Carlos Andres Perez dead at 88

December 26, 2010

Carlos Andres Perez, twice Venezuela’s President in 1974 and 1989 died yesterday at 88. A controversial figure, CAP, as he was known, was twice in exile as a young Adeco activist in 1948 and the 1950’s and was in charge of the fight against guerrillas during Romulo Betancourt’s presidency from 1959 to 1964, first as a Director General of the Ministry of Interior and Justice and later as Minister. He developed an image of being tough during this time. When the 1973 Presidential campaign arrived, Romulo Betancourt quickly said he would not be a candidate, leaving the field open for CAP. It was the first multimedia electoral campaign in Venezuela’s history with CAP projecting an energetic image (he was a tireless worker), visiting all corners of the country and defeating Lorenzo Fernandez of the incumbent COPEI party.

Once elected, CAP was dramatic the first few months of his presidency, nationalizing oil and iron his first day in power, benefiting from the sharp rise in oil prices. But CAP, like most Venezuelan Presidents, had no economic knowledge and his Government was a hodge podge of Cepal-like recipes and the conception that the Government could do it all. But he dazzled the population, in the first month in power, he cleaned up Caracas, froze the prize of arepas (which made areperas disappear in short order) and decreed that all elevators had to have an operator, as a way of creating employment (Pleno empleo, full employment, was his motto).

The economy boomed, thanks to the oil windfall, but the same windfall hid all of the problems as CAP developed his vision of the “Gran Venezuela”. Money was thrown at steel, aluminum and technology projects in which the Government was the owner or provided the financing, but there was little control and/or know how to make it successful. He did try to protect some of the windfall, creating the Fondo de Inversiones de Venezuela, reduced oil production because so much money was not needed and maintained the structure of the oil industry before it was nationalized, creating PDVSA and naming General Ravard to preside it.

The boom was so huge that everyone benefited, poverty reached the lowest levels in Venezuela’s history, he created the Mariscal de Ayacucho program that sent 10,000 Venezuelans abroad for mostly graduate degrees, protected wild areas in National Parks, he created the oil research institute INTEVEP, he built important hydroelectric projects.

He was a democrat and he was a populist, a bit of megalomaniac, worried about his image and his legacy. He gave a boat to Bolivia which has no ports, as a symbol of its fight to have access to the sea. He reached out to Fidel Castro, while shunning the Dictators from the South, while making it attractive and facilitating for thousands of highly educated people from the latter countries to move to Venezuela to help in his push to increase the number of university students.

But his economic policies had as their central theme the intervention by the State. He removed the independence of the Venezuelan Central Bank, while increasing salaries periodically, which debased the currency leading to inflation. Venezuela was not ready for the huge inflows and there were lots of corrupt people ready to make a lot of money off the Government. By the end of his term, corruption charges, including the infamous Sierra Nevada refrigerated boat scandal, tarnished his image. He was brought to trial because of that case, curiously, it was Jose Vicente Rangel who cast the deciding vote to exonerate CAP. That was CAP, he was capable of talking to everyone and anyone, even his staunchest enemies felt that he was someone he could talk to.

His last year in power, oil prices dropped, forcing CAP to lower the budget by 10%, Venezuelans had the feeling that things were worse for the first time in many years (little did they know!) and his party lost.

CAP spent the ten years required by law between terms, traveling around the world, involving himself with the South commission and talking to world leaders. This changed his ideas, but still, he had little economic knowledge and as he ran for President in 1988, he promised  to return to the hey day years of his first term.

But it was not be. CAP reached out to a group of well educated non-adecos, including those that were involved in studies on how to change the state. It was not until they began talking to the people of the Lusinchi Government, after CAP was elected. that they realized how dire the situation was. International reserves were less than US$400 million. After a lavish “crowning” with all of the pomposity that was simply out of place, the CAP Government realized that they needed help form the IMF and imposed an adjustment program, a “shock” program that included increasing gasoline prices by 100%, interest rate increases, the increase of public tariffs, freeing of prices that had been frozen for years, eliminating tariffs and allow the currency to float.

One month after taking power, having won with 56% of the popular vote, riots started the “Caracazo” four days of rioting and protests against the gasoline price increase that cast a shadow over CAP’s Presidency. He believed people had the right to protest, doing little the first two days and the protests and the looting go out of hand. In the end an estimated 276 people died and the looting was in the millions. His Government was a lame duck Government even before he started.

