? -
LIBRARY Mandatory Recurneo t
21 1
natt elcei'M ate
situation in venezuela
Submitted byDIRECTOR Or CENTRAL INTELLIGENCE
r/te following intelligence organisations participated inof this estimate: The Central Intelligencethe intelligence organizations ot the DepartmentsDefense, the Army, the Navy, the Air Force, Theand
Concurred in bp the NITED STATES INTELLIGENCE BOARD
onovember XXI. Concurring were The Director otand Research, Department of state; TheIntelligence Agency; the Assistant Chief of StaffDepartment of the Army; the Assistant ChiefOperationsepartment ot theAssistant Chief of Staff, Intelligence, VSAF; theIntelligence, Joint Staff; and the Director of theAgency. The Atomic Energy Commissionto the USIB, and the Assistant Director, Federal Bureauabstained, the subject being outside of
TABLE OF CONTENTS
Page
THE
I.
n. THE PRESENT POLITICAL
in. ECONOMIC SITUATION AND
TV. THE
V. EXTERNAL
THE SITUATION IN VENEZUELA
THE PROBLEM
To estimate the prospects for the Betancourt government, for the survival ofgovernment in Venezuela, and for orderly social and economic reform.
CONCLUSIONS
Venezuela, an eartraoitiinarily wealthy country in terms of Its natural andresources, is nevertheless beset byeconomic, social, and politicalwhich reflect the strains inherentransition, in one lifetime, fromdictatorship and an oligarchic social orderemocratic welfare state.)
The Betancourt administration,after the overthrow of the Perezdictatorship,ocial democratic-Christian socialist coalition committed to the evolutionary reform of economic and social institutions. It is opposed byleftists, including the Communists and other Castro sympathizers, and also by rightist elements, but, with the support of the armed forces, has survived repeated coup attempts, including several attempts to assassinate Betancourt.)
Pro-Castro sentiment, once strong In Venezuela, has sharply declined. Tnhe successful suppression of serious disorders fomented by the revolutionary left showed that it lacked sufficient strength to coerce or overthrow the )
Despite the resources available to it, tho Betancourt government is beset by severe financial problems resulting from (a) the end of the Venezuelan oil boom,onsequent decline in the growth offrom the petroleum industry, and (b) greatly increased expenditures for politically necessary social welfareIts difficulties have been further complicatederious economicand heavy flight of capital.now amounts tof the labor force and is rising.)
The government is counting heavily on external assistance to restore business confidence and to carry out its programs for economic recovery and development. Even with such aid, progress in theseis likely to be slow and uncertain.)
Popular dissatisfaction and impatience with the slow rate of economicis likely to grow, especially in the congested urban areas. Thiswill provide the Communists and other revolutionary leftists with further opportunities for agitation against the regime. At the same time, distrust and dissatisfaction In business circles is likely to continue, and some rightists willto conspire with reactionaryelements to overthrow the regime. Thus Betancourt will remain underthreat from both the left and the right
On the other band, Betancourt enters the final half of his term with certainadvantages. His standing in the Caribbean areaeading exponent of constitutional government and moderate reform adds to his domestic prestige. The military will probably continue to support him against threats from the right as well as from the revolutionary left. )
On balance, we believe that Betancourt will probably be able to serve out bis term, ending ine are much less confident, however, that hiswill havetablefor the continuation ofgovernment.)
Betancourt has carefully avoided any appearance of dependence on the US, but has done his part to keep relations with the USordial footing. His position at home and in the area has been strengthened by recent developments in the Dominican Republic. He probably is inclined to go along with anacceptance to the Balaguerin the Doroinican Republic now that the Trujillo family's power over it has been broken. He has broken diplomatic relations with Cuba, and is supporting the Colombian proposals for collective action against the Castro regime.)
enezuela, an extraordinarily wealthy country in terms of its natural and financial resources, is nevertheless beset by severesocial, and political problems. Thanks to private foreign (principally US)and exploitation of its petroleum and iront has the highest per capita income in Latin America and the government is assured of substantial revenues and foreign exchange. However, itsgrowingate ofercent annually and the hinterlandhe rural population is flocking to tne cities in search of employment and better living conditions, and is arriving faster than decent housing and employment opportunities can be provided. Thesedwell in the poverty and squalor of shantytowns, within sight of conspicuous opulence.
