Venezuela and the Perils of Ceding Sovereignty

US imperialism is “not to be trusted even a little bit,” much less considered a “partner” in a “cooperation agenda.” - Che Guevara

By Ricardo Vaz

 

On January 3, the US bombed Venezuela’s capital region and kidnapped President Nicolás Maduro.  The unprecedented attack represented the culmination of a quarter-century of imperialist hybrid war, including devastating unilateral sanctions, mercenary incursions, “color revolution”-style insurrections, media disinformation, and NGO infiltration.

The four months since have brought a flurry of developments, from renewed diplomatic ties with the US to an overhaul of key legislative pillars of the Bolivarian Revolution.  Additionally, the Trump administration established semi-colonial control over Venezuelan oil revenues, with the amounts and timings of disbursements back to Caracas left entirely at US officials’ discretion.  The arrangement is similar to the one Washington has forced on Iraq since the 2003 invasion.

This compromised sovereignty is a catalyst for other issues.  On the one hand, it makes it tougher for the Venezuelan government to improve living standards without challenging business interests.  On the other, the burden of Venezuela’s external debt might see Washington attempt to impose an IMF loan that will bury the country in debt and dependency for decades.

The acting Rodríguez government’s tenure has been marked by accelerated political and economic transformations.  On the international front, Caracas has restored diplomatic ties with Washington and recently resumed dealings with the US-controlled International Monetary Fund (IMF) and World Bank.

Domestically, Rodríguez has changed key cabinet and military posts, while pushing through the National Assembly a number of reforms with the explicit goal of making the country more attractive for private sector investment, especially from Western multinationals.

Plans to reform pension, tax, housing, and the landmark 2012 labor law are in motion.  Mining and hydrocarbons have already undergone pro-business overhauls, with slashed fiscal responsibilities, decreased oversight, and disputes subjected to international arbitration.  In contrast to Chávez’s reassertion of oil sovereignty, which underpinned the massive sociopolitical achievements of the Bolivarian Revolution, the reformed energy law brings back the old concession model that puts operations and sales in the hands of private corporations.

In tandem, the Trump administration has issued licenses to pave the way for Western conglomerates to return to Venezuela, and several have already struck deals under the new highly favorable conditions.  The licenses maintain and even double down on US sanctions by barring dealings with China, Cuba, Iran, North Korea, and Russia and mandating that all Venezuelan state revenues from oil and mining be deposited in US Treasury-run accounts.

The subordination to US impositions saw Venezuelan authorities extradite former diplomatic envoy and minister Alex Saab to face charges in the US with little to no explanation.  The move was shocking but not out of context.  In recent weeks, there has been a succession of ceremonies at Miraflores presidential palace where Trump officials get the red-carpet welcome and escort corporate executives to sign contracts under the new pro-business incentives.  Far-right tech moguls, including Palantir founder Peter Thiel, are already taking advantage of Trump’s leverage to establish a lucrative foothold in the country.  For his part, the US chargé d’affaires holds regular publicized meetings with Venezuelan cabinet ministers. 

Caracas’ technocratic and pragmatic approach has dovetailed with a corresponding shift in discourse.  On foreign policy, the anti-imperialist rhetoric has all but vanished.  As Trump unleashes a savage war against Iran and threatens to “take over” Cuba, Venezuelan leaders have refrained from condemning the escalating imperialist aggression while emphasizing their desire to build good relations with Washington.  At the same time, references to Maduro have drastically decreased, as documented in a recent investigation.  Domestically, the central focus has become macroeconomic stability and attracting foreign investment.  Both Acting President Rodríguez and her brother, National Assembly President Jorge Rodríguez, acknowledged receiving “recommendations” and “suggestions” from oil majors amid the recent hydrocarbon overhaul. 

Rodríguez and the Bolivarian leadership, under ongoing US pressure, are betting that the pro-business opening will lead to accelerated economic growth that will trickle down into improved living conditions, thus allowing the government to rebuild social legitimacy and political prospects.  However, this plan faces serious roadblocks.

The first issue is that the acting authorities may not have a lot of time to improve the living conditions of the Venezuelan people. 

