Spring 2007

Letter from Caracas

Living Large on Oil

By Alexandra Starr

New Jersey mall rats would be unlikely visitors to the El Tolon shopping center in Caracas, Venezuela, but if they were deposited in the multilevel, marble-floored building, they could be convinced they had never crossed the isthmus. Even the most snobbish teenage sybarite would approve of the neon-lit brand names crowding the complex. A Diesel store is selling professionally faded, fashionably ripped jeans. A few paces away is a Fendi boutique, where gold-and-brown streaked bags and scrunched red-checkered purses crowd the window display. Lacoste is on the verge of running out of green zip-up hoodies. Those weary of overcrowded dressing rooms can watch snippets of the film Elektra on jumbo-sized plasma TVs; a salesman is handing out brochures listing the dozen or so distributors who retail the sets for several thousand dollars apiece. The torrent of shoppers is reminiscent of Christmas Eve pandemonium, but the holiday is more than three weeks away, and the visitors I ask say gift buying does not account for their presence. “I’m here for myself,” one woman collecting multiple pairs of Zara leopard-skin patterned slippers told me. She looked up from the piles of merchandise and smiled. “I’m taking advantage of the moment.”

It was an auspicious moment for Venezuela, which holds the largest proven oil reserves outside of the Middle East. Oil prices were hovering at $60 a barrel, leaving the nation awash in cash. At the same time, President Hugo Rafael Chávez Frías was on the verge of winning reelection by the biggest margin in Venezuela’s history. The two events were not unrelated: economic booms tend to cast incumbents in a flattering light, and as they passed judgment on Chávez, Venezuelans were living large. Hummers and Range Rovers clogged streets, Caraqueños were consuming aged whiskey at an unprecedented rate, and plastic surgeons saw their practices surge. My aunt, a Caracas radio personality, told me that a surgeon who advertises on her show had expanded his office twice in the previous five months and still could not accommodate all of the women who poured into his office demanding that their breasts be enlarged to C-cup size.

The booming economy may make elective surgery and luxury vehicles affordable for the upper-middle class, but the Venezuelans who are amassing the immense fortunes are the Boliburguesa, or the members of President Chávez’s inner circle. (The name refers to the president’s leftist Bolivarian revolution and the bourgeoisie.) Boliburgueses had constructed mega-mansions in the most storied Caracas neighborhoods and bought spanking new jets. A journalist friend who shadowed one of Chávez’s closest allies was chauffeured around in a bulletproof BMW, flanked by Korean bodyguards who can allegedly brain a would-be assailant with a butter knife at a distance of 20 meters. “It was like something out of Goldfinger,” my colleague said, still somewhat incredulous. Just as bizarre was his description of a Caracas sushi restaurant that had been enthusiastically recommended: rare tuna could be served—for an exorbitant fee—on the belly of a woman in the buff.

To be sure, this hedonism is out of reach for the great majority of Venezuelans. Even with the billions of dollars that have arrived in the country, four out of 10 residents subsist on two dollars a day or less. Still, the destitute haven’t been completely cut out of the oil bonanza. Chávez has funneled a portion of the windfall to provide an array of social services—ranging from free eye surgery to literacy classes—in the poorest neighborhoods. The misiones, as Chávez calls these programs, touch every aspect of people’s lives. Government supermarkets sell cut-rate pasta, rice, sugar, and meat. (Perhaps in a nod to Venezuelans’ capitalist predilections, the shops I visited were also well stocked with Fruit Loops and Cap’n Crunch.) Clinics staffed with Cuban doctors treat the sick free of charge. Venezuelans who band together to create cooperatives can apply for government seed money. A new line of the country’s subway was opened this fall, and for the first seven weeks of its operation, rides were gratis. Most Latin Americans can only dream of this kind of largesse. During the last major boom, in the 1970s, a constant Caracas refrain was “God is a Venezuelan.” Many residents probably are uttering similar hosannas today.

The founder of OPEC, a Venezuelan by the name of Juan Pablo Pérez Alfonzo, had a different take on the country’s vast oil deposits. “It is the devil’s excrement,” he declared. “We are drowning in the devil’s excrement.” When he delivered that judgment in the 1970s, it was, to put it mildly, a contrarian view. Who could complain when a surge in oil prices had boosted Venezuela’s fiscal per capita income to equal West Germany’s? Several booms and busts later, however, that statement doesn’t seem so outlandish. Oil has shaped every aspect of Venezuela, from its economy to its citizens’ values to its style of governance. Survey that legacy, and so-called black gold begins to look like a poisoned gift.