efforts of thegovernment to promoteand social welfare areprivate investors' distrust of it,conditions, and financialThe government's program ofhas antagonized vested interests,and domestic, while its failure topopular expectations renders ltCastro/Communist agitation.
enezuela's present economic, social, and political difficultics reflect the strains inherentransition, in one lifetime,radition of military dictatorship and an oligarchic
private Investment amountsore than two-thirds of which Is In oil. us private investment amount* to about S4 billion,illion In oil0 million In mining.
'The agricultural labor forceercent ot the total) generates aboutercent of nationalwhereas the petroleum Industry (with under two percent of the labor force) generatesercent. About one-ten Ui of all Veoeantlanaf the total private Income, whereas nearly half ot tbe population receives about one-tenth of the total. Caraeai. with only one-fifth or thetookercent of total private income.
social orderemocratic welfare state. The economic and social transformation began with the oil boom ofs. Moderndevelopment was blocked untilyear dictatorship of Juan Vicente Gomez ended with his natural deathnd was checked byyear period of military.
Constantly increasing petroleum revenues enabled the Perez Jimenez dictatorship to undertake spectacular programs of public works and Industrial development, but these resulted In no substantial improvement in the living conditions of the masses of the people. All elements of society were antagonized by the ostentatious benefits conferred upon the favored few, and by the ruthless police state methods of the regime. Inlandestine Junta representing all of thepolitical parties succeeded inan effective general strike. In this crisis, the military proved to be unwilling to act against the entire population and instead compelled the dictator to leave the country.
A military-civilian junta assumed power in Venezuela pending the elections held inuring this period several attempts toeactionary coup were frustrated by (a) the threatenewal of the general strike, and (b) the continuing unwillingness of the rnilitary to employ force against the united population. Theof this period had two significantThe junta's dependence onof popular support led it to tolerate and evenonsiderable amount of moh violence, or threat of violence, which came toustomary mode of expressing political sentiments. This popular tendency toward political violence in Caracasonstant problem for the government. At the same time, the parties recognized inunity" an effective defenseilitary coup. Accordingly, they agreed that, no matter what the results of the Decemberroad coalition government would be formed.
This agreement was facilitated by the fact tbat there were only minor differences ol emphasis among the three principal parties, each of which Is nationalistic and socialistic. Accion Democratlcahe largest of the three. Is roughly comparable to the social democratic parties of Westernadical, but evolutionary, reform of traditional social Institutions. The AD. dependent mainly on labor and peasanthasar more effective party organization than Its rivals, but is weak in Caracas. The Partldo Social CrUtiano Copeis comparable to tho Christianparties of Europe and appeals to devout Catholics In all walks of life. It differs from AD mainly In Its religious Inspiration, as opposed to AD's secular approach. The Union Republicana Dcmocratica (URD) Is more amorphous and opportunistic than the others. It achieved political Importance by providing an alternative popular leadershipime when AD waa suppressed; Its leaders are still largely moved by personal rivalry with the AD for leadership; Its appeal is primarily to less highly organized economic groups such as artisans, small businessmen, and the slum dwellers of Caracas.
The Communist Party of Venezuela (PCV)ertain respectability by Itswith AD. COPEI, and URD, in the clandestine Junta which organized the general strike resulting ln the overthrow of the Perez Jimenez dictatorship. In order to preserve this advantageous united front, it was vociferous in its declarations of devotion to "nationalut It was excluded from the postelection coalition government. In fact, the CommunlsU are AD's mostcompetitors for labor and studentand there is do love lost between them.
In general, wealthy Venezuelans do not participate in party politics, although some few are influential party members and others have participated In government asConsequently, there is littleinfluence within the three major parties and no effective conservative party to oppose them. The wealthy, however, do exert apolitical influence through personal relations with particular politicians andand through the capabilities of their business and professional organizations to exert pressures on the government. In the view of many of them, the democraticof AD is equivalent to communism.