Over the previous seven years, with the economy asphyxiated by the US economic blockade, the Maduro government prioritized macroeconomic stability and reduced inflation first and foremost, through a strict monetarist policy package.  While the approach, coupled with a modest oil industry recovery, did lead to slowed down inflation and modest economic growth, it came at a price of freezing wages, consumer credit, and public spending.  The minimum wage, last raised in 2022, is now worth less than US $1 per month, with further increases replaced by non-wage bonuses that cheapen labor costs for employers.

Though these bonuses have increased periodically (the income floor is now $240/month for public sector workers), they are still far from covering living costs.  On May 1, Rodríguez ignored growing calls for a minimum wage hike, the conversion of bonuses to wages, and the restoration of collective bargaining rights, instead doubling down on the bonus policy.  With government officials announcing a labor reform soon, it is likely that the return of the minimum wage will come alongside a significant erosion of workers’ rights and employer responsibilities.

However, apart from its commitment to fiscal discipline, the Rodríguez acting government has little room to maneuver because of its lack of direct management over oil revenues.  At the mercy of the Trump administration to return export earnings in the amount and timing of its choosing, Venezuelan authorities are unlikely to commit to anything that might unsettle the budget.  Rodríguez herself warned that wage increases must be “responsible.”

There is a delicate balance to strike.  To implement the current pro-business agenda, not to mention the US rapprochement, the government needs social peace, and only improved material conditions for the working-class majority can ensure that in the short term.

It is not just the pressure for better living standards that looms large on Venezuela’s economic front.  There is a growing expectation that creditors will soon reengage with Venezuelan authorities to collect on a sizable external debt: a combination of defaulted bonds, unpaid loans, and arbitration awards that, with interest accrued over years, may amount to as much as $170 billion.  The Venezuelan government recently announced the launch of a debt restructuring process, while Washington issued a license allowing the hiring of financial and consulting services. 

Given the recent overtures to foreign capital, Venezuelan leaders will be hard-pressed to honor whatever commitments necessary to render the country a favorable investment climate.  Nevertheless, a major chunk of this debt is illegitimate.

On the one hand, debt ballooned in the mid-2010s as Venezuela’s credit rating was unjustifiably downgraded and borrowing costs went up, as Washington slapped its first rounds of sanctions on the Caribbean country.  The Maduro government made a strategic choice to prioritize debt service as the economy reeled following a collapse of global oil prices, hoping that this “discipline” would stave off a scenario where the country was shut out of financial markets.  It turned out differently.

Venezuela was gradually locked out of global finance after the Trump administration’s 2017 financial sanctions.  Bonds defaulted one after another and have been accruing interest ever since.  And the notoriously corrupt US-backed “interim government” also played its part in running up Venezuela’s liabilities and pilfering state assets abroad.

The diverse group of bondholders and corporations owed arbitration awards is sure to receive the backing of the White House, which holds the purse of Venezuela’s export proceeds.  This mechanism could be utilized to directly transfer Venezuelan state income to creditors in what would effectively amount to international wage garnishing.  Given how Venezuelan bonds have risen in recent months, investors are eagerly eyeing a significant windfall.

Venezuela’s unsustainable debt burden opens the door for further US imperial predations.  Even if there is an agreement to pay 50 cents on the dollar for Venezuela’s $170 billion debt for a period of 15 years, that comes to $5.6 billion a year, roughly a quarter of the present budget.  It is simply unpayable.

While Caracas may be able to settle with some creditors by privatizing Venezuelan state assets, it will not amount to much.  Venezuelan leaders will stress that, with the recent reforms and US opening, the economy will grow tremendously, and they will be able to honor all commitments.  But creditors are not willing to wait when they can cash in now, especially given Venezuela’s weak bargaining position.  The government cannot maintain a functioning country in the short term with a huge debt burden.  As a result, the US might take advantage of the crisis to impose a major loan from the IMF or some lending coalition.

An IMF or similar loan program is more than just an agreement to lend some amount under certain repayment conditions.  It is an opportunity to impose neocolonial arrangements on Global South countries.  In Venezuela’s case it is even more symbolic: it would mean exacting the proverbial pound of flesh for Chávez’s revolutionary audacity to challenge US hegemony in the Western hemisphere.