Dependence on one export has strapped the country’s financial fortunes to a roller coaster. When oil prices are high, many Venezuelans enjoy an enviable quality of life, particularly for a developing nation. The state doles out subsidies to domestic businesses, adds thousands of state jobs, and keeps the domestic currency artificially strong, which makes imports cheap. This state-dispensed bounty has helped create a carefree, let-the-chips-fall-where-they-may mentality in Venezuelans and fostered a concomitant sense of entitlement. After all, with money seeping out of the ground, what incentive is there to work? Of course, government can only apportion handouts when the cash box is full. When oil prices fall, government revenue plummets, and the state is forced to curtail the spoils.

The prudent approach would be to leverage the country’s petroleum wealth to fortify other sectors of the economy. But Venezuelans gravitate to leaders who swear oil reserves can keep the party going indefinitely. Chávez is the latest in a long line of irresponsible, populist presidents, and if he has his way, his successor won’t emerge for many years. Chávez is demanding—and is expected to receive— authority to run for unlimited reelection. Still, even as he concentrates power, broader trends could determine how long his unlimited term in office lasts. Chávez’s standing—like so many things in this country—may depend more on the price of oil than he would like to believe.

I can testify to how bleak things can be during an economic contraction. In the mid-1990s, when annual inflation was in the high double digits and nearly half of Venezuelans lived in poverty, I spent three years in Caracas as an Organization of American States fellow. My professors had advised me to try to land a scholarship in Mexico or Brazil, but personal considerations drew me to Venezuela: my mother had been born and raised there, and I wanted to explore, maybe learn to love, a country that was in my blood. I didn’t arrive at a propitious moment to succumb to Venezuela’s charms, however. Oil prices were at an ebb, the country was starved of cash, and there was a whiff of desperation in how people struggled to make a living. A little over half the nation’s work force labored in the “informal” sector, taking in washing or selling fried plantains on the street to support their families. Upper-middle-class Venezuelans were scrambling, too. Many seemed irrationally obsessed with get-rich-quick schemes. Thousands of families lost their life’s savings when they transferred their deposits to local banks offering 80 percent interest rates, even though these institutions were known to be on precarious financial footing. When the banks collapsed, society matrons began calling me to ask if I knew of young foreigners who would take a room in their spacious, disintegrating apartments and pay the rent in U.S. dollars.

As I took measure of the country, it became apparent that oil didn’t just dictate its economic fortunes. The commodity had also shaped, and arguably sterilized, Venezuelan culture. Visitors to Caracas often remark on how it resembles U.S. cities. Skyscrapers soar over the traffic-congested streets. Kiosk vendors sell hamburgers and hot dogs. Some U.S. franchisers have encountered pro-native-culture agitators in Latin America, but McDonald’s and KFC are warmly embraced in Caracas, where U.S. pop culture has been evident for decades. Latin Americans in general lusted for the opportunity to wear U.S. fashions and emulate Hollywood; oil-rich Venezuelans have the resources to do so. This bounty, however, left little room for native artists to emerge. Venezuela has no writers to equal Colombia’s Gabriel García Márquez or Mexico’s Carlos Fuentes. Nor is reading a common pastime, as I discovered by the reaction my Venezuelan boyfriend had when he’d phone and discover I was in the middle of a novel. “Leave that,” he’d order. “I’ll be by to pick you up.”

The prospect of spending long hours alone might well be intolerable for some Venezuelans. Socializing is the true national pastime, and it is pursued with gusto. Lunchtime meals often become hours-long, whiskey-soaked fetes. Bring a group of Venezuelans into your home, and odds are they will end the evening singing along and boogying to whatever CD is spinning on the Bose at midnight. Celebrations are not confined to restaurants or living rooms. I once spotted passengers dancing salsa in the aisle of a bus. You don’t see this spontaneous bonhomie in most other corners of the continent, and that is partially because Venezuela’s money has shielded it from some of the most painful trends in modern Latin American history. When Chileans were living under the thumb of dictator Augusto Pinochet, Venezuelans jetted off to Miami for weekend shopping sprees. The oil-rich country never registered four-digit inflation like Peru. Certainly, Venezuela’s Caribbean roots and relatively peaceful racial relations helped cultivate a blithe, animated culture. But it’s a lot easier to kick up your heels when you don’t have to worry about a daughter being sequestered by the secret police or fear that your paycheck will lose 20 percent of its value overnight.

If oil has served as a kind of prophylactic for Venezuela, rescuing it from rampant violence and the economic ruin that has plagued other South American countries, oil has also spoiled its populace. In particular, the creation of such easy wealth from petroleum hasn’t done much to generate a national work ethic. As I embarked on a master’s program and journalism career, I soon realized that a lack of professionalism was the norm. At the university, some professors would regularly fail to show up for class. When I phoned the Economic Ministry, secretaries were rarely amenable to taking down phone numbers; if you asked to leave a message, the most common retort was “call back later.” The beginning of lunchtime was often your last chance that day to catch a source at work.

The something-for-nothing expectation doesn’t just mark people’s personal comportment; it also characterizes Venezuelans’ relationship with their government. Perhaps the best example is how Venezuela subsidizes gasoline. At around 12¢ a gallon, gas is less expensive than bottled water. The subsidy costs the country several billion dollars in lost revenue every year, but raising the price to near-market levels is so politically fraught that President Chávez didn’t even broach the possibility during his past eight years in office. (After winning reelection, he did warn that a price hike—the first in a decade—was in store.) Cheap gas strikes at the heart of the arrangement many Venezuelans feel they have with the state: national patrimony belongs to all of us, and I deserve my share of the spoils.

No Venezuelan leader has understood this dynamic as well as Chávez. The only political experience the former army lieutenant colonel had on his resumé when he launched his first presidential bid in 1998 was a failed military coup he had led six years earlier. Nevertheless, he understood intuitively what Venezuelans wanted to hear. “The oligarchs have stolen from you,” was the gist of his campaign theme. “Elect me, and you will get what is rightfully yours.” The fact that Chávez honored this promise, at least to an extent, is one reason he has managed to hold onto power. The misiones have provided a safety net for people who in the past felt they received mere crumbs of government largesse. The handouts, however, don’t account for all of Chávez’s connection to Venezuela’s most disadvantaged voters. Even as he jets around the world and shows off a collection of Rolex watches, el Comandante has positioned himself as a man of the people. Take, for example, how the Venezuelan leader arrived at a Caracas polling station in December of last year. Instead of being chauffeured in a limousine with tinted windows, the norm for sitting presidents, he drove himself in a VW bug, honking the horn and waving exuberantly to voters.

Chávez was obviously emboldened by how he thrashed the competition. Addressing supporters from the balcony of the presidential palace after his victory, he declared he was placing the country on the “road to 21st-century socialism.” In the following weeks, he made good on that commitment, announcing his intention to nationalize Venezuela’s telecommunications and electricity utilities. Ambitions for his socialist revolution, however, are not limited to Venezuela’s borders. Over the past several years, Chávez has leveraged the country’s oil wealth to help likeminded politicians win high office, and his allies have been elected in Bolivia, Ecuador, and Nicaragua. What’s more, regular shipments of Venezuelan crude to Cuba have allowed the communist regime to remain solvent. While Chávez’s Santa-Claus-to-the-Third-World act irks even many of his supporters, the president shows no sign of easing up on his philanthropy. He recently announced a generous aid package to newly sworn in Nicaraguan President Daniel Ortega, a politician the Bush administration tried to keep from office.

Chávez embarked on this ambitious, risky agenda even as oil prices began to dip, a sign, perhaps, of how much he believes his authority derives from his charisma and vision rather than from high global demand for petroleum. But he may want to heed the experience of Carlos Andrés Pérez, the other modern Venezuelan leader who had the good fortune to serve during an extended oil boom. Pérez, who first served as president from 1974 to 1979 and won a subsequent term in 1988, also enjoyed periods of wild popularity. When oil money coursed into the country in the 1970s, Pérez nationalized Venezuela’s iron ore and petroleum industries. Pérez relished international power politics as much as Chávez does: he meddled in Nicaraguan affairs, championed Bolivia’s bid to win access to the sea, and served as vice president of Socialist International, an organization that promotes labor rights and democracy. There are, of course, salient differences between the two men. Pérez had an uneasy relationship with the United States, but it was nothing like the virulent hatred Chávez harbors for the country he calls “the evil empire.” (The animosity stems in part from the Bush administration’s jubilant reaction when Chávez was briefly forced from office in 2002.) And Pérez respected the basic norms of Venezuela’s democracy. He didn’t rewrite the constitution, clamp down on the media, or intimidate nongovernmental organizations opposed to his rule. Those are all legacies of Chávez’s tenure. Still, there are striking similarities between the two presidents’ agendas, and Pérez’s eventual fate should give Chávez pause. When voters returned Pérez to the presidency in the late 1980s, he led them to believe they were in for a reprise of the go-go years. But years of low oil prices had left government coffers bare. Instead of dispensing goodies to businesses and jacking up spending on social programs as he did during his first term, Pérez was obligated to inflict harsh economic measures, including raising the price of gasoline. Stunned Venezuelans took to the streets; bloody riots left as many as 1,000 people dead. It was an inauspicious debut for the administration, and an ambitious Hugo Chávez spotted an opportunity. Three years later he led a coup d’état, and while the effort failed, it politically wounded Pérez, and he was ousted from power in 1993. Pérez’s successor commuted Chávez’s prison sentence, and the ex-military officer immediately began campaigning for the presidency. With the support of Venezuela’s poor, he won the 1998 election in a landslide.

Impoverished voters had been convinced that Chávez would transform their lives. But with oil prices in the cellar, it was basically impossible for him to fulfill even a sliver of their expectations. By 2002 his popularity had plummeted. Protesters staged a massive march; when they reached the presidential palace, gunfights broke out with Chávista forces, and dozens died. In many Latin American countries this would not have torpedoed an administration—violent confrontations, after all, have unfortunately been the norm throughout the region’s history. But Venezuelans were not as inured to public brutality. Before Chávez’s election, Venezuela could lay claim to a four decade democratic tradition, which had essentially been financed by the nation’s oil wealth: enough money was channeled to the military, domestic businesses, and trade unions to keep powerful stakeholders quiescent. Pre-Chávez administrations focused on serving the interests of the elite, versus tending to the needs of the poor, but those years were largely peaceful. When the Chávez government seemed on the verge of ushering in a much harsher era, the president was forced to abdicate. If the opposition hadn’t immediately disbanded the legislature and Supreme Court, Chávez might have been deposed permanently. But the oligarchs’ aggressiveness frightened Venezuelans; it looked like a dictatorship was taking root. People poured into the streets, demanding el Comandante’s return. Chávez reassumed office. Soon thereafter oil prices began to rise, and the president’s political standing did too.

When I returned to Venezuela last December, after a nine-year absence, to write about Chávez’s reelection, I felt as if I’d stepped into a quasi-time machine. The frenzy at Caracas’s many malls brought to mind the phrase that Venezuelans became famous for repeating during the 1970s boom: “That’s cheap—give me two.”

It wasn’t just the high-octane consumerism that drove home how much things had changed since the 1990s depression. Acquaintances of mine who had been scrambling a decade ago were now relishing the good life. On my last day in Caracas, my aunt and uncle and I were joined by a couple who had once enlisted me to recruit Americans to rent rooms in their home. They certainly didn’t need to run a boarding house now. The husband, an architect, had landed a government contract to design housing settlements. The emolument must be sizable because they planned to fly to Paris and possibly London. “Like a life of millionaires,” the wife crowed, only half in jest.

The trip also offered consolation, for, despite getting work from the Chávez government, the couple was deeply uneasy with his paeans to socialism. If the president went through with some of his more outré ideas, like instituting a nationwide bartering system, they were going to relocate to Miami. “But only as a last resort,” my dining companion explained. The wife was horrified by stories from family members who ran a restaurant in the United States, where, on occasion, when wait staff ran short, the couple had to serve the customers themselves. “That I will never do,” the woman said emphatically. “I prefer to stay here and have the tray brought to me.”

As I listened to the dinner conversation, it struck me that petroleum hadn’t just imprisoned the Venezuelan state; it seemed to have had a similar influence over individuals and families. This couple’s financial standing had risen and fallen along with the gyrations of the international energy market. Although part of them wanted to establish a life that would allow for more autonomy, the prospect of humiliating, demanding work—something that felt utterly foreign—was unpalatable. Plus, periodic windfalls of easy money were a hard siren call to resist. One of the more coveted benefits, it appeared, was whiskey, and lots of it. By the end of the afternoon, the party—which had expanded to seven—had consumed close to an entire bottle. “Shall we get another?” someone inquired. “Go ahead,” came the response. Aproveche el momento. After all, who knew how long these days would last?

Alexandra Starr has written about politics and Latin America for The New York Times Magazine, Slate, and The New Republic.