WORLD

Fires of discontent

A government austerity plan creates rioting

MARY NEMETH March 13 1989
WORLD

Fires of discontent

A government austerity plan creates rioting

MARY NEMETH March 13 1989

Fires of discontent

WORLD

VENEZUELA

A government austerity plan creates rioting

The scenes of anarchy seemed tragically out of place in modern-day Venezuela. Looters and demonstrators, many of them impoverished slum dwellers, battled police and soldiers in the streets, setting up barricades and burning buses. In four days of rioting last week, more than 300 people died and as many as 2,000 were injured, including innocent bystanders caught in exchanges of gunfire. Until the violence broke out, Venezuela had been the most stable and generally prosperous Latin American democracy since a popular revolt toppled the country’s last military dictator 31 years ago. Indeed, shocked Venezuelan leaders said that the massive lawlessness could have serious consequences for the usually tranquil nation of 19 million people. Declared Rene de Sola, chief justice of the Venezuelan Supreme Court: “I believe we’re putting in jeopardy the democratic system that we conquered with so much blood, sweat and tears.”

The immediate cause of the unrest was an increase on Feb. 27 of up to 100 per cent in bus fares. That took place only one day after the

government imposed a 90-per-cent increase in fuel prices. The increases were part of an austerity package that newly installed President Carlos Andrés Pérez, 66, introduced shortly after his inauguration last month in order to secure a three-year, $5.1-billion loan package from the Washington-based International Monetary Fund (IMF).

The riots released pent-up frustrations among Venezuelans who—following a decade of prosperity fuelled by booming prices for the country’s ample oil resources—have seen their living standard steadily deteriorate since 1981. Last week’s outbreak sent a sombre message to other debt-ridden Latin American governments trying to implement austerity packages. Referring to the total $38 billion that Venezuela owes to foreign creditors, Pérez declared, “The disturbances are a consequence of the deterioration of the economy due to a crisis whose name I write in capital letters: Foreign Debt.”

Tensions erupted when Venezuelan commuters were confronted with the bus-fare increases on their way to work. The riots quickly

spread from the capital, Caracas, to 16 other cities. As the dead and wounded jammed morgues and hospitals, doctors issued an urgent call for blood donors. The day after rioting erupted, Pérez called out the army, suspended constitutional rights and imposed a dusk-todawn curfew. As sporadic violence continued the next day, Pérez announced some modest wage increases. But on the fourth successive day of trouble, authorities rushed 10,000 reinforcing troops into Caracas to block a renewal of rioting. Said one witness: “I saw angry mobs shout at an army unit, ‘We prefer to be killed by bullets than to die from starvation.’ Then shots started and I saw three fall dead.”

Until late last year, Venezuela was rated among Latin America’s most creditworthy nations. The previous presidency of Jaime Lusinchi scrupulously met foreign debt payments despite declining economic fortunes. With the energy boom at an end—Venezuela gets 90 per cent of its foreign earnings from oil— revenues from oil exports dropped to only $10 billion last year from $22.6 billion in 1981, and real wages fell by one-third. Lusinchi, while meeting the debt and interest payments, also cushioned the economic blow for average Venezuelans with subsidies on food, fuel and many imports. At the same time, foreign currency reserves used to service the debt fell to a critical level. Last December, Lusinchi—nearing the end of his five-year term—finally suspended some debt payments. Robert Bottome, editor of the Venezuelan economic newsletter Veneconomy, said that Lusinchi opted to increase public spending “for political reasons.” Now, he said, “we are bankrupt.”

In exchange for a loan to help Venezuela out of its current economic crisis, the IMF demanded that Pérez implement such economic measures as raising a ceiling on interest rates and slashing subsidies for many basic foodstuffs. Consequently, inflation was expected to exceed 70 per cent this year, double last year’s rate. “The looting of stores is reminiscent of scenes in recent years from Brazil, Santo Domingo and more recently Peru,” wrote reporter Alfredo Alvarez in the Caracas daily El Nacional. “Now that we have accepted the IMF prescription, it is our turn.” And other countries were taking a lesson from the Venezuelan riots. In heavily indebted Peru, economy minister Carlos Rivas said that his government’s policy of gradually easing inflation was obviously superior to Pérez’s “shock measures.”

At week’s end, litter and debris cluttered the streets in downtown Caracas, giving parts of the city the appearance of a war zone. At a news conference, Pérez warned that unless Western industrial nations soften their stance on repayment terms for Latin America’s foreign debt—a total of $478 billion—the region would soon plunge into political upheaval. “I think 1989 will be the year [either] of the new treatment on the foreign debt or of the destruction of the region’s democracies,” he said. “That is how grave the situation is.”

MARY NEMETH with MERRILL COLLETT in Caracas

MERRILL COLLETT