, whether he really represents a fundamental rupture with his country's past, and whether his 'revolution' is likely to survive and be copied elsewhere in the region.

The blessing and curse of oil

Modern Venezuela is built on a lake of oil. Foreign oil companies began pumping the black stuff during the First World War. In December 1922, while drilling beneath the shallow waters of Lake Maracaibo, engineers working for Shell stumbled upon a fountain of oil gushing forth at the rate of 100,000 barrels per day.1O For the next four decades, Venezuela was the world's biggest oil exporter (until it was overhauled by Saudi Arabia). Thanks to oil, between 1920 and 1980 its economy grew faster than any other in the world, at an annual average rate of 6 per cent.11 Oil money transformed what had been a sleepy, rural country of coffee, cattle and cacao farms. Caracas became the most 'Americanized' capital in Latin America, studded with skyscrapers and criss-crossed by urban motorways crowded with big Chevrolets and Fords. Venezuelans glimpsed prosperity: in 1970, income per head was the highest in Latin America, outstripping that of Argentina.12

Venezuela was one of the five founding members of OPEC. But higher and more volatile oil prices from the 1970S onwards proved to be as much a curse as a blessing. Oil gave Venezuela a chronic case of what economists call 'Dutch disease';13 an overvalued currency made it hard for the country's nonoil businesses to compete against imports or to export, and thus reinforced Venezuela's dependence on oil. Productivity languished and inefficiencies multiplied. Second, oil played havoc with fiscal discipline. Habituated to oil revenue, the government failed to collect taxes efficiently: by 1992, nonoil public revenue was just 5.6 per cent of GDP. When the oil price fell, governments turned to foreign loans and to debauching the currency so that oil dollars went further in bolivares.14 As a result, after decades of price stability, Venezuela caught the Latin American inflationary disease.

The third curse inflicted by oil was political. Oil rendered public opinion hostile to even the mildest of austerity measures or economic reforms. Venezuelans were convinced that they lived in a rich country. If they were poor, they believed that this was because someone - corrupt politicians or foreign multinationals - must be stealing their wealth, rather than because of misguided policies or weak and ineffective institutions. This would make them uniquely susceptible to populist political messages - especially because after the mid-1970S they did get steadily poorer. The long boom came to a painful and symbolic end on 'Black Friday' in February 1983, when the Bolivar was devalued. By 1985, income per head was 15 per cent lower than in 1973.

Under the presidency of Jaime Lusinchi (1983-89), Venezuela drifted deeper into an economic abyss, exacerbated when the oil price halved after 1985. The government struggled to carryon servicing its debt, which absorbed up to 70 per cent of export earnings. It imposed exchange controls under which importers of 'essential' goods were subsidised with cheap dollars. According to one estimate, over-invoicing or..,downright fraud under this scheme cost the state up to $11 billion - a figure that dwarfed subsequent corruption scandals.15

Economic decline exposed political we7iknesses. A popular revolution in 1958 had ushered in a seemingly solid democracy in a country that had seen an almost uninterrupted succession of dictators since Simon Bolivar. This democracy was moulded by a power-sharing agreement, called the Pact of Punto Fijo. It placed the two main political parties - the social democratic Accion Democratica (AD) and the Christian democratic COPEI - at the centre of politicallife.16 It was designed to exclude the Communist Party, and to set limits to political competition. Its authors wanted to avoid the polarization that marked a short-lived democratic interlude from 1945 to 1948, when an AD-dominated government had pushed through modernizing reforms but its sectarianism had alienated business, the Church, the army and the other parties. Punto Fijo was similar to the National Front forged by Colombia's Liberal and Conservative parties in the same year.

For a quarter of a century, puntofijismo worked well. Both parties, and especially AD, were highly organized and disciplined. They controlled social organizations, such as trade unions and professional associations. Their leaders spun a vast web of patronage financed by oil revenue. The party in power would regularly consult the other, which functioned as a loyal opposition. Guerrilla movements were defeated and sections of the left brought into the system in a third party, the Movement to Socialism (MAS) founded by Petkoff. Both of the main parties backed the prevailing economic orthodoxy of state-led industrialization. Business was fed cheap credit and tariff protection. Though generally speaking Venezuela aligned itself with the United States in the Cold War, its foreign policy displayed considerable autonomy. In his first term as president from 1973 to 1978, Carlos Andres Perez of AD began selling oil to Cuba, for example.

The system had several weaknesses which would eventually prove fatal. The armed forces were bought off with arms purchases, perks and a top-heavy command structure, and allowed to run their own affairs without civilian oversight. Political power was highly centralized: until 1989, state governors and mayors were appointed, not elected. Some social groups were not well represented by the two main parties. That was especially true of the urban poor. From the mid-1970S onwards Venezuela's economy failed to and staple foods was artificially held down.22 To take one example, petrol, at the equivalent of just 20 American cents a gallon, was cheaper than anywhere in the world except Kuwait. The difference with the average world price - and thus the implicit, indiscriminate, subsidy - was equal to 10 per cent of the national budget.23 No matter that he had campaigned otherwise: Perez realized that reform \vas unavoidable as Fujimori in Peru and Menem in Argentill2 were to do shortly afterwards. He appointed a talented team of free-market technocrats who launched a radical programme intended to shift Venezue12 from state-led import-substitution to export-led growth. But the president, 2 machine politician accustomed to 'administering abundance' as he had put it in the 1970S, proved a poor salesman for austerity and reform. And it soon became clear that the years of easy money had rotted the Venezuelan state to its foundations.

