Bolivarians and Bolivians

Another thing that I didn't quite realize until I got to Venezuela is just how important the international dimension of the Bolivarian Revolution is to President Chávez. 

The above photo is of a speeding red jeep, of the sort that Chávez has distributed to various functionaries, with “Viva Bolivia libre” painted on the back window.  We were up in the “Country Club” neighborhood, a wealthy part of town where the government planned to build public housing until Chavista supporters started buying homes in the area.  Those plans, mysteriously, now seem to be on hold.

It was a Saturday, the day before Bolivia's recall referendum.  Chávez is deeply vested in Evo's success, and so he organized mass demonstrations in support of Evo Morales here in Caracas.  Parts of the city were a sea of red, gold, and green, and Evo supporters could be seen everywhere.  It formed a decent counterpoint to the opposition demonstration held on the same day. 

Bolivia is a member of the Alternativa Bolivariana para las Américas (aka, ALBA), along with Nicaragua, Dominica, and Cuba.  Honduras is on the verge of joining.  It isn't entirely clear what ALBA does (there's not a lot of institutional heft to it) but the Venezuelan government has vested a lot of rhetoric.  It also seems to have invested no small amount of money.  A back-of-envelope calculation from data in this Miami Herald article implies that subsidies to Cuba alone are worth around one billion dollars a year.  Information in this Reuters piece implies an even higher cost:  34 million barrels a year, worth around $4 billion, in exchange for Cuban doctors.  Chávez has given aid to Bolivia and Nicaragua under ALBA, purchased billions and billions of Argentine debt in support of the Kirchners, and finances oil purchases in the circum-Caribbean.

There are two mysteries to Chavista internationalism.  First, what's its extent?  How many resources has Caracas put into spreading Bolivarianism?  Second, what does President Chávez get out of it?  Neither one has a clear answer, but I'll take a very superficial stab at it.

First question:  how much does Venezuela devote to international affairs?  That's a surprisingly hard question to answer.  In fact, I can't answer it, except to say that it's both a lot of cash in absolute terms and probably not all that much in terms of Venezuela's nominal GDP.  ($236 billion in 2007.) 

The easiest program to pin down is Petrocaribe.  It offers cheap loans to circum-Caribbean nations to finance oil imports.  As the price of oil grows, the buying nations get to finance a larger percentage of their imports.  (60%, as long as oil stays above $100.)  The loans are made for 25 years at 1%. 

The actual value of these subsidies is hard to find.  The Venezuelan government announced that Petrocaribe members saved $14 per barrel on 59 million barrels over the last three years, for a total of $826 million, but God only knows how that was calculated.  If you assume that (1) Venezuela meets its Petrocaribe commitment of 185,000 bbd, (2) the average cost of oil is $110, and (3) Petrocaribe members can borrow on the open markets at 7%, then the value of the program comes to $223 million per year. 

What about direct financial aid from Venezuela?  That's even harder to find.  The Venezuelan budget website doesn't seem to be working.  Venezuela buys plenty of Argentine bonds (more on that in another post), and Caracas lends plenty of funds to various Latin American states through a panoply of aid and investment programs, but there's no central registry. 

Nor is it clear how such financial aid would be booked in the balances-of-payments published by the receiving nations.  I heard a lot of rumors that the Venezuelan embassy in Bolivia has a budget of $500 million per year.  That would be an astounding figure, considering that the entire Bolivian government barely manages to spend $1.5 billion, but it's impossible to verify.  The Bolivian balance-of-payments registered less than $300 million in official transfers in 2007.  Most forms of unbooked aid should eventually show up in the erros & omissions category of the balance-of-payments, but that category is small and shows no trend.  (Bolivia, unlike Venezuela, has very easy-to-use statistical websites.)  Bolivian officials admit to about $50 million in unofficial Venezuelan support, channeled directly to local officials.      

If the Bolivarian Republic provided services that aren't booked in the trade data, like, say, a small army of Cuban doctors, then that wouldn't show up in the receiving-country's statistics.  Venezuela could also, say, overpay for its imports from favored nations, or finance development projects, none of which would be booked.  In other words, estimating the value of Venezuelan aid would take a lot more time than I have available.

Amazingly, Venezuela also gives help to the U.S. and U.K., providing cheap heating oil to poor Americans in the northeast and subsidizing bus fares for poor Londoners, at least until recently.  The cost of those programs, however, isn't very high. 

