Highlights
-President Hugo Chavez advances 26 new decrees under special legislative powers
-Critics state new laws are too similar to those rejected in December 2007 referendum
-Decrees will lead to investment uncertainty in near to mid-term
On August 4, 2008 26 new decrees from President Hugo Chavez were released in the nation’s official gazette. The laws, which critics state are similar to those that voters rejected in a national referendum in December 2007, bolster Chavez’s renewed move towards socialism since his defeat in December (Previous Report). Chavez approved the measures in the final hours of an 18-month period during which lawmakers had granted him special legislative powers.
Critics remain concerned over Chavez’s lack of regard for democratic policy. As such, the increasing state-control illustrated in the new measures is likely to worry foreign investors in the mid-term.
Decree Details
The new decrees cover a range of topics impacting Venezuelan political, social and economic policy. Economically, the laws include greater state control over the agriculture industry. Under the new provisions, food retailers or distributors determined to circumvent the government-imposed price controls or hoard products (especially those established by the state as “items of basic necessity”) could be punished with up to 10 years in jail. The government can also “restrict or prohibit the import, transport, distribution, exchange or sale” of certain food and products, as well as take over the distribution activities “when considered necessary.”
The decrees also target commerce, services, and publicity of businesses more broadly. With the new powers of state control, the government could choose to “occupy and temporarily operate” private companies who fail to comply with new transparent bookkeeping rules. Companies found to violate the measures could be fined or face indefinite closures. Socialist-style economic changes are also to be implemented at the community level, including the instatement of the long-underground market that provides for the bartering of goods and “social property” businesses operated communally.
Military changes are also addressed, including the establishment of Chavez’s long-desired neighborhood-based militias. A new branch of the military, called the “New National Bolivarian Militia,” will consist of civilian volunteers who will partner with neighborhood-specific “communal councils” to “establish defense committees.” While Chavez has not detailed what role the new militia and councils will have in the community, they will likely be touted as crime deterrents. However, the likelihood remains high that these units will be politicized and used to inform on opposition movements and supporters in their respective areas.
However, the new decrees stop short of removing term limits for Chavez, which was one of the most highly contested measures included in the December 2007 package. While Chavez has indicated that the new decrees are different from those previously rejected, it is clear that he still desires some of the same reforms. However, he likely realized that new laws regarding term limits could not be disguised or changed as easily.
Defense and Critics
Critics remain concerned over what they feel is Chavez’s lack of regard for the democratic process, namely not entirely complying with the rejected referendum. Additionally, domestic analysts remain concerned that the reforms will not be beneficial to the nation’s global economic position, with the increased ability for companies to be shut down or overtaken at the government’s discretion. Major business associations were not consulted throughout the drafting of the decrees, and these associations have indicated they will release full statements in the near-term once they have had time to fully analyze the measures.
Chavez and his administration have staunchly defended the new laws. Vice President Ramon Carrizalez countered critics’ charges by stating, “there are things that can be done without the necessity of reforming the Constitution.” President Chavez pledged to continue pushing for new ways to implement the measures lost in December, and challenged anyone upset with the decrees to “go to the Supreme Court.” This is a safe response for Chavez, as his political allies dominate the Court, Congress, and the majority of other political institutions within Venezuela.
Outlook
Chavez will likely continue to pursue new avenues to implement his failed December measures in the long-term. The recent set of decrees could have a negative impact on attracting foreign investment to Venezuela in the near to mid-term, however. Private investors will likely remain concerned about investing capital into companies that could potentially be overtaken by the government without much warning.
The ongoing move by Chavez towards a centralized, state-run economy will likely lead to conflict with the business community within Venezuela in the near to mid-term. Economic and political instability, coupled with ongoing protests from opposition parties over the recent approval of a blacklist of candidates for November 2008 regional elections, will likely continue in Venezuela in the near to mid-term (Previous Report).