Within three weeks of the 'coronation', Venezuela was shaken by urban rioting on a scale hitherto seen in Latin America only in Bogota in 1941 following the murder of Gaitan. The immediate trigger was a botched decision to double the petrol price. Not only did Perez fail to explain the need for this but officials also failed to enforce an agreement that bus operators would only  raise fares by an initial 30 per cent.24 On Monday 27 February - the end of the, month when many people tended to be short of cash - commuters were face< with an abrupt doubling of fares. Small protests by radical students were joined by angry commuters. From the capital and its suburbs, the protests spread to ; dozen other towns and cities, encouraged by live television coverage. By mid morning, the crowds began to loot shops. The Caracas police had only just ended their first-ever strike, and stood idly by as the slums were envelope by chaotic and leaderless rage. The government seemed paralyzed. After thirty hours of chaos, Perez ordered the army to restore order. Over the three days of what became known as the Caracazo some 400 people were killed according to a careful analysis by human-rights groups. Most were civilian shot by the security forces.25 Some 3,000 shops, including 60 supermarkets were destroyed in the Caracas area, most of them serving the ranchos, as the tightly packed slums that cling to the hillsides are called.

The Caracazo was a profound shock to a peaceful democracy. Perez pressed on with the reforms, but he had been forced onto the defensive politically right from the outset. The reforms did produce growth. But they were incomplete inflation remained stubbornly high, the fiscal situation remained fragile an labour laws unreformed. The government was slow to put in place an effective anti-poverty programme. A much-needed reform of bank supervision was held up by opposition in Congress, including from Perez's own party. The riots ha another unexpected consequence. Hugo Chavez, an army major, conclude that the conditions were ripe for his longstanding dream of overthrowing what he saw as a corrupt democracy. 'It was the moment we were waiting for to act: he would say later.26

Chavez had long nurtured a sense of himself as a man of destiny. A typical Venezuelan mestizo, of mixed African, indigenous and European descent, he grew up in respectable poverty in Sabaneta, a small town in the depths of the Venezuelan llanos (plains), in Barinas state.27 His father was a teacher, his mother a teaching assistant. Like so many other ambitious Latin Americans of modest provincial background, he joined the army as a way of getting ahead. Gradually, radical politics displaced baseball in his affections. But his initial inspirations were not Marx, nor even Fidel Castro. As a young cadet, he travelled to Peru for the 150th anniversary of the Battle of Ayacucho and was received by the president, General Juan Velasco Alvarado. Chavez was a fervent admirer of Velasco's military socialism, as he was of Omar Torrijos, the Panamanian strongman who negotiated a 1977 treaty wresting ownership of the Panama Canal from the United States. Through childhood friends and his elder brother, Adan, Chavez met leaders of small left-wing groups founded by survivors of Venezuela's guerrillas of the 1960s. From one of them, Douglas Bravo, Chavez adopted the image of a 'three-rooted tree' of radical nationalism drawn from Venezuelan history - an inspiration to which he constantly refers. The first root was Bolivar. What Chavez saw in the Liberator was not the conservative aristocrat who admired Britain and the United States. Rather, he imagined Bolivar as a radical anti-imperialist. The second root was Simon Rodriguez (who sometimes called himself Samuel Robinson), a tutor and friend of Bolivar and an eccentric educator, socialist and early champion of indigenous rights. The third was Ezequiel Zamora, a liberal general in Venezuela's endless 'federal wars' of the mid nineteenth century. One of Zamora's slogans was 'Lands and free men: horror to the oligarchy'. Chavez took him as a pioneer of agrarian reform, though he was a hacendado. Zamora died after being shot in the back by one of his own men - a fate which Chavez seems to fear. He is said to have confided to friends that he thinks himself to be the reincarnation of Zamora.28 Chavez later added a fourth root to the tree: Pedro Perez Delgado (whose nom de guerre was Maisanta), the son of a lieutenant of Zamora's and sometime social bandit whom Chavez claimed as his great-grandfather.

In 1983, the year of the 200th anniversary of Bolivar's birth, with three other young officers Chavez formed the Bolivarian Revolutionary Movement200 (MBR-200). On the date itself, they gathered under a celebrated saman tree near Maracay where their hero had rested after a battle. There they repeated the oath of liberation that Bolivar is said to have sworn in the company of Simon Rodriguez after they had climbed Monte Sacro in Rome. Two years after the Caracazo, Chavez and his friends were promoted to the rank of lieutenant-colonel. That rank is popularly known in Latin American armies as comandante. And indeed, for the first time, they had command of troops - in Chavez's case a parachute battalion at Maracay, the army's main garrison just , 70 miles (no kilometers) south-west of Caracas. At last, they could put their -. conspiracy into effect. On the night of 3 February 1992, Chavez set off with 460 conscripts, telling them they wehr going on a training exercise. In fact,. their destination was Caracas and the exercise was a military coup in which they were joined by four other lieutenant-colonels with some 1,900 further troops. The conspirators seized positions in the capital as well as in Maracaibo and Valencia, the country's second and third cities. But Perez, their target, eluded them. The night before Perez had returned from the World Economic Forum at Davos, where he had received the plaudits of international bankers and businessmen. He managed to broadcast a message denouncing the coup and rallying loyal troops. Ironically, given Castro's subsequent alliance with Chavez, one of the first messages from abroad supporting Perez came from the Cuban leader.29

