Chávez Builds His Sphere Of Influence

Venezuelan President Hugo Chávez, above, has forged alliances with Nicaragua's Daniel Ortega, from left, Bolivia's Evo Morales and Ecuador's Rafael Correa.
Venezuelan President Hugo Chávez, above, has forged alliances with Nicaragua's Daniel Ortega, from left, Bolivia's Evo Morales and Ecuador's Rafael Correa. (By David Rochkind -- Bloomberg News)

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By Juan Forero and Peter S. Goodman
Washington Post Foreign Service
Friday, February 23, 2007

CARACAS, Venezuela President Hugo Chávez of Venezuela has long pledged to buck Washington-backed economic policies in Latin America. Now, two months after winning reelection and consolidating his hold on the country with new powers to rule by decree, he is strengthening economic ties in the region in a bid to limit U.S. influence.

Chávez recently announced that his government would build housing, a highway and an oil refinery in Nicaragua, part of an aid package that would benefit one of Washington's most tenacious Cold War adversaries, President Daniel Ortega.

Farther south, Venezuela has pledged to provide Ecuador with $1 billion in credit, a gesture that would soften the blow if that country's leftist government follows through on its threat to default on foreign debt payments. And, along with President Mahmoud Ahmadinejad of Iran, a foe of the Bush administration, Chávez has announced a $2 billion international investment fund for Latin America.

Taken together, economists and others who track the country's affairs say, the investments signify an effort by Venezuela to curb the reach of the U.S. government, whose influence has waned in Latin America. For Chávez, the goal is nothing less than to kill the so-called Washington consensus, the economic prescriptions championed by the International Monetary Fund and the U.S. Treasury, which press governments to limit spending, raise interest rates and open their economies to foreign trade and investment.

Backing such economic principles as privatization and trade liberalization, the consensus rooted out bloated bureaucracies and helped tame hyper-inflation. Yet even those countries that have run their economies along Washington consensus lines have generally seen disappointing rates of economic growth and deepening poverty. The electoral success of such leftist leaders as Chávez, Ortega, Bolivia's Evo Morales and Ecuador's Rafael Correa is in part the result of the failure of previous policies to generate growth and raise incomes, economists say.

"All of this IMF stuff has actually benefited a very small sector of our economies," said Hernando de Soto, a Peruvian economist who champions free markets and has criticized elements of Chávez's political program. "That's where Chávez and company come in, because they pick up on the resentment."

Chávez's campaign to persuade countries to break with fiscal orthodoxy, a strategy funded by revenue from the largest oil reserves in the Americas, has had mixed success. Some of the region's most important economies -- Mexico, Brazil, Chile, Colombia and Peru -- maintain solid relations with multilateral lenders and continue to follow market-oriented principles, such as welcoming foreign investment, limiting government spending and attacking inflation.

For its part, the United States still has enormous influence in and close ties with most Latin American countries. Free-trade agreements now cover nearly two-thirds of economic output in the Americas, according to Thomas A. Shannon Jr., assistant secretary of state for Western Hemisphere affairs. And although voters in the region have increasingly elected leftist governments in the past several years, most of them are like those headed by Luiz Inacio Lula da Silva in Brazil and Michelle Bachelet in Chile -- concerned about social inequality but fiscally austere and on friendly terms with Wall Street.

Although Chávez frequently travels to foreign capitals to lambaste Washington, it's not so clear that Latin Americans favor the Venezuelan president's prescriptions, even if their governments are happy to accept his aid. According to a recent survey of 20,200 people in 18 countries by Latinobarómetro, a Chilean polling firm, most Latin Americans lumped Chávez with Fidel Castro and President Bush as bad leaders, citing Brazil's Lula and Chile's Bachelet as the best. And most of those polled classified themselves as political moderates .

Still, U.S. efforts to reach a free-trade agreement with South America's two biggest economic powers, Brazil and Argentina, are stalled, and Washington's efforts to influence economic policies through the IMF and its sister organization, the World Bank, have diminished.

Chávez vs. the IMF

In a policy marked by 1960s-style rhetoric, Chávez is promising to "liberate" Latin America from the "imperialist North American plot" to enslave the region, as he put it recently during the inauguration of Correa in Ecuador. Given new powers to pass economic decrees for 18 months, the Venezuelan president has a free hand to control his country's purse strings.

"In Latin America and the Caribbean, there's more consciousness that these financial organizations are a curse that have taken our countries to hunger, misery and exploitation," said Saúl Ortega, a member of the Venezuelan National Assembly's foreign relations committee.


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© 2007 The Washington Post Company

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