An eventual long-term credit program would surely come alongside a structural adjustment package of mass privatizations, gutted social expenditure, and all-around liberalization of the economy.  Given the current leverage over Venezuela, US officials may attempt to further entrench the rollback of the Caribbean nation’s sovereignty.

Between the growing domestic demands for improved living conditions and the specter of debt renegotiation, the acting Rodríguez government will find it increasingly difficult to walk the tightrope of maintaining social peace while continuing to make one concession after another to monopoly capital and the Trump White House. 

With the limits of US imperialism nakedly exposed in Iran, Trump needs a victory in Venezuela.  But that victory does not entail a buoyant economic recovery with social justice, let alone the survival of a sovereign and revolutionary project.  Victory for the US is a dependent country, mired in debt and underdevelopment, where Western corporations plunder natural resources and geopolitical rivals are kept at bay.

Ultimately, any long-term plan for sovereign development needs to start from the fact that US imperialism, to echo Che Guevara,  is “not to be trusted even a little bit,” much less considered a “partner” in a “cooperation agenda.”  It will undoubtedly be a major hill to climb.  But thankfully, even if it means starting over, the Bolivarian Revolution is not starting from scratch.

Source: Sovereign Media

What is Happening in Venezuela?

By Miguel Tinker Salas:



On February 12th, (Venezuelan Youth Day and the commemoration of the independence battle of La Victoria) some university students and traditional conservative opposition groups took to the streets in Venezuela.  In Caracas students and others attacked a government building, burned cars and damaged the entrance to a metro station.  The demonstrations extended for several days, as it quickly became obvious that the principal purpose of the protests was to destabilize the government and seek the ouster of the democratically elected president of Venezuela, Nicolás Maduro.

Maduro faced a hotly contested presidential election shortly after the death of Hugo Chávez, in which he narrowly defeated Henrique Capriles.  To gain support, Capriles promised to continue social programs initiated by the late president becoming what some called a “Chávez lite” candidate.  The hard line elements of the opposition, including Capriles refused to accept the results of the elections and street violence generated by conservative forces left close to a dozen people dead.

Last December, Venezuela held municipal elections that the opposition purposely turned into a referendum on the Maduro presidency.  Despite the opposition’s winning of several important areas in Caracas and the city of Maracaibo the government sponsored coalition (Polo Patriotico) won over 70% of the country’s municipalities.  The election results revealed that the opposition had not won over the majority despite the country’s serious economic problems and the loss of the charismatic Hugo Chávez as leader of the left.

Coming on the heels of a recent electoral defeat the protest by the opposition in early February caught many by surprise.  Even though Venezuela has held 19 elections since 1998, with the left winning 18, there are actually no elections scheduled during 2014, a rarity in the country’s active electoral cycle.

The earliest elections are scheduled for December 2015 when voters will go to the polls to elect members of the National Assembly.  The presidential recall provision of the constitution cannot be triggered until 2016.

It quickly became obvious that segments of the radical right wing were not willing to wait for the democratic process to unfold.  The opposition feared that the government might have time to address the very real problems that Venezuela faces, including food shortages, inflation that has reached over 56% and crime that takes a toll on all sectors of society.  Therefore it should not come as a surprise that when Leopoldo López, (the political figure who hoped to capitalize on the protest and replace Capriles as the de facto leader of the opposition) was asked how long the protest should last, he responded, “hasta que se vaya” until Maduro leaves.
 
This is not the first time the opposition has resorted to extra-parliamentary means to oust a sitting president in Venezuela.  Previously, the opposition staged a coup in 2002 and when that failed, the upper echelon of the oil company led a strike in 2002-2003 that paralyzed the nation.

Subsequently the right engaged in efforts at destabilization known as the guarimba in the early part of 2004 that also failed.  In essence, the opposition has once again adopted the all or nothing strategy they embraced in 2002 and 2004; --- either Maduro resigns or they will continue to protest.

Who are the students?

It is also misleading to assume that all students in Venezuela support the opposition; in fact many also support the government and its allies.  Moreover, student leadership of opposition activities is not new in Venezuela.