The coup failed. Chavez's bid to seize power from a democratically elected government had cost 20 dead (14 of them soldiers), and left several dozen wounded. But it turned into a political triumph. Perez's defense minister allowed a defeated Chavez to broadcast, live, a brief call to his supporters to surrender. For the first time, Venezuelans glimpsed Chavez's innate skill as a communicator: 'Companions, unfortunately, for now, the objectives that we set ourselves in the capital were not achieved ... I assume responsibility for this Boliviarian military movement.'30 This brief broadcast turned him into a hero to many citizens of an unhappy republic. The phrase 'for now', which he later said had been unconscious, seemed to signal a continuing movement. His ready acceptance of responsibility for his actions contrasted with the self-serving evasions of the politicians. He had crystallized popular disillusion with political leaders and corruption which, in hard times, had suddenly become unbearable to previously complaisant Venezuelans. He had managed to identify himself in the public mind with the sainted Bolivar, Venezuela's only unquestioned hero. He had exposed the weakness of the Punto Fijo state. The MBR-200 had been almost reckless in its preparations but had not been stopped - just as the interior ministry had failed to anticipate or respond to the Caracazo. The conspirators enjoyed much military sympathy. Officers' salaries had declined so that they could no longer afford cars or decent housing; a lieutenant was taking home the equivalent of $200 a month in 1991.31 Months later, a group of senior officers staged a second, bloodier, rebellion. In several hours of fighting, in which Mirage fighter jets buzzed the capital, 142 civilians and 29 soldiers were killed. The rebels possessed a tape recorded by Chavez in prison, in which he called for the population to join the rising (though in the end this was not broadcast).32 Repelled by the violence, they did not. But that did not save Perez. His approval rating had dipped into single figures in opinion polls. In 1993, the hapless president was impeached. Ironically, given Chavez's subsequent massive off-budget financing and use of billions of dollars of public funds for foreign diplomacy, Perez was sentenced to 28 months of house arrest., for misappropriating a mere $17 million, which he said he had used in part to help Violeta Chamorro win the 1990 presidential election in Nicaragua.

Another irony surrounding the collapse of puntofijismo was that its final gravedigger was one of its original authors: Rafael Caldera, an elderly COPEI leader who had been Venezuela's president from 1969 to 1974. The Punto Fijo Pact had taken its name from that of Caldera's Caracas house, where it was signed in 1958. In February 1992, in a special session of Congress, he expressed sympathy for the aims of Chavez's coup attempt, though not the method. Breaking with COPEI, Caldera stood for the presidency in 1993 as an independent at the head of a coalition of 17 small parties, mainly of the left. He won, but with only 30.5 per cent of the vote. Caldera - who would be aged 83 by the time he left office in 1998 - tried vainly to turn the clock back. For the first two years of his government, he abandoned economic reform and reemplosed controls. But within days of his taking office, the economy was dealt another heavy blow when Banco Latino, the country's second-largest bank, collapsed. That triggered a run on the financial system. Misguidedly, the Caldera government pumped liquidity into the stricken banks while leaving their owners in charge. In vain: much of the new money went swiftly abroad while 13 banks, accounting for 37 per cent of total deposits, duly went bust in 1994. The bailout cost the state the equivalent of 21 per cent of GDP.33 The bank bust wiped out an important segment of Venezuelan business, while further undermining the credibility of democratic government.

Caldera eventually realized that he had little choice but to prelaunch Perez's reform programme. He renamed it Agenda Venezuela. It was implemented by Petkoff, whom Caldera had made planning minister. The government tried to raise oil output by offering risk contracts to foreign companies for the first time since nationalization. Given more time, Agenda Venezuela might have restored faith in the system. But it was too late. Desperate for change, in the 1998 presidential election Venezuelans turned once again to the candidate who expressed the most radical rejection of the status quo, as Caldera and Perez had seemed to in 1993 and in 1988 respectively. This time it was Hugo Chavez, whom Caldera had pardoned after he had served just two years in prison. The former coup leader had been persuaded, reluctantly, that elections were a more effective route to power than force. To that end, he formed the Movimiento V Republica (MVR, or Fifth Republic Movement), which brought together his real social justice and peace.' 35 He publicly expressed sympathy for Colombia's Marxist guerrillas. In 2001, he launched the Bolivarian Circles, intended to be a grassroots organization to defend his regime, paid for out of public funds. Though probably modeled on the 'Dignity Battalions' of Panama's General Manuel Noriega, opponents compared them to Cuba's Committees for the Defense of the Revolution. He had already put the army in charge of a new social programme, the Plan Bolivar 2000, which quickly became the target of corruption allegations. Finally, Chavez sacked the board of Petr6leos de Venezuela (PdVSA), the state oil company, appointing a new one headed by a leftist academic and made up of low-ranking employees picked for their political loyalty.36 Chavez accused PdVSA of having become a state within a state, acting in its own interests rather than those of Venezuelans. But his opponents saw the company as a rare example of meritocratic efficiency and feared its subjection to political control.

All this fuelled a massive opposition movement, centered on the middle class, which staged a series of strikes and massive street demonstrations. Some sectors of the opposition were undemocratic, some comprised the remnants of the old order resisting Chavez's determination to extinguish them, but the majority were convinced democrats battling against what they saw as imminent military or communist dictatorship. The government organized counter-demonstrations in support of the president. But Chavez's approval rating in opinion polls had sunk to around 30 per cent. He had lost the middle class and the political middle ground. Several of his closest allies turned against him, including two of his co-conspirators of 4 February and Luis Miquilena, an octogenarian former communist who had persuaded Chavez to contest the 1998 election and who had presided over the Constituent Assembly.

