Foreign Policy making in America’s back yard, The case of Venezuela, 1936 – 1969i Working Paper By Rob Kevlihan

Abstract This paper considers the degree to which Venezuela was able to exercise autonomy in foreign political and economic spheres over a 60 year period from the 1930s to the 1960s. An oil rich but relatively weak state, Venezuela succeeded, over time, in carving out increased levels of economic autonomy from foreign multi-nationals, often in return for political support for the regional hegemon. Venezuela’s success in this regard was somewhat dependent on external events; World War II and the Cuban revolution in particular, providing changing the opportunity structures facing the country in such a way as to facilitate economic gains by enterprising local leaders as a quid pro quo for a relatively dependent position in the foreign political sphere.

External relations have throughout history been seen as a key issue in Latin American development (Urquidi et al., 1973). The ability to follow an independent foreign policy is a key component of state sovereignty. However, the inability of weaker nations to enact completely independent foreign policies has long been recognised (Moon, 1983, 315). Venezuela in this respect, though a country endowed with enormous oil wealth, has had to walk a narrow road of foreign policy options. In common with most of Latin America, its relationship with the regional hegemon has defined the nature and scope of its foreign policy.

Moon (1983, 315-340) considered the impact on foreign policy of economic dependency. He emphasised the systemic nature of dependency status on foreign policy, rather than pinpointing particular points where pressure has been exerted by the dominant power. This corresponds with the dependency approach generally, its essence lying in the focus upon structural characteristics of relationships which persist over time. He concluded that economic integration with the US implied a greater degree of similarity of foreign policy behaviour on the part of the dependent state with the US. The structural nature of the relationship means that external reliance does not deterministically generate a foreign policy distortion and consequently some element of tacit bargaining may be involved in the foreign policy process. In foreign policy terms this equates to Evans’ dependent development position – some room for manoeuvre is available within structural constraints.

Because of its huge oil reserves, Venezuela has had a rather unique experience in Latin America, both for good and for bad. The battle for control of its oil industry has been a key factor in the politics of the period under review. This struggle has been to a large degree determined by events in the international arena which have presented various Venezuelan governments with opportunities for securing greater control. The role of the US in this respect was paramount – both due to the strategic importance of Venezuelan reserves to the US and the economic interests of predominantly US owned concerns in the Venezuelan oil industry. Nonetheless, its early experience in the transition from dictatorship to democracy was regionally significant as it occurred before most other Latin American states, it having achieved a stable democracy in 1959. Indeed, it was characterised by some as the ‘wise elder’ of Latin America during the democratisation wave of the 1980s (Norden, 1998, p143).

2

This paper will analyse Venezuelan foreign policy from 1936 to 1969, using Hey’s three building blocks of policy formation as a framework for analