Venezuela - Domestic policy

To reform Venezuela's political system, Chávez successfully orchestrated a popular referendum to elect a Constitutional Assembly to rewrite the 1961 Constitution, reorganized the judiciary, and extended his own presidential authority. Chávez was clearly the major political winner in the late 1990s. The new Constitution, which came into effect on 30 December 1999, replaced the Senate with a unicameral National Assembly and consolidated power in the executive branch. It extended the presidential term from five to six years and eliminated a law that prevented the president from seeking two consecutive terms. Critics said the new Constitution would allow Chávez to remain in power for more than a decade. According to Chávez's wishes, the Constitution renamed the country Republica Bolivariana de Venezuela (Bolivarian Republic of Venezuela) to honor Simon Bolívar.

Chávez had asked for an extension of his presidential authority in order to fight poverty, reform the fiscal system, and restructure the foreign debt. Political opponents feared the changes had given Chávez too much power. By early 2000, Chávez had grown increasingly more critical with anyone who opposed his plans for the nation. In April 2000, journalists symbolically refused to ask any questions during a presidential press conference, in part to protest against a constitutional mandate that could be used to censor the press. While Chávez remained popular, criticism of his policies was growing. By May 2000, Chávez held a 15- to 20-point lead in public opinion polls over his presidential opponent, Francisco Arias Cardenas, a former state governor. General elections were to take place in July 2000 and Chávez won with 59.5%.

Yet, the economy continued to be a problem. The decline in oil revenues, combined with high interest rates, pushed the country into a deep recession. Over 18 million Venezuelans were living in poverty. Venezuela's gross domestic product shrank 1% in 1998 and 5.8% in 1999. Despite 3.8% and 2.9% growth in 2000 and 2001, Venezuelans were poorer in 2002 than when Chávez took office in 1998. Unemployment has remained in the double digits. Chavez promised to cut the budget by over 11%, raise the sales tax, and encourage foreign investment, but his effort to remain popular among the poor made it impossible for him to cut social services. His need to keep the loyalty of the military also prevented him from cutting the defense budget. The high unemployment rate placed a huge burden on the government bureaucracy. In the end, the government was paralyzed and no drastic economic policy reforms were undertaken. Oil exports were seriously affected after labor strikes began in March 2002. In April, the strikes were extended indefinitely. Thus, despite high international oil prices, Venezuela has not benefited from its oil exports.

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