In 2006, after suffering a series of electoral defeats, students, especially from private universities, became the new face of the opposition.  Students were also the leading force protesting the non-renewal of the broadcast license of RCTV (a leading television company) for its involvement in the 2002 coup.

The social character of university students in Venezuela has changed significantly since the 1960s and 1970s.  The application of neoliberal policy to the educational arena, the continued use of standardized entrance exams and the expansion of private universities transformed the social character of students and a greater percentage are now from the middle and upper classes.

A tale of two cities and two countries

Much of the reporting by the mass media gives the impression that Venezuela faces a national rebellion.  The reality is that the protests have been restricted to certain pockets in the country, mostly middle and upper middle class neighborhoods, not entire cities.

Most damage to private property and infrastructure has occurred in these neighborhoods.  According to the government 18 municipalities have been the center of protest out of 335.

And even in municipalities where there are protesters, residents live a tale of two cities, with some areas besieged and others functioning under normal-like conditions.  With the advent of carnival, there are also contrasting images of people at the beach and others protesting behind barricades.

Guarimba

To create conditions of un-governability, the so-called “democratic opposition” had taken to barricading the roads to prevent the free movement of people and precipitate a crisis.  They have set up barricades using boulders, glass, trees, trash filled bags, and anything else at their disposal.

In other cases they are throwing glass and nails (called miguelitos, nails thrust through pieces of garden hose) onto the road to impede traffic.  The police and the National Guard have cleaned city streets on numerous occasions.  However, protestors hide materials and take over the streets again once the Guard departs.
 
Walking around areas controlled by the opposition it is impossible not to notice that many streets have been covered with car oil to make the surfaces slick causing motorbikes to skid out of control.  The opposition assumes that motorizados, those on motorcycles are government supporters.  There has not only been a demonization of the motorizados, but also a racialization of individuals who purchased cheap Chinese motorcycles since most are from lower socioeconomic sectors and tend to be people of color.

It is also impossible not to notice the steel wire and barbwire strung across the roadway and some motorcycle drivers have either been injured or killed by these barriers.  Edwin Duran (29 years old) in Caracas was killed by steel wire placed on the street to frustrate traffic.  Delia Elena Lobo, a 39 year old mother was also killed as she rode on a motorbike with her son in city of Mérida.

A retired general, Ángel Vivas tweeted several times giving instructions to his followers on how to place the steel wire on city streets.  The government tried to arrest him for inciting violence.  The general put on a bulletproof vest, armed himself with an M-16 and pistol and took to the rooftop of this house.  The opposition blocked his house while some U.S. Spanish language media rushed to interview him, but never asked how or why he was in possession of an M-16 assault rifle.

Fear is also being used to intimidate the population where barricades disrupt people’s lives.  Residents are being told that the barricades are needed to protect the community from marauding bands of government supporters, the National Guard or the motorizados, (motorcycle riders).

In some neighborhoods, they use the fear of being attacked by the Tupamaros, a political organization inspired by the Uruguayan group of the same name.  In Venezuela, the Tupamaros are a leftist organization that has clashed with opposition forces in the past.

Throughout the day the rumor mill generates one potentially calamitous event after another.  The mainstream media is not reporting the dangerous conditions on the streets; in fact many foreign reporters are afraid to leave the comfort and perceived protection of middle and upper-middle class neighborhoods in which they reside.  One U.S. journalist tweeted he had not ventured out of Altamira, a wealthy area of Caracas, and therefore could not report on conditions elsewhere.

Likewise, contrary to many reports in some media outlets, the military has not been unleashed to senselessly attack the protestors.  Undoubtedly there have been incidents of violence and provocations on both sides and the government recently ordered the arrest of several intelligence officers implicated in the two deaths, one in the opposition and one a chavista activist.

The number of killed has now reached double digits, but violence has taken its toll on both protestors and supporters of the government.  While too high, the numbers would undoubtedly be much worse if the security forces were trying to suppress the protest with lethal force.

Why Táchira?

Protest in the western state of Táchira preceded the larger demonstrations in Caracas and elsewhere on February 12th and were purportedly sparked by the attempted rape of a university student.  The governor of the state of Táchira insists that no students came forth to file a complaint about the attempted rape.