II. THE PRESENT POLITICAL SITUATION
In3 elections. AD won majorities in both houses of Congress and Romulowon the Presidencylurality barely shortajority. However, ADoor fourth in the capital city, an ominous circumstance since tho government would have to be conducted undor the latent threat of the URD-PCV capability to call forth the Caracas mob. The re-establishment of an elected government was auspicious, however. In accordance with the pre-election compact, an AD-COPEI-URD coalition government was formed. Although the Communist protested against their exclusion, they still found ltto proclaim their devotion tounity."
Nevertheless, the Betancourt government has had to meet repeated challenges from both the right and the left. Numerous attempts to overthrow Betancourt, or to assassinate him, have been mode by exiled followers of Perez Jimenez and by other disgruntledelements, in some cases with the active aid of Rafael Trujillo, the late dictator in the Dorninican Republic. On the other hand, the Communists and other leftists have sought to foment disorder in Caracas by exploiting the distress of the slum population and Invoking the appeal of Castroism
The failure of these efforts hasthat the armedritical element of power in the country, areresent threat to the stability of theThey have notably failed to respond to the appeals of disgruntled rightists. The military leaders appear to be convinced that an attempt toilitary rule would incur the united opposition of the political
"The armed forces consist of four coequalan armyavy, an air force, and ao elite national guard comprised ofrofessional police-soldiers.
parties and the population at large. Most military leaders by now probably regard Betancourt as the best alternative to anleftist government and, like their counterparts in. other Latin Americanare coming to see themselves as theof legally constituted authority. The vigor with which Betancourt has acted to put down threats from both right and left hascertainly Increased his prestige with the military as well as with the public at large.
A serious threat to political stability has come from the extreme left minority, which by tbe end0 had united in militantto Betancourt. The hard core of this opposition has been provided by the PCV, which is still among the largest In Latinalthough its membership has probably fallen to0 from8 peak oft has considerable Influence, particularly ln the Caracas area and In the oil fields. Its youth wing In conjunction with other leftists controls the principal university and secondary school student organisations. The PCV is AD's principal competitor inlabor and virtually controls thepress association. The PCV has not effected any significant penetration of the armed forces, although there are some Castro/ Communist sympathizers In the lower ranks of the army.
The strength of the left opposition has been greatly enhanced by the emergence of pro-Castro left-wing elements ln URD and AD. The AD dissenters, expelled0 for their violent disagreement with the moderateof the old guard AD leadership, promptlyew party called the Movement of the Revolutionary Left (MIR) andational liberation movement modeled on Castro's. Led by Congressman DomingoRangel, it is the most aggressive of Venezuela's minor parties. Its strength is mainly Ln the Caracas area and in eastern Venezuela.
In an effort to force the government to adopt Castro-like policies or to relinquish its control, the PCV, working with MIR andfrom URD,eries of riots and demonstrations Inuring the period of disorders, the URD leadership, for some time dissatisfied with its position ln the Betancourt government and desirous of establishing forore radical image, seizedispute with Betancourt over his policy toward Castro to withdraw from the coalition.
During this critical period, however, Betancourt was able to count on effectiveand military action to contain andsuppress public disorder. The event showed that, although the left was capable of fomenting serious disturbances. It lackedstrength to coerce or overthrow the government. Since this crisis, the President hascries of political measures which have at least to some extent neutralizedHe has maintained the partialof constitutional liberties Instituted at the time of the disurbances, suppressed MIR and PCV propaganda organs, and arrestedfrom URD as well as its allies. He has been careful to use the suspension of liberties only in dealing with those who seek topublic order; he is preparing to resume constitutional guarantees, subject toaw enabling his government topolitical party activities.4
Furthermore, the URD withdrawal from the coalition actually strengthened Betan-court's hand. The President's resultingof the Cabinet to Include only members of AD, COPEI, and politicalclearly established the administra-
1 The suspension of constitutional guaranteesby Presidential dDcrce permits theto: prohibit public meetings, close downconsidered by It to be sodlUous, prohibit internal as well as international travel, and search homes and make arrestsarrant. The projected law on parties requiresarty DOS subordinate Itself to InternaUonal pollUcalIt permits political demonstrations lr. open places and pollUcal propaganda uUlhOng the usual communlcaUona media only for electoral purposes and only withinmonth period before an election. In addition, the law forbids political propaganda which la anonymous, lacks respect for the law. or Is disrespectful to the President and other public authorities.