But he pressed on. His intuition was right, that he was very good at. He implemented or began to implement many of the reforms suggested by the Commission for the Reform of the State, including the election of Governors, tax reform and the general decentralization of the Government. He was changing things very fast.

But his own party AD felt it had been replaced by these “technocrats” and he had opposition from within. His cabinet was composed of very knowledgable, very well prepared people, most of which had no political experience. CAP was supposed to take care of the politics, but he did not, it was an ego thing and that was what doomed him. Policies were working, the economy grew by over 9% in 1991 after all the adjustments, CAP thought he had no worries.

A group of people the self called “Notables”, mostly intellectuals, who had always opposed CAP and envied his popularity, began calling for his removal. Chavez followed this with his coup in February 1992 (which had been in the works for a decade!), weakening the Government further. When it was discovered that CAP had used funds from the secret slush fund to provide security to Violate Chamorro in Nicaragua and exchanged it at a preferential rate when the Government was ready to devalue, he was accused and impeached. He was later sentenced to 28 months in prison and charged with other crimes. He was elected Senator in 1998, which gave him immunity, but the 2000 Constitution eliminated the Senate and this rule, removing the protection he had. He never returned to Venezuela.

He was in the end, a true democrat, too ignorant on economic matters to have a coherent plan, but smart enough to follow his instincts with his collaborators, he allowed corruption to flourish around him, there was so much money to be made. But he did many positive things, implementing changes in his second Government that were very important. Some of them even took power away from him! He was willing to change, but sadly he did not sell the change the same way he sold himself. On a relative scale, he was not that bad, better than Caldera, who would never change, better than Luis Herrera, who had no program on how to change the country, better than Lusinchi, who had no clue. Betancourt was better, because he understood economics, oil and what the country needed, he had a program. Leoni simply followed Betancourt’s plans with honesty and surrounded by many of the same people.

And of course, he was much better than Hugo, who is not a democrat and has failed at all of his economic initiatives, allowing the largest corruption levels in Venezuela’s history and failing to leverage the biggest oil boom in the country;s history for the benefit of the people.

May Carlos Andres Perez rest in peace!

33 Responses to “Carlos Andres Perez dead at 88”

  1. Alek Boyd Says:

    Many thanks for the history lesson and an objective post Miguel.

  2. Johnny Says:

    Very good review of CAP and the snapshots of our chief political leaders. Thanks for you post.
    Unfortunately today we are still in the same boat! The MUD has no plan for change, other than a wish list for santa, it does not understand the economy and what makes it tic, and the government much less.
    The unflattering truths about us that must be addressed are not easy to fix. 70% of us will steal if we can and believe that those who have something must have stolen it. More than 70% of us are motivated by Power, more than 50% by Affiliation and a very few by Achievement. It is the achievers and would be achievers who are leaving the country in droves. Over 70% of us do not believe in ourselves, we blame others and other external elements for our circumstances, so we beg to be placed “donde haiga” because we can not make it on our own.

    If all this sounds a lot like our current rulers and the majority of their supporters, remember Gresham’s Law and try to figure out how to revert this: a thankless and very tough task.

  3. geronl Says:

    “Not that bad”? Well, compared to present leaders I suppose.

  4. moctavio Says:

    That’s right, he was more intuititive, more willing to try things and chose collaborators better…

  5. bruni Says:

    CAP was special for my generation. There is something more than economic issues in the evaluation of CAP.

    Here’s my post:

    http://cuentosintrascendentes.blogspot.com/2010/12/la-muerte-de-carlos-andres-perez.html

  6. m_astera Says:

    Thanks for the history, Miguel. Well done and many things I didn’t know before.

    I’m a little puzzled by the reference to an independent central bank. Isn’t that a bit of an oxymoron? If the government chooses a single central bank to issue the currency at interest, charged to the people, how does that benefit the people? How is that working out with the “Federal” reserve bank in the USA?

  7. moctavio Says:

    The idea is that the Central Bank should be independent, carry monetary policy out, without regards for the politics. Venezuela had a de facto “conversion” system until CAP arrived, if dollars left, bolivars were removed from the system and viceversa. The US Federal Reserve is supposed to be independent and not act according to short term political gals too. Inflation only reached double digits when the Central Bank left that policy.

  8. Bill Simpson in Slidell Says:

    Excellent writing, as usual.