Events moved to a head in April 2002. The unions and Fedecamaras, an umbrella private-sector lobby, declared an indefinite general strike cum lockout, seeking the restoration of the PdVSA board. Unrest in the armed forces was palpable.37 There is much evidence that a conspiratorial movement within the armed forces had been planning a coup for months. On 11 April, hundreds of thousands of opposition supporters marched through the centre of Caracas towards the Miraflores Palace. Gunmen opened fire on the demonstration, killing several people. Many senior army officers refused to obey Chavez's order - reminiscent of that of Perez during the Caracazo - to put troops on the streets to repress the crowds.38 On the evening of 11 April, the army command asked Chavez to resign. There is controversy as to whether he in fact did so. By one account, negotiations over his resignation broke down. Certainly, he did not submit a written resignation. But Chavez did take Fidel Castro's advice, delivered in a telephone call that night, and opted to surrender rather than to resist or to die in his palace like Salvador Allende.39 As he had done on 4 February, Chavez showed cold realism, choosing strategic withdrawal after losing a battle. Had the army turned power over to the National Assembly and agreed to let Chavez go to Cuba as he requested, he might still be there today. But there was a 'coup within the coup'. Pedro Carmona, the president of Fedecamaras, proclaimed himself..president, named an ultra-conservative cabinet which excluded even his labor allies, decreed the immediate closure of the National Assembly and the supreme court, and the abolition of the new constitution which had been approved by a large majority in a referendum only 28 months previously. Carmona was backed by a coterie of senior generals and admirals. But they had no direct command of troops. The army command withdrew its support. As diehard chavistas from the Caracas slums rioted on the streets (something which the private television channels chose not to cover), General Raul Baduel, the commander of the parachute brigade, sent three helicopters to collect Chavez from his confinement at a naval base on the Caribbean coast and return him to the Miraflores presidential palace once again.40 In four days of chaos and confusion, some fifty people had died. In the end, it was the army that restored Chavez to power, just as it was the army that had eased him out days before.

The coup was swiftly condemned by other Latin American governments - but not by the United States. Under George Bush the United States had become increasingly supportive of the Venezuelan opposition, especially after January 2002 when Otto Reich was appointed to be the State Department's top diplomat for Latin America. Reich, who was born in Cuba, had worked in the Reagan administration in an office conducting propaganda on behalf of the Nicaraguan contras. Chavez had irritated the Bush administration not just with his anti-American rhetoric and his affection for Colombia's guerrillas, but also by visiting Saddam Hussein in Iraq in 2000, and Iran and Libya the following year. Chavez's government would later go to great lengths to assert that the coup had been dreamed up in Washington - perhaps to try to distinguish it from his own effort of a decade earlier. The 2002 coup was 'manufactured by the CIA', Chavez claimed.41 There is no evidence of this. Rather, a State Department official said publicly in February 2002 that US diplomats had told dissident Venezuelan officers that they would oppose any COUp.42 However, this was obscured by the failure of Reich and the administration to condemn the coup when it happened - an extraordinarily short-sighted and selective failure to support democracy in Latin America which sent a dangerous message.

Chastened by the coup, Chavez temporarily backpedalled, restoring the old PdVSA board and making a half-hearted call for dialogue. But the coup weakened the opposition more than it did the government, undermining its Chastened by the coup, Chavez temporarily backpedalled, restoring the old PdVSA board and making a half-hearted call for dialogue. But the coup weakened the opposition more than it did the government, undermining its international legitimacy.

Chavez moved quickly to strengthen his control over the armed forces. Seven months later, the opposition's most uncompromising leaders once again marched into the president's trap. Many of the military officers who had backed the April coup began a public protest in a square in Altamirano, an upper-middle-class district of Caracas. At the same time, Fedecamaras and the trade unions began an indefinite general strike. They were soon joined by PdVSA workers. Oil output plunged. The dispute cost $50 million a day, and wreaked huge economic damage. But to the disappointment of the military rebels, the army sat on its hands. Chavez opted to sit out the strike whatever its costs. When it collapsed after two months, the president seized direct control of a shattered oil company, sacking 18,000 workers, including many experienced professionals. Some of those who replaced them were untrained loyalists.

In its quest to unseat Chavez, the opposition belatedly arrived where it should have begun. As the strike ended in February 2003, the opposition movement collected 3.2 million signatures for a referendum to recall the president - a device inserted into the constitution by Chavez. Had the referendum been held in mid-2003, by his own admission Chavez would almost certainly have 10st.43 The economy was reeling: mainly because of the strike, by December 2003 GDP had shrunk to less than 85 per cent of its level of two years previously. Despite the rise in the oil price, poverty had continued to rise under Chavez, peaking at 60 per cent in 2004.44 Opinion polls showed support for the president at only 30 per cent.

Three things came to Chavez's rescue. The first was the spectacular rise in the oil price, to which his own actions had made a modest contribution but which was mainly attributable to war in Iraq and rising demand in China and India. By 2005, higher prices had quadrupled Venezuela's annual oil revenues compared with 1998.45 Second, with Cuban advice Chavez finally came up with more effective social programmes. Third, Chavez used judicial maneuvering and his control of the electoral authority to delay the recall referendum. The opposition was obliged to collect the signatures again in December 2003. That the referendum was finally held, in August 2004, owed much to pressure from the Organization of American States (OAS) and other Latin American countries. By then the economy was recovering and the new social programmes, called 'missions', were up and running. Chavez survived the referendum, winning by 59 to 41 per cent in an election in which 70 per cent of registered voters turned out (compared with an average of 55 per cent in previous elections). Opposition claims of fraud were not endorsed by observers power, exercising personal control not just over the legislature and judiciary, but over PdVSA and the armed forces.