Students took to the streets to protest the rising crime rate and the arrest of two protestors by the police is citied as a factor that enraged students.  The protests in San Cristobal quickly spread to Mérida where the main campus of the University of the Andes (ULA) is located.

However, like everything in Venezuela, developments in Táchira are more complicated than they initially appear.  Some business sectors in Táchira profit tremendously from the illicit trade of subsidized Venezuelan goods sent to Colombia as contraband where they obtain much higher prices.

It is estimated that upwards of 30% of some Venezuelan basic food products exit the country as contraband.  Shortages of basic food products have been especially evident in Táchira and Mérida where many stores shelves are empty.

Average citizens also engage in the contraband trade to augment their salaries.  Gasoline that in Venezuela is heavily subsidized, costing less than 10 cents a gallon is also part of the contraband trade.  The subsidy of gasoline, in place since the 1950s, costs the government upwards of $12 billion dollar a year. 

Táchira is the center of an active remittance trade between Colombians and Venezuelans and money launderers exploit this exchange.  Government efforts to control this illicit trade have generated displeasure among certain sectors.

Táchira also represents another challenge, the presence on Venezuelan soil of Colombian and Venezuelan paramilitaries that profit from the illicit trade and are linked to transnational criminal networks.  They have already kidnaped one Venezuelan military officer who was visiting his family.  They are an ever-present factor in the political protests in Táchira.

Gocho Identity

A racialized “gocho” identity (Andean and predominantly whiter compared to Venezuela’s predominately mixed race and African heritage population) is also being promoted in the Andean states of Mérida and Táchira.  Posters and banners proclaiming gocho power and their role in the protest have been common at rallies in Mérida and Táchira.

From 1898 through 1958, Venezuela was ruled by a series of Andean generals from the state of Táchira.  This gocho identity harkens to a time when the Andes, and in particular Táchira and Mérida exercised a prominent role in the governance of Venezuela.

Protests centered in Táchira and Mérida raise the specter of a Bolivian Media Luna (half moon), where the conservative opposition using a purported racialized identity promoted the secession of the eastern provinces of Bolivia.  Likewise some have suggested that Mérida, Táchira, Trujillo and Zulia might become a Venezuelan version of the Media Luna.  However, protests in Zulia and Trujillo have not reached the levels of those in Mérida or Táchira and that scenario has failed to materialize.

Another important feature of the opposition protest marches has been the leadership role of middle and upper class women.  On Saturday February 22, 2014 women who support the government rallied in Caracas to promote peace and an end to the violence.

On Wednesday February 27, 2014 opposition women dressed in white staged protests against the government and rallied in front of the building of the Guardia Nacional in Caracas.  A female officer of the guard came out to receive their demands and urged the protestors to take part in efforts at dialogue proposed by president Maduro.

At various opposition rallies some women have taken to demanding a hyper-masculinity, baiting men to confront the Guardia or the police and when they do not, raising questions about the men’s virility.    Opposition social media is circulating the image of a young female protestor at one rally that attached a pair of “testicles” to her shorts and carried a sign that said “Soy Gocha y tengo de sobra lo que algunos de ustedes les falta.” (I am a Gocha and I have in excess what you are all missing.)  An arrow on the sign pointed to her purported “testicles.”  Other signs at women’s protests state “women with ovaries vs. a symbolic military” and others crudely state, “The men in Venezuela have no balls”

Daily Life

Where the opposition has set barricades, people live by the cell phone, texting each other to see if it is safe to get out and make a mad dash to whatever store may be open for a few hours.  Most products can be found, though it may take multiple trips to various stores and the frustration of standing in long queues.  Rumors tend to dominate street conversations, where is milk being sold; who has Harina Pan (corn flour used for making arepas, a national dish) and which roadblocks are passable.  The opposition communicates mainly by social media, and many spend countless hours on Twitter, Whats-Apps, Facebook and Zello an application that carries live conversations.

In areas where protests are taking place, workers and other employees cannot enter and are losing income.  Businesses, merchants and the tourism industry on the eve of Carnival also suffer the consequences of the blockades.  Public transportation is at a standstill in these areas and “moto taxis” have become the primary form of transportation.