  9. RF Says:

    Alan Garcia the current president of Peru reminds me very much of CAP. Like him, he has been president twice, once as a populist and pro-state control, once again as a reformed pro free enterprise. Why did Garcia not get himself booted out while CAP did?


  10. Because they had Fujimori first?

  11. m_astera Says:

    “The idea is that the Central Bank should be independent, carry monetary policy out, without regards for the politics. Venezuela had a de facto “conversion” system until CAP arrived, if dollars left, bolivars were removed from the system and viceversa. The US Federal Reserve is supposed to be independent and not act according to short term political gals too. Inflation only reached double digits when the Central Bank left that policy.”

    But why should the government need to have any money from the central bank at interest, when it already has money coming in from the taxpayers etc? It seems to me that it might be better to not have the central bank taking interest payments on money that the government already owns.


  12. Those are two separate roles, the Central Bank manages money supply, that is the money in the hands of the public. It lends money to banks, or issues bonds to remove money from the ststem if there is too much money out there.

    The Treasury manages the money the Government gets from taxes, royalties, etc. The Treasury can also issue bonds when it needs money.

    The role of the Central Bank is to provide monetary stability, controlling the amount if money in the system to keep inflation low and maintain currency stability.

  13. Leo Says:

    Clear ang honest political bio of Carlos Andrés Pérez … may his soul rest in peace.

  14. geha714 Says:

    Great article, Miguel. A difference of other posts, which looked more like hit jobs, this one is a fair look to the man and his legacy.

    The idea of a “Great Venezuela”, independent, developed, self-sustainable country is not bad. The problem were the means he used to do so. As you wrote, CAP was naive on economic and administrative matters. He was a visionary but he didn’t took care of the details. That was his downfall.

    Even if I didn’t admire the man, I respected him. The way he faced the two coup attempts in 1992 show he was courageous.

    RIP Carlos Andres Perez. I hope that he can be laid to rest in his native soil soon with his close relatives in peace.

  15. jeffry house Says:

    Of course the Central Bank needs to be independent in a democratic state, just as the judiciary does. Some decisions do not lend themselves to an up-and-down vote, nor to the wise words of the Leader, whose interest is short-term re-election, not setting up his successors for success.

  16. yver borg Says:

    “He was in the end, a true democrat”, specially when he brought nine thousand soldiers from the interior of the country in to Caracas and perpetrated the most ominous carnage in Venezuela’s history killing thousands of citizens that were buried in a mass grave baptized by the people as La Peste, “The Pest”.
    Oil can be use as ink to write the word excrement!

  17. moctavio Says:

    Had he not been a democrat, he would have brought the army out the first day, but he thought the police could take care of it. Law and order broke down and the military started killing people, I dont believe he ordered that.

    As to the thousands of victims, COFAVIC disagrees with that number and it has requested repeatedly that the Government exhume the bodies in La Peste to determine precisely how many people were buried there. The Chavez Government has not charged anyone, could it be because too many military buddies of Hugo are involved?

  18. liz Says:

    Thanks for this post Miguel. Amazingly good and truthful.

    I just wanted to point out to your readers that ‘El Caracazo’ riots were orchestrated by people that now belong to the so called chavista revolution.
    Just a little example: http://www.slideshare.net/Cedeo3800/vanessa-davies-periodista-de-vtv-y-su-prontuario

    Those crowds were not headless and the riots were not so anonymous or came out of nowhere.

  19. JGross Says:

    The number of dead people in the Caracazo is comparable to the number of dead people in the February 1992 attempt led by Hugo Chavez in which dozens of innocent civilians and soldiers led under lies were take to their deaths. It is ironic that CAP was persecuted for the Caracazo, while Chavez sits in Miraflores. Or is it a double standard?

  20. JGross Says:

    attempt should read coup attempt

  21. A_Antonio Says:

    100 % agree with the post and with the last comments from Liz and MOctavio.

    Maybe democracy could be maintained if Alfaro Ucero? And AD’s elite did backup Carlos Andres meanwhile “Caracazo” and the coup intents.

  22. Kepler Says:

    Miguel, excelente entrada.

    I agree with Liz. This is something one day Venezuelans have to properly investigate and openly discuss. But I have seen quite a lot of evidence.
    Pity we don’t have much of “investigative journalism”.

    About the coups: and let’s remember the amount of people who got murdered in the second coup.