'We're starting to build our own socialist model,' Chavez claimed 2005. To get a glimpse of what this entailed, officials directed fore visitors to Catia, a gritty district a few miles west of the Miraflores Palace. There, a defunct petrol-distribution depot had been turned into a 'nucleus of endogenous development'.48 That meant a combination of workers' operatives and social service provision, all paid for by PdVSA. Three new buildings surrounded by  a central meeting area. One housed a well-equipped health clinic. In a second, the government installed scores of sewing machine for a co-operative of 180 women. Their first contract, in 2005, was to m. red T-shirts and caps for Venezuela's diplomats to wear on a May Day mar The third building was a co-operative making shoes. The hillside above 1 been planted with maize by another co-op, this one of market garden Some 1,200 people worked in the 'nucleus', which cost $6.6 million to build.  Across the road there was a small but well-stocked new supermarket run by Mercal, a state company set up by Chavez to provide cheap food for a poor. Mercal operated on largely commercial lines, but some of its prices were subsidized, at a cost of $25 million a month to the government. Neal was a centre for the education 'missions' set up by Chavez. One programe officially completed, taught illiterate adults to read. Two others allowed people to finish their primary or secondary education; a fourth gave crammi courses - and the promise of a place in an expanded university system 286,000 teenagers who failed to complete secondary school. The first a perhaps most appreciated of the 'missions' was Barrio Adentro, under which 16,000 Cuban doctors and dentists, lent by Fidel Castro in return for Cheap oil, worked as general practitioners in the ranchos, where medical service were all but non-existent. So the 'Bolivarian revolution' indeed provided 1 urban poor with services they previously lacked. But it did so in a clientelistic fashion, in return for political loyalty. The 'missions' represented a parallel state, accountable to nobody but Chavez. Their financing was opaque - a they were almost certainly unsustainable.

Even more than its predecessor, the Fifth Republic was dependent oil revenue. Thanks to the steep rise in oil prices, the economy recover rapidly after the strike: GDP grew at over 10 per cent a year in 2005 a 2006. The private sector made money again but was slow to invest, because of uncertainty about its future. It was hemmed in by a web of controls and intermittent threats to property rights. Price controls on staples led shortages of some products in 2006, as they had in the late 1980s. Banks were required to earmark 29 per cent of their loans for farming and houses at subsidized rates, and rates on other loans were capped (again just as they had been in the 1980s). In the countryside, the government launched a noisy war on the latifundio. By mid-2006, around a hundred private farms deemed 'unproductive' had been taken over by the government or by squatters.49 They included parts of an estate owned by Britain's Vestey family. For all of Chavez's vociferous denunciation of an 'oligarchy' of latifundistas, the fact was that agrarian..j;eform had already been carried out by Perez in the 1970S. Venezuela is an overwhelmingly urban country, and the state itself owns more than enough idle rural land to settle the landless. At the start of his new term, in January 2007, Chavez nationalised the main telecoms company, CANTV, which had been privatised by Perez and in which Verizon, an American firm, had a 28.5 per cent stake. He also said the energy industry would be nationalised. He had already obliged multinational oil companies to accept new contracts in which they became minority partners in joint ventures; the same was due to happen to their investments in gas and in refineries that upgrade the heavy oil of the Orinoco belt.

The main feature of 'twenty-first-century socialism' was a massive increase in public spending as a result of the huge rise in oil prices, as well as the bigger share of oil revenue the government took through taxes and royalties on its joint-venture partners. The central government's budget rose from 20 per cent of GDP in 1999 to 27 per cent of GDP by 2005.50 But there was much off-budget spending too. Chavez obliged the Central Bank to turn over $6 billion of its foreign-exchange reserves to FOND EN, a slush fund under his control. In addition, PdVSA diverted several billion dollars from its investment budget to the same fund. In 2006 the government had an extra $21 billion at its disposal from these sources, according to one estimate.51 Despite its huge oil windfall, until 2005 the government ran a fiscal deficit, and the public debt rose. Some of the money was lavished on new state companies, such as an airline; other planned state ventures included mining, iron and steel and cement firms, and tractor and computer factories.52 Another chunk went on the government funded co-operatives. In the first two years of this programme 6,814 'productive units' were created, and 264,720 participants given training, according to the government. In 2006 alone, officials planned to train another 700,000 people and create 28,000 new co-operatives or other community associations.53 In this Chavez was copying Velasco's Peru which, in a similar top-down manner, sponsored hundreds of co-operatives. Only a handful survive today. So abundant did the oil money become that Chavez had plenty available to spend on promises of foreign aid designed to win allies and influence abroad. According to an estimate by an opposition newspaper, in the seven months to January 2006 alone Chavez made aid commitments totalling $25.9 billion.54