And then, of course, there is the $300 million that Caracas may have provided the FARC.    Doug Muir, I should point out, predicted that Chávez would "meddle" in just this way.  (Can anyone find that link?)  The recent near-war combined with the FARC's troubles, however, seems to have the kibosh on that. 

An American intelligence official told Congress that Venezuela has spent $33 billion to influence his neighbors, but he gave few details.  I don't trust the number, but it is within the realm of possibility, if you include purchases of Argentine bonds. 

In short, it's clear that Venezuela spends a fairly substantial amount on aiding other Latin American governments.  (Or, in the case of Colombia, trying to subvert them.)  So what does Caracas get out of its involvement? 

The most concrete gain would be the effective annexation of most of the Caribbean.  Venezuela claims Aves Island, in the center of the basin, and if Caracas can persuade the rest of the world that Aves is both permanently inhabited and Venezuelan, then it could use it to establish an Exclusive Economic Zone across most of the seabed.  Here's a map taken from a Barbadian blog, Notes from the Margin:

On April 1st, 2007, the Stabroek News of Surinam reported that Dominica had finally caved in on the Aves Island issue.  Now, that sounds like a pretty concrete gain ... only a high-placed Trinidadian official in Caracas pointed out to me that the U.S. and France had already recognized Venezuela's claim.  (To be fair, both countries hold that possession of Aves Island would not allow Venezuela to claim a Caribbean EEZ.)  In point of fact, Dominica has not revoked its claim, and the Dominican opposition is fighting the construction of a Venezuelan-financed fuel refinery, fearing the expansion of Venezuelan influence.

Mr. Chávez has discussed building a pipeline across Nicaragua, in order to export oil to China.  After all, it currently takes four days to transport Venezuela crude to the United States, and four weeks to get it to the People's Republic.  On the other hand, it takes special refineries to process Venezuela crude, and it still wouldn't make sense to sell to China instead of America even with a Nicaraguan pipeline.  So nothing has happened there, and all Caracas seems to have gotten is Mr. Ortega's rhetorical support at Ibero-American summits.

What about Bolivia, whose referendum kicked off this post?  Venezuela has signed a defense accord, of sorts, and Bolivia is a full-on supporter of ALBA and Venezuela's other unity initiatives.  But the country isn't about to become a Venezuelan colony, and Chávez isn't going to get Bolivia (or any of the other beneficiaries of his largess) to subsume its sovereignty in some sort of great Bolivarian Federation.

At home, the benefits are equally hard to see.  On the margin, Chávez gets some props from his association with Fidel Castro, but is that worth one (or four) billion dollars?  His supporters don't vote for him because he helps keep exposure deaths down in the Bronx or prevent diarrhea in Bluefields.

In short, his initiatives aren't providing much concrete benefit to Chávez or his constituents.  Nor do they seem to be laying the groundwork for a serious attempt to unify parts of Latin America under Venezuelan leadership.  I'd understand either one.  But if I'm correct, and neither goal applies, then he must be spending all this money out of ... pure charity, pure ego, or both.   

That's a bit unsatisfying, of course.  I may be blinkered by my own realism.  I must be missing something.  Any ideas or better analysis out there?

Comments

[Doug M.]

On the FARC thing: I remember saying it but I don't have the cite either. alt.history.future, maybe? Would have been 2-3 years ago.

I do remember that the Colombia meddling was in the context of "he might do this, but it would be really stupid, and gain him nothing. At best nothing."

The other thing to watch out for is an attempt to bully Guyana on the old border issue. I used to think this was very likely -- something he would try as soon as his popularity began to seriously crash.

I still think it's a good possibility, but I'm not sure I would bet on it any more, because he now has so much invested in his reputation (and self image) as an international man of peace.

(As I've said before, it would make a lot more sense for Venezuela to just buy the disputed territory... they can afford it, and Guyana needs the money. But things don't work that way any more.)

Doug M.

[Noel Maurer]

Doug, what exactly do you mean when you say "things don't work that way any more"? More specifically, is that a (clearly true) empirical observation, or a theoretical statement about modern international relations?

I'm honestly curious, especially now that my actual real paid work is turning to such matters.

As an empirical matter, things don't work that way anymore ... but I'm not so sure that there is a theoretical content to that observation. After all, what would Chavez lose if he made a monetary offer, as long as it was tied to an explicit statement renouncing the use of force to settle the issue?