tion moderate left. This move, coupled vith his manifest determination not to allow radical excesses, almost certainly increased his standing with the military and withand conservative elements. Although the government's position in Congress was weakened by the defections from thothe government parties stillajority In the
Chambkb or Dta'cnes
Senate
The Government Coalition
AD
COPEI
7
The Opposition
URD
MIR
PCV
6
10
1
2
13
2
Other
hasfrade anionheld since February.
AD has scored considerable success in halting the inroads oi MTR-PCV-URDIn the Venezuelan Confederation ofmajor labor organization ln thein isolating or eliminating their influence. AD is stilltrong majorityIn the labornd controls the land workers federation, thereby exertinginfluence on the peasantry. AD has been less successful among student groups, since the MIR defection caused it to lose its one-Umo dominant position in the organized student movement.
Pro-Castro sentiment, once formidable ln Venezuela, has sharply declined. Students, teachers, and intellectuals, and much oflabor have been antagonized by the authoritarian character of the Castro regime. The peasants were never seriously affected by Castroism. The press and othermedia are now highly critical of the Castro regime. Thus Castroist agitation in Venezuela ts now limited to the efforts of the PCV, MIR, and USD party organizations.
agitation, while concernedissues of foreign policy. Is nowthe deterioration in thenauguration and theprogress of the President's social anddevelopment program. The leftthe administration not only ofmove fast enough on reform, but alsoa program ill suited tofundamental social and economicin the country. Conservativecriticize the government for beingand blame it for tho depressedthe economy. At the same timeis rising over persistentand cost of livinggovernment, with little experience lnaffairs, is hampered In Itsby the need to compromise withof political groups. It finds Itto make effective use of Venezuela's
CONOMIC SITUATION AND PROSPECTS
For years Venezuela's grossas been one of the highest in Latin America (an estimatedillion) and until recently the boom provided by theof petroleum ensured the country against foreign exchange shortages andbudget deficits. Various levies on petroleum production and profits stillmore than half of government receipts3nd petroleum, together with iron ore, accounts for almost all of the country's exports.
However, the spectacular growth in these extractive Industries has not beenby adequate development of otherof the economy. Resources for many years were devoted to grandiose programs ol construction of government buildings and luxury housing, and large sums of money flowed into the hands of tbe rich, many of whom In turn bought land or sent their money abroad. Investment in agriculture,Industries, housing, public health, and education has been inadequate to meet the needs, much less the aspirations of the bulk
of the population. There is still aImbalance in the distribution ofincome, which remains largely In the handsmall percentage of themainly in .the capital city.
The present government Is committed to4 billion program designed to promote diversification of agriculture, agrarian reform, and improvements In housing, health, public welfare services, and education. It is placing particular emphasis on developing the interior. With an eye to reviving the construction industry andunemployment (particularly among the slum dwellers In the Caracashe government Is also startingrashfor expansion of housing and rural water supply facilities, using bonds andbank loans to finance tt.
Thus far the government has made little progress In dealing with problems of urban housing and urban unemployment, but has done relatively well In education, in theof rural credits, and in agrarian(mainly using government lands,those taken away from officials of the ousted Perez Jimenez dictatorship).Venezuela Is the only Latin American country except Cuba which has begun aagrarian reform program.agencies have settled about one-quarter of theamiliesland. Under pressure from powerful campesino unions the government is nownumbers of large estates forprojects. Although the program isto have desirable social effects, the benefits in terms of Increased farm production may be limited by comparison with the large Investments being made. The shortage of technical and supervisory personnel is aproblem.