The reviving economy and the torrent of public spending finally began to cut poverty, from 49 per cent in 1999 to 37 per cent by 2005. Given the extraordinary increase in oil revenue, the record of the Chavez government in reducing poverty was not outstanding compared with that of several others in the region who lacked such wealth. The 'Bolivarian revolution' was enormously expensive, but all the evidence suggests that it was rather incompetent. Despite its cornucopia of resources, the Fifth Republic neglected Venezuela's basic infrastructure. This was dramatised in January 2006 when a viaduct carrying the motorway which links Caracas to the international airport and the port of La Guaira had to be closed because of subsidence (the viaduct collapsed weeks later). For several weeks, the half-hour journey from airport to city took five hours, until a temporary road cut that to three hours. Governments had known of the problem for two decades. Under Chavez, Venezuela has had six infrastructure ministers in seven years; the president normally shuffles more than half of his cabinet each year.55 The social-welfare 'missions' were set up in parallel with a state health and education bureaucracy which remained unreformed. At 23 de Enero, a large public housing project dating from the 1950S and a stronghold of chavismo, the health clinic lacked X-ray plates and chemicals for pathology tests in January 2006. There were no medicines.56 Violent crime increased steadily. The number of murders per year tripled between 1998 and 2005. Caracas became the most violent capital in South America. That was in large part because of the failure of the state to train its police forces adequately. The police themselves were responsible for many murders. In April 2006, the attorney general's office said that it was investigating 6,000 'extra-judicial executions'.57 All the indications were that corruption was at least as prevalent, and probably much more so, than under previous governments. In a statement in 2005, Venezuela's Catholic bishops warned of 'wide and deep corruption in many areas'.58 The difference with the past was that the auditor-general and attorney-general were no longer drawn from the opposition.

While opinion polls showed that many Venezuelans were dissatisfied with the government, Chavez himself remained popular, as the 2006 presidential election showed. His supporters tended to be poorer, darker skinned Venezuelans. Many of them saw Chavez as one of themselves, and were linked to him by a quasi-religious bond. But many others merely valued the 'missions', the economic growth and the make-work programmes. Their loyalty was not unconditional. The big question for Chavez was what would happen if and when oil revenues fell substantially. By one estimate, the government would find it hard to sustain its levels of spending if benchmark prices fell much below $40 (others put that figure at $50).59 Chavez has talked of expanding production, but there were doubts about Venezuela's capacity to do so. For the first time, institutional decay spread to PdVSA. After the 2002-3 strike, oil output fell. The company claimed that total national crude-oil production in 2005 was 3-3 million barrels per day (bId), of which only 2.1 million came from fields operated by PdVSA and the rest from those managed by private companies. But according to the International Energy Agency, total output was only 2.7 million bId. Chavez invited state oil companies to invest itnto Venezuela, including those from Iran and China. But it was not clear how much any outsiders would invest in Venezuela on the new contract terms.60

For all the defects of Chavez's regime, Venezuela in 2006 was not Cuba. Was it likely to become so? In 2004 Chavez had stated: 'We are not proposing to eliminate private property. Nobody knows what might happen in the future ... but at this moment it would be madness.' 61 The Fifth Republic adopted - and intensified - many of the economic policies that had brought down the Punto Fijo system when oil prices fell. The Venezuelan state continued to rely for political support on the distribution of oil revenue, it continued to neglect infrastructure and institutions, and it relied on a similar battery of economic controls. Just as its predecessor had provided social assistance to the organised working class, the Fifth Republic did so to the urban poor. But it could not give them sustainable jobs. Politically, Chavez had replaced the limited democracy of the Punto Fijo republic with a hybrid regime that, according to Petkoff, had 'one foot in democracy' and 'the other foot in authoritarianism and autocracy'.62 Chavez reversed Punto Fijo's historic achievement of taking the armed forces out of politics. Instead of power being shared by two parties, it was concentrated in one man.

In the wake of the 2006 presidential election, Chavez announced plans to unify the MVR and the myriad grupusclos that supported him into a single revolutionary party to be called the United Socialist Party of Venezuela. Hitherto, the absence of such a party had been a notable difference between Chavez's Venezuela and Castro's Cuba. The Bolivarian revolution rested on three pillars. One was the armed forces. In 2005, nine state governors were military officers, either retired or on active service; by one estimate, more than 500 senior government jobs were held by military men.63 The second was Ala Presidente, his television chat show broadcast every Sunday. This usually lasted around five hours, but on occasion stretched to over seven hours. Chavez employs all his charm and llanero wit, telling jokes, interrogating officials, interviewing guests and generally getting his message across. The third pillar was Cuban political support. Cubans designed the 'missions', and provided specialist help in the form of doctors, sports trainers and literacy teachers. There were reports in 2006 that Cuba's intelligence service was assembling a national register of people and property. Some Cubans are reported to have been given Venezuelan nationality. A fourth potential pillar involved a planned new army reserve, supposed to be 1.5 million strong, and answerable directly to the president. This seemed to be a more ambitious - and armed- version of the Bolivarian Circles. Its purpose was ostensibly to defend the 'revolution' against the United States, but it was probably intended as a means of intimidating the opposition.

For Venezuela, the big unanswered question was whether Chavez would ever allow himself to be freely voted out of office. Some of the regime's critics, such as Petkoff, trusted in the residual strength of Venezuela's democratic culture, and the influence of international opinion, as a restraint on the president. There was much polling evidence that a majority of Venezuelans valued democracy, and that they understood 'socialism' to mean social programmes, not Cuban-style communism. Strikingly, in the 2006 Latino barometro poll, 70 per cent of respondents in Venezuela agreed that democracy was the best system of government, down from 78 per cent in the 2005 poll but still a higher percentage than in all but four other countries in the region.64 But according to another view, Chavez has 'virtually eliminated the contradiction between autocracy and political competitiveness' and 'has refashioned authoritarianism for a democratic age.' 65

There was no longer a Soviet nuclear umbrella under which Chavez could shelter, as Fidel Castro did in 1962. For all his rhetorical attacks on the 'empire', the United States remained the main export market for Venezuela's oil. But in his search for allies abroad, Chavez did seem to be seeking to buttress himself against potential hostility in the Americas to any lifetime presidency. He offered oil to China, though transport costs and the need to adapt refineries to Venezuela's sulphurous crude meant that exports on any scale were probably several years away. He bought arms from Russia. And he made friends with Iran, defending its nuclear ambitions.