Although most business sectors support the opposition they are beginning to distance themselves from the more violent protests.  Some appear to recognize that the mobilizations will not topple the government.

On Wednesday February 26 the leaders of Fedecamaras (Chamber of Commerce), Fedeindustria (Chamber of Industry) and Eugenio Mendoza the CEO of the country’s leading food company attended the government sponsored “Peace Conference.”  Although they criticized the government on many fronts, they also expressed opposition to the blockades and acknowledged the legitimacy of the Maduro government.

Though the hierarchy of the Venezuelan Catholic Church was invited, they opted not to attend.  The papal nuncio did attend and urged dialogue and negotiations to end the violence.  The political leaders of the opposition MUD (Unity Table) coalition also boycotted the event.

There is, however, evidence that some elected opposition political leaders are starting to distance themselves from the street violence as well.  This is because people are tired of the disruptions in their lives.  The opposition mayors of Baruta, Sucre and El Hatillo all part of greater Caracas have called for an end to violence and disavowed the street protests that create siege-like conditions.

Fighting for political leadership of the right

Capriles appears desperate to reassert his leadership of the opposition coalition particularly since López outflanked him, becoming the most recognized leader of the right.  However, López is not widely trusted by many sectors of the opposition, including some students.

Capriles spoke at one opposition demonstration indicating his willingness to take part in a dialogue.  Maduro convened a meeting of governors at which Capriles, the governor of the state of Miranda, should have attended; however, pressured by the far right wing, he refused to attend.

Previously, he had attended a meeting and shook Maduro’s hand for which he was roundly criticized by the right wing.  Two other opposition governors showed up and openly sparred with Maduro.  Capriles absence as well as other opposition voices was a mistake and a lost opportunity to dialogue and attempt to diffuse the violence the country faces.

Overtaken by the protests, Capriles initially asserted that political extremes sought violence, a reference to both the right and the left.  He has even publicly criticized López and national assembly member María Corina Machado for raising false expectations that the protests would unseat Maduro.

However, he will find it difficult to cast himself as the moderate in the current fracas.  Capriles faces a scenario similar to the Republicans in the U.S. as they confront the Tea Party wing of the party.

To remain the leader of the opposition Capriles has to appeal to the more radical right wing that refuses to negotiate with the government under any condition.  However, to win elections he has to gain the support of disgruntled chavistas and poorer sectors.  As opposition to the disruptions caused by protests increases, Capriles will find it harder and harder to portray himself as a moderate.

Conclusion

Venezuela is not facing a Ukraine-like crisis as some in the opposition have suggested.  The president retains support throughout the country.  Neither is it on the verge of a fratricidal conflict similar to what has taken place in Syria.

A large part, but apparently not a majority of the society remains bitterly alienated from the government.  Undoubtedly, Venezuela faces real economic and social problems.  However, opposition efforts to topple the government will only exacerbate these problems and continue to raise tensions in the country.
  
On the international front, countries like Brazil and Argentina have called for no foreign intervention in Venezuela, an allusion to United States support of the opposition.  Despite recent tensions, and the mutual expulsion of diplomats, the Maduro government recently extended an olive branch by naming a new Venezuelan ambassador to Washington.

The countries have not formally had ambassadors since 2008.  The U.S. has not formally responded to the gesture.  The U.S. however has expressed concern over a potential new immigrant wave from the Caribbean if Venezuela curtails or ceases the sale of oil through Petro-Caribe to the countries of the region.

There is no evidence that broad sectors of society, especially the urban poor who provide the most support to the government, have joined the protests initiated by middle and upper class sectors.  This division led one Colombian commentator to state, “Venezuela is an odd country, the only place were the rich protest and the poor celebrate.”

It is doubtful the opposition can sustain the present level of protests.  By seeking Maduro’s ouster through undemocratic means and without majority support, the opposition has once again entered a “callejon sin salida,” a political dead end.

After the debacle of the 2002-03 oil strike that cost the country over 14 billion dollars in lost revenue, they saved face by calling for Chávez’s recall.  Under the present electoral calendar they have no such option.