Betancourt's most acute problems,have been in the financial field. The government has resorted to Import licensing and exchange controls to restrict the outflow of foreign exchange, whichecline In net official foreign exchange reserves4 billion at the end72 million aseanwhile the regime has run substantial deficits. The high level of expenditures, with an estimatedillion budgetedn part reflects heavycharges on short-term loans used toprevious deficits. In keeping with its traditional practices, the government haa avoided currency inflationeans ofthe deficit. The accumulated debt, including floating debt,8 million inhe government plans to seek long-term loans, both domestic andto refund much of this dobt and toinvestments which are now included ln the budget.
The government's financial difficulties are attributableumber of causes. One is the end of the Venezuelan oil boom, which happened to coincide with the advent of the Betancourt administration, but is mainly the result of conditions In the world petroleum market. Anothereneral decline inconfidence attributable to toss ofImpetus with the end of the oil boom, to the political uncertainties of recent years, and to apprehensions engendered by thepolicies of the BetancourtThese factors have contributed to aeconomic recession and an alarming flight of capitalime when newand economic expansion were sorely needed. Despite the government's efforts to revive and expand the economy,now amounts to aboutercent of the labor force and Is still rising.
Other important factors contributing to financial difficulties are heavy government outlays to pay off the debts left by thePerez Jimenez regime, thelosses of uneconomic state enterprises which he established, and the costs ofnecessary social welfare programs. Expendltures for social services and ruralhave risen sharply undermany low priority projects have been undertaken for political reasons. Publicat all levels, down to municipalities, are bloated by the expansion of politicalrequired to satisfy the demand in agovernment
The state of the petroleum industrythe chief determinant of Venezuelan economic conditions. OU production is high and still increasing, thoughlower rate than during the boom, The oil companies, however, aro reluctant to increase theirin Venezuela, in part because world conditions provide little incentive to do so, but chiefly because they dislike the policies of the Incumbent regime. Betancourt has declared that his administration will respect existing foreign investments and concessions, but he has refused any new concessions to foreign oil companies and has sought instead to induce them to accept service contracts with the newly established Venezuelan state oilHe has also denied any intention to increase the taxes imposed on the foreign oil companies, but the increase imposed justhis inauguration raised the government's take from the oil Industry to an amount more than twice that of the companies. The net yield on petroleum Investment has now fallen to aboutercent. In these circumstances, exploration by private companies hasceased, drilling is drastically reduced, and new investment is noteffects upon the Venezuelan economyhole.
Betancourt has made an attempt bamonths to stem the tide of financial drift, but has encountered considerable opposition to proposed remedial measures. In May he put before Congress an austerity andprogrameduction in the salaries of government employees, an increase inutback in administrativeand greater efficiency in government agencies. This program met with strongnot only from the parties of the far left, but also from AD and COPEI, and was modified by the Congress to eliminate part of the salary cuts and tax increases.the President has been able to abolish some government jobs and to cut slightly the salaries of government workers and the
The government is counting heavily on outside assistance to permit it to follow through with Its development program and to re-establish business confidence ln the country.1 foreign loans of0 million,0 million from the Export-Import Bank, have been obtained, and others are in the process of negotiation.
Nevertheless, the prospect is that progress Inwell aswill remain slow. The agrarian reformwhich envisages expendituresf the national budget ornnually, probably will not result in any appreciable Increase in agriculturalfor several years. Heavy expenditures on housing, public services, and education, while of considerable political value, can have but little effect on national development for some time to come. Much of the public money which might be used for development will continue to be drained away forayrolls necessary to maintain an effective AD and COPEI apparatus.
Now that his political fortunes have risen Betancourt Is likely to make new efforts to reduce administrative waste and inefficiency and to encourage investment in economicHowever, his efforts are certain to be limited by domestic political pressures.esult, budget deficits and exchange problems will probably continue to Impedeof the development program.
IV. THE OUTLOOK
years remaining until theat the end3 will be criticalcause of moderate leadership andgovernment in Venezuela. AtBetancourt administration willa difficult time. The President'sto deal with pressing economic andproblems are certain to arouse neweven among some of those mostto the administration.will be under considerableobtain additional benefits from theindustry, which many Venezuelansable to provide the funds necessarynational financial problems. Hesucceed In obtaining some newother external financial assistance,toward economic recovery andis likely to be slow and uncertain.