  23. loroferoz Says:

    Excellent post. Simply, excellent. CAP was controversial enough. But he was no dictator and never tried to become one. Populist, yes. A demagogue? Much less than the present sample.

    But he can be credited with starting something that undid Venezuelan democracy. CAP, and Venezuelan democracy at large, were both perpetrators and victims of three problems they did not solve.

    First, the mis-managing of oil riches and it’s many overtly political and populist uses. Loads of ink on this one, by everyone.

    Second, the relationship of citizens to the State. Both authority with force and the paternalistic government awash in oil money pumped from the ground. Also, a load of ink on this one, by most everyone.

    Third, that of the Armed Forces, the military as a chaste, political extremism and their own sense of entitlement. They covered the thing up with what amounted to bribes and blackmail. Which only made them feel bolder and more entitled. Then they took power by means of opportunistic politicians and businessmen, took (peacefully) the political organization that AD had built to win elections. Then they ditched the opportunists that helped them do it. And then we have the present, semi-military government.

    So far, we (the ignorant) know that CAP was Interior Minister during the Carupanazo and Porteñazo.

  24. amieres Says:

    Excellent summary of CAP’s terms. Very complete and objective.

    One thing that was left out was the big public (and private) debt after his first term.

    Also a precission: in his second term after a big contraction in the fist year the PIB grew every year more than 6% only slowing down in 1992 with the two coup attempts.

    One question, what did CAP do to remove the independence of the Central Bank?

  25. moctavio Says:

    He changed the BCV Law

    Debt was peanuts compared to today, the FIV had so much money it could have paid it, if my memory serves me right.

    Was it 6%?

    will check, did that from memory

  26. Johnny Says:

    The BCV was established in 1940 as a mixed corporation. The state did not have absolute control and could not print inorganic money like the Fed has done since Nixon took the $ off the Gold Standard so he could print paper money with no real backing, that is why an ounce of gold buys so many “worthless” greenbacks today.
    I though it was Caldera I that turned it into a state corporation, buying out the private minority, thereby putting it under absolute political control and setting the stage for the endless devaluations we have had to date.
    Money is supposed to be a store of value, but now we call all that fiat currency “money”, when it obviously is not real money, just funny money.

  27. amieres Says:

    Thanks Miguel

    Sorry, I did not mean to say that 1991 didn’t grow 9% but that the other years 1990 and 1992 also grew at least 6%.

  28. moctavio Says:

    Johnny, my memory is that Caldera indeed changed the corporation, but CAP changed the way the Board members are named such that the Government controlled everything. I am not an expert, was not even involved in finance at the time, Just memories…


  29. Carlos Andres Perez dead at 88 « The Devil's Excrement…

    Here at World Spinner we are debating the same thing……


  30. [“Not that bad”? Well, compared to present leaders I suppose.”]

    He could have been much worst than this one, and he wasn’t, so that’s a very good point to consider.

    Now if we were living in this great paradise with this great president, then we should criticize cap to death… but we are not. Does that make sense? Anyway, the legacy of CAP is evident, positive and negative. RIP.

  31. Johnny Says:

    I’m running on memory batteries too Miguel. I guess it was a one- two punch. A cinch after the government controlled all the votes at the shareholders meeting to change the bylaws and anything else that might have stood in the way of state power.

  32. Roger Says:

    Few Venezuelan presidents or Leaders have left office on a positive note.
    CAP did well his first term as did Caldera all thanks to oil. But even then the problems were quite obvious and ignored as Venezuelans enjoyed their new found oil money. When global oil busted they wanted to maintain the same life style. Soon the value of the Bolivar if you can get one went from about 4 Bs to the Dollar to 58Bs in 1991 just before the riots and coups. After they removed him from office it shot up to 85 then 100 and so on. something happened. After Caldera took office again, it took off and the changes were daily. Also, this is when the banks start to fail and there is no money to do anything ( I know this first hand) and it continues to this day. My feeling is that they got rid of CAP and then installed an old man that they could use as a puppet to control the banking and economy. I think that Chavez, rather than cracking jokes should look at this a visit from the Ghost of Christmas Future! No Venezuelan leader yet has changed the Venezuelans.

  33. paulaH Says:

    Miguel!
    I am very sad for his death!…I hope his wishes come true: to be able to be buried in Vzla when Democracy comes back!…

    RIP CAP!


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