The opposition will find it difficult to save face after this round of protests and many question their commitment to democratic principles and their ability to unite all of Venezuela.  Having radicalized their base, they now face the daunting task of demobilizing their followers if they are to salvage any credibility in future elections.

---

Miguel Tinker Salas is professor of Latin American history at Pomona College and author of several books on Venezuela, including The Enduring Legacy: Oil, Culture, and Society in Venezuela (Duke University Press).

March 04, 2014

cepr.net

The sad decline of Caracas

By Nathan Crooks:

Living in Caracas has never been easy. While the oil boom that started in the 1950s turned the city into one of the most sophisticated capitals in the western hemisphere, growing socioeconomic imbalances and increasing political tension that existed long before Hugo Chávez have always made Venezuela a challenge to navigate.

One glance at the US Department of State's travel fact sheet on Venezuela - which in the first paragraph warns of murders, express kidnappings and armed robberies - is enough to scare away even the most seasoned traveler. The city, however, maintains a magnetic draw on anyone who has lived there before.

Blessed with year-around spring-like weather, Caracas is within hours of some of the best beaches in the world. The shopping is probably the best in South America, and world class restaurants have always pleased the palates of the most discerning diners. With all its problems, the city has been able to retain even those opposed to Chávez's Bolivarian Revolution. Despite the crime, political black lists and social instability, few Venezuelans that live well in Caracas have found a better life elsewhere.

But that could all be changing. Three key events this year have pointed to a decline which may be irreversible. While every aspect of Chávez's project can be debated, it's possible to run any kind of government in a way that works or in a way that doesn’t. And Venezuela is simply not working anymore.

First, Caracas is becoming prohibitively expensive because of Chávez's exchange rate controls and import-dependent economy. According to consulting firm Mercer's 2009 cost of living report, Caracas is now the 15th most expensive city in the world, ahead of famously pricey metropolises including London, Rome and Dubai. When a box of Froot Loops in a Caracas grocery story costs US$54, authorities should realize they have a real problem on their hands.

Venezuela's electric power problems come second. The country nationalized its power industry in 2007 and consolidated generation, transmission and distribution activities under state oil company PDVSA and the newly created state power company, Corpoelec. It's been nothing but downhill since, and El Niño has pushed the power industry to the brink of collapse this year because of low rain levels. Demand, meanwhile, is continuing to increase, despite pleas from the government for power conservation.

Isn't it ironic? One of the most energy endowed countries in the world can no longer provide enough power for its own citizens. Even if you agree with the Bolivarian Revolution, it's hard to argue that the government ministries or political operatives running the state companies are doing their job well.

But the biggest sign of Bolivarian incompetence is the water rationing that started in Caracas on November 2. Entire zones of the city are being cut off from water service for 48 hours at a time. Both public hospitals and five-star hotels alike are having to make plans for the weekly 48-periods they will be without water.

El Niño is affecting many countries across the region, and hydro levels are giving more than one government headaches. But don't the authorities realize that programmed water rationing will only increase demand as everyone will hoard water the days before the scheduled cuts? The fact that water rationing has to be implemented in a major city because of a recurrent weather event is evidence of criminal bad planning.

Power and water service are the basic fabric of any civilized city. One expects problems with such basic services in a war zone or in some other far off locale where Westerners sometimes go to escape modern life. But in Caracas? In a capital city of five million? In a global energy hub? No. It's not something even those most ardently opposed to Chávez would have expected a few years ago. Venezuela's inability to guarantee such basic services takes one's breath away. It was mildly humorous when shortages of eggs and milk complicated daily life in Caracas, but being without reliable power and water service is an entirely different matter.

Without debating the merits of socialism or the Bolivarian Revolution, without even talking about democracy or politics, it's obvious that Chávez's government is doing something wrong. There won't be much to debate anymore in Caracas. One will only have to flick a light switch or turn on a faucet to realize that something is not working.

Caraqueños are used to putting up with crime, political instability and a government bureaucracy that seems schizophrenic at best. The well-off can still eat their Froot Loops, even if a box costs US$50. What remains to be seen, however, is if they will want to do so in the dark. And will even the most loyal Chavistas want to endure Caracas without taking a shower or flushing the toilet for 48 hours?

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