Popular dissatisfaction and Impatience with the slow rate of economic Improvement is likely to grow, especially in the congested urban areas. This dissatisfaction willthe Communists and other revolutionary leftists with further opportunities foragainst the regime. At the same time, distrust and dissatisfaction ln business circles is likely to continue, and some rightists wUl continue to conspire with reactionaryelements to overthrow the regime. Thus Betancourt will remain under continuing threat from both the left and the right.
Although the regime will continue to be subjected to public disorders organized by the revolutionary left and attempts to overthrow it by extreme rightists, lt enters the final half of President Be tan court's term withadvantages. His standing in theareaeading exponent ofgovernment and moderate reform adds to his domestic prestige. His demonstrated ability for living with the diverse politicalcoupled with the breadth of hissupport, weighs heavily in his favor. In addition, Betancourt, probably more than any other Venezuelan leader, continues to bewith change from the old days. This popular image of the President, even among many in the Caracas area, probably will do much to reduce the adverse Impact of histo make spectacular achievements on behalf of the lower class.
The military will probably continue to support the Betancourt government against threats from the extreme right as well as from the left. Military leaders are probablythat an attempt to restore military rule would incur united and sustained opposition from all the pollUcal parties. Thisin addition to the growing tendency of the leaders in the armed forces to favor legally constituted government, will diminish the likelihoodilitary takeover. Moreover, although the military will remainabout some AD policies, It will probably continue to see Betancourt's moderateas the best it can hope for. Betancourt Is aware of this and, as In the past. Is likely to court military favor and to behave Inay as to command the crucial military support.
On balance we believe that Betancourt will probably be able to serve out his term. We are much less confident, however, that the Betancourt administration will havea stable foundation for theof constitutional government.
The national elections scheduled for3 will be the only formal test of theappeal of the Betancourt administration and no firm forecast of their outcome can be made at this time. The constitutionthe re-electionresident and thereood chance that this prohibition willaffect AD's bid ln the election unless Betancourt has made such far-reachingas to assure AD's dominanceew government. Aa yet no member of AD can be identified as the President's heir apparent, and in any event no individual on thescene has comparable stature.
If3 Betancourt has clearly failed to make satisfactory progress in bettering the lot of the Venezuelan people, the capability of his extremist opposition will grow andparticularly troublesome during the electoral campaign. Any firm coalition of the MIR. URD, and the PCV ln favoringle candidate3 would give that candidate important strength. Thus,reeandidate of radical tendencies or one, such as former Junta President Larrazabal, with considerable ambition but few fixed political ideas, could be elected.areer military figure whose role as provisionalput him ln the national spotlight,onsiderable personal popularity, especially ln tho Caracas area, and can count on somewithin the armed forces. He might again be willing to work with the far left, as he didresidential candidate In the last election-
The reaction of the military to awhose character and orientation seemed to It contrary to the best Interests of the country would be uncertain. Theperhaps with support from elements In AD and COPEI. might move to prevent the inauguration of an unacceptable President.
Venezuelaecord of close ties with the US. based in large part on the mutual Interest of the two countries in theof Venezuela's oil industry. Betancourt has carefully avoided any appearance ofon the US. but has done his part to keep relations with the USordial footing. Bctancourt's interest In obtaining additional foreign economic assistance and his desire to keep the US oil market open will probably strengthen his inclination to get along with the US.
Within the Latin American community Betancourt has championed the cause ofgovernment and the repudiation of authoritarian regimes. This policy will continue to foster close relations with Latin American governments, like Colombia and
Costa Rica, which shore his interestong time foe of Rafael Trujillo, the late Dominican dictator, has had his position at home and In the areaby recent developments in theRepublic. He probably is inclined to go along with an inter-American acceptance of the Balaguer government in the Dominican Republic now that Trujillo family's power over it has been broken. He has brokenrelations with Cuba and isthe Colombian Initiative for collective measures against Castro.
n world affairs, Venezuela will continue to support the West against the Communist Bloc on most issues in the UN and elsewhere. Venezuela maintains diplomatic relations with ono Bloc country, Poland, butIs not likely to establish such relations with the USSR or Communist China.
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