Like you said, Guyana needs the money, and most of the disputed territory contains only 120,000, save for some towns on the west bank of the Essequibo that Venezuela could easily disavow.

Some math, using the preliminary '08 projections:

Public revenue/person = US$525.
Public spending/person = US$742.
GDP/person = US$1,478.

To make Guyana a tempting offer, then, you'd have to offer them an equivalent income in, say, American treasury bonds. A 30-year T-bill offers around 4.46%, so:

Offer based on revenue: US$1.4 billion.
Offer based on spending: US$2.0 billion.
Offer based on GDP: US$4.0 billion.

Venezuela's bought US$7 bn of Argentine bonds, and may spend US$4 bn every year on aid to Cuba. It spends at least US1.3 bn on aid, possibly a lot more. PDVSA's social budget in '07 came to US$16bn. So like you said, the Bolivarian Republic has the money.

Would Guyana turn that down if it were seriously offered? Truth be told, Doug, for all the power of modern-day norms, I'm not so sure.

So why doesn't Chavez offer US$4 billion? I don't believe that it's because he's afraid Georgetown will reject it. (So what if it did? What would he lose?) Nor do I believe that the reason is that Chavez that he'll look bad overseas, as long as he makes it clear that force is off the table.

(Which wouldn't be hard to do, considering as he'd find himself at war with the United States --- and probably the entire OAS --- the very next day.)

No, I suspect that it's because Chavez doesn't actually /want/ the "Reclamation Zone."

But if I'm wrong, and there are binding norms against /offering/ money for territory, I would very much like to know what those norms are and how they operate. For professional reasons.

[Noel Maurer]

And I should also say that I think Chavez does want the Reclamation Zone. So there's a hole in my own analysis, unless it's that Chavez believes that the Venezuelan public opinion would turn against offering US$153 per Venezuelan to settle for a chunk of territory that many think is already rightfully theirs and many (most) others couldn't care less about.

That, though, doesn't jibe with his willing to spray aid money about like a fire hose at a demonstration.

So I am puzzled.

[Doug M.]

It's an empirical statement. But also, I think you're missing a step or two. Offering money makes a statement that Venezuela is not the rightful owner -- since you don't pay money for something that already belongs to you.

Also: if Georgetown then rejects, Chavez looks stupid. Which I don't think he'd like.

On the Guyanan side, keep in mind Guyana's deep and bitter ethnic division. If the disputed territory contains more Afro-Guyanans than Indo-Guyanans, or vice versa, then selling it could upset the balance. (Just eyeballing the map, I suspect it's more Afro, since the Indians are more concentrated in the towns.) So, whichever group stands to lose would be fiercely opposed. Since both groups have a veto power, that makes a transaction pretty unlikely.

Two other thoughts. 1) Chavez might want to use the territory as a rallying point for nationalist sentiment, but care very little whether he actually gets it or not. 2) He might want the land, but not the inhabitants -- my impression from a distance is that Venezuelans neither like nor respect Guyanans, and wouldn't much care to make a couple hundred thousand of them into fellow citizens.

Doug M. -- in a Belgian airport hotel

[Noel Maurer]

Food for thought. So let me think a moment.

I'm not quite going to use the same order you did.

"Chavez might not want the land." True, but unlikely, given his revealed preferences.

"Chavez might want the land, but not the inhabitants." From inside Venezuela, nobody thinks about the Guyanese at all. There's no prejudice, because nobody thinks about it. I doubt that the addition of 120,000 Guyanese to a nation of 27 million will produce any tangible opposition. (As opposed to the expenditure of $4 bn, but the people who'd oppose that as a waste probably /already/ oppose Chavez.)

"Offering money admits it's not yours" doesn't seem to be an issue. If I were Chavez (yes, I'd like to be Chavez), I'd offer Guyana membership in Alba, tied to $4 bn in aid and Guyanese /recognition/ of Venezuela's proper boundaries.

"Keep in mind Guyana's deep and bitter ethnic division." Point taken. I suspect that the Guyanese government will reject almost any offer. (This is not the same as saying that a referendum on the issue wouldn't pass, but as you point out, that's not relevant. What's relevant is that the government of the day will almost certainly say no.)

"If Georgetown rejects, then Chavez looks stupid." Since Georgetown almost certainly will reject, then this seems to be the reason. Chavez plays down political game trees fairly well (even with Cemex, he's lost nothing by being dramatic rather than quietly paying $1.3 bn) this would seem to be the reason.