He increasingly seemed to see himself as Castro's successor. He conceived the Bolivarian revolution to be continental in scope, like its Cuban predecessor. Yet rather than a twenty-first-century socialist, Chavez most resembled some of the political figures from Latin America's past: the twentieth-century populists and the nineteenth-century military caudillos. Like Peron and the other populists, he has created a personalist regime, blurring the boundaries between leader, party, government and state. Like them, he used the mass communications media effectively. Like them, he used elections as his route to power but ignored the checks and balances and pluralism inherent in democracy. Like them, he engaged in unsustainably expansionary economic policies. Like Rosas and the caudillos of the Argentine interior in the 1830S, he commanded a private army in the shape of the reserve. Like Rosas, as well as like Castro, he seemed to see himself as pretty much president for life. In a speech in 2005, he said that he did not intend to retire until 2030, the bi-centenary of Bolivar's death, by which time he will be 76. As long as the oil price remained high, the odds were that Chavez would cling to power for many more years. But given its inefficiencies, keeping the Bolivarian show on the road required ever more money. It is not hard to envision the regime imploding amid fights over corruption and cash. If the oil price were to fall sharply, Venezuela would face an appalling hangover. The Caldera government had belatedly established a fund to save windfall oil revenues, with the aim of cushioning the effect on the economy when the oil price falls. Chavez scrapped that arrangement, and spent like there was no tomorrow. The prospect facing Venezuela might not be that of turning into a second Cuba but a second Nigeria - a failed petro-state.66

Supporters of Chavez liked to claim that he was the leading figure in a uniform regional wave of anti-American leftism. Certainly, he was not alone in trying to extract more of the the rents from the oil industry. After a period in which low oil prices had given multinational oil companies much leverage in contract negotiations, they had to yield to 'resource nationalism' in many parts of the world. In Latin America, Evo Morales was Chavez's closest disciple. On Chavez's advice, he decreed the 'nationalization' of Bolivia's oil and gas industry; he later signed new, tougher, contracts with the multinational companies involved in which they became sub-contractors of a revived state energy company. Like Chavez, Morales summoned a Constituent Assembly to rewrite the constitution, which offered the potential for him to put his supporters in charge of all the institutions of state. In Ecuador, Rafael Correa seemed set on following a similar course. What these countries had in common with Venezuela was the availability of revenues from oil or natural gas. So it was possible that their presidents might be able to imitate Chavez's strategy of appropriating those revenues and redistributing them to create a mass political clientele. But the scale of those revenues was far greater in Venezuela, and Bolivia and Ecuador were politically very fragmented. In Bolivia, Morales was backed by a genuine and variegated mass movement that was likely to be critical of any pretensions to one-man rule. Even if they wanted to imitate Chavez, it was not certain that either Morales or Correa could do so. Still less was this the case for Daniel Ortega in Nicaragua, with no oil or gas revenues. He seemed likely to try to maintain friendly relations with both Venezuela (to get its aid) and with the United States (for its Central American trade agreement). Elsewhere in the region there were several other policy models which combined social democracy and a market economy in differing, more progressive and more sustainable ways. By far the most successful was at the other end of South America from Venezuela, in Chile.
 

1. Marcano, Cristina and Barrera Tyszka, Alberto (2005), Hugo Chavez Sin Uniforme: Una Historia Personal, Debate, Caracas.

2. This point was first made to me by the late Janet Kelly, a political economist at the IESA business school, interview in Caracas, October 1999. The comparison is also made by Marcano and Barrera.

3. In a speech to several hundred officials and political cadres in November 2004, ,1 Chavez said: 'I want you to know that in this new stage, he who is with me is with)' me, he who is is not with me is against me. I don't accept half-tones.' 'El Nuevo Mapa Estrategico: Intervenciones de Hugo Chavez Frias, 12 y 13 de Noviembre.

4. Garcia Marquez, Gabriel, 'EI Enigma de los dos Chavez', Revista Cambio, February I 1999, available at www.voltairenet.org

5. Petkoff, Teodoro, 'Prologo' to Marcano/Barrera, Hugo Chavez Sin Uniforme.p.10

6. Gott, Richard (2005), Hugo Chavez and the Bolivarian Revolution, Verso, p.3.

7. 'Nueva Izquierda?', Carlos Fuentes, Reforma (Mexico), 1 February 2006.

8. Interview with the author, Caracas, April 2005.

9. McCoy, Jennifer L and Myers, David J (eds) (2004), The Unraveling of Representatiw Democracy in Venezuela, Johns Hopkins University Press, Introduction, p.3.

10. Gall, Norman, 'Desordem venezuelana afeta petroleo', 0 Estado de Sao February 2006.

11. Maddison, The World Economy; Nairn, Paper Tigers and Minotaurs, p. 19

12. Thorp, Progress, Poverty and Exclusion, p.317.

13. The term was coined after the discovery of natural-gas deposits in the NI prompted the Dutch guilder to revalue in the 1970s.

14. In tile two decades aft~ 1982, Venezuela recorded an aggregate currentsurplus of more than $50 billion. In normal circumstances, that shot strengthened the currency. In fact, by 2002 the bolivar was worth just 1 of its value of January 1983. Se'; Ortiz, Nelson, 'Entrepreneurs: Profits' Power?', in McCoy/Myers, The Unraveling of Representative Democracy, p.79

15. Little, Walter and Herrera, Antonio, 'Political Corruption in Venezuela in Little, Walter and Posada-CarbO, Eduardo (eds) (1996), Political Corru Europe and Latin America, Macmillan.

16. For the strengths and weaknesses of the Punto Fijo system, see McCoy/M) Unraveling of Representative Democracy, and Philip, George (2003), Demo Latin America, Polity Press, Chapter 8.

17. Torres, Gerver (2001), Un Sueiio para Venezuela, Banco Venezolano de ' p. 36; Nairn, Paper Tigers and Minotaurs, p. 37. The fall in government oil r per head was partly the consequence of a growing population, as migrants in, especially from Colombia and Peru, but it was also because of the gov, policy of pursuing a higher oil price rather than increased production.

18. Nairn, Paper Tigers and Minotaurs, Chapter 2.

19. Inauguration covered by the author.

20. Philip, Democracy in Latin America, p. 142.

21. 'Ex-President Perez Set to Return in Caracas Poll', report by the autho Guardian, 3 December 1988.

22. Nairn, Paper Tigers and Minotaurs, p. 28. 23· Ibid., P.39.

24. See Lopez Maya, Margarita, 'The Venezuelan Caracazo of 1989: Popular and Institutional Weakness', Journal of Latin American Studies, Vol. 35, February 2003.

25. Ibid., p.130. Others have cited figures of over a thousand dead, but with hard evidence.

26. Quoted in Garcia Marquez, Gabriel, 'El Engima de 108 dos Chavez'.

27. For Chavez's early life, see Marcano/Barrera, Hugo Chavez Sin Uniforme.

28. Ibid., p. 153.

29. Ibid., p. 118.

30. Ibid., pp. 125-6.

31. Nairn, Paper Tigers and Minotaurs, p.118.

32. Marcano/Barrera, Hugo Chavez Sin Uniforme, p. 151.

33. Palma, Pedro A, 'La Economia Venezolana en el Quinquenio 1994-1 una crisis a otra', Nueva Economia, Ario VIII, No. 12, April 1999, (PP·99-104.

34. Venezuela had had three short-lived republics during the independence SI The fourth dated from 1830. Richard Gott suggests that the notion of Republic' may have echoed the millenarian idea of a 'Fifth Monarchy' led by saints after those of Babylon, Persia, Greece and Rome. Gott, Hugo Chavez and the Bolivarian Revolution, p. 136.

35. Ibid., p. 13.

36. 'Venezuela: On Troubled Waters', The Economist, 7 March 2002.

37. 'Venezuela's. Crisis: Towards the Endgame', The Economist, 11 April 2002.

38. Marcano/Barrera, Hugo Chav~ Sin Uniforme, pp. 245-6. The opposition blamed the attack on the demonstration on members of the Bolivarian Circles. The government claimed that the killings were the work of opposition agents provocateurs but it used its majority 1b. the National Assembly to block the appointment of a truth commission on the events of 11 April 2002.

39. Marcano/Barrera, Hugo Chavez Sin Uniforme, p. 248; Gott, Hugo Chavez and the Bolivarian Revolution, p. 227.

40. Marcano/Barrera, Hugo Chavez Sin Uniforme, p. 259.

41. Interview with Hugo Chavez, Newsweek, 10 October 2005.

42. 'U.S. Strongly Opposes Venezuelan Coup', Associated Press, 27 February 2002. 'El 43.Nuevo Mapa Estrategico'. Chavez went on: 'So that's when we decided to work on the missions, we designed the first one here and I began to ask for help from Fidel.' 44.'Venezuela: Mission Impossible', The Economist, 16 February 2006.

45. Ibid.

46. 'By Invitation: What Really Happened in Venezuela?', Jennifer McCoy, The Economist, 2 September 2004.

47. Visit by http://soc.world-journal.net/

48. Interview with the author.

49. Lapper, Richard (2006), 'Living with Hugo: U.S. 49. Policy Towards Hugo Chavez's Venezuela', Council on Foreign Relations, New York, November 2006, p.12.

50. ECLAC/CEPAL, Economic Survey of Latin America and the Caribbean, 2005-6.

51. Economist Intelligence Unit (2006), Venezuela Country Report, December 2006, London.

52. New York Times, 30 October 2005.

53. 'Vuelvan Caras Mission: 2 Years of Achievements', Yen-Global News, 20 March 2006, Ministry of Information's website, www.mci.gob.ve

54. Quoted in Lapper, 'Living with Hugo', p. 15.

55. 'Hugo Boss', Javier Corrales, Foreign Policy, January-February 2006, P.38.

56. Gall, Norman, 'Chavez sobrevivera it desordem?', 0 Estado de Si'io Paulo, 22 January 2006.

57. 'Venezuela: Crimes and Misdemeanours', The Economist, 20 April 2006.

58. 'Venezuela: The Sickly Stench of Corruption', The Economist, 30 March 2006; Gall, 'Chavez sobreviveni it desordem?'.

59. Lapper, 'Living with Hugo', p. 27. Because much of it is heavy and sulphurous, Venezuela's oil sells for around $10 less per barrel than Brent or West Texas Intermediate.

60. Economist Intelligence Unit (2006).

61. 'El Nuevo Mapa Estrategico'.

62. Interview with the author.

63. 'Hugo Chavez's Venezuela: Oil, Missions and a Chat Show', The Economist, 21 May 2005.

64. 'The Latinobarometro Poll: The Democracy Dividend', The Economist, 9 December 2006.

65. Corrales, 'Hugo Boss'.

66. This point is made in different ways by both Yepes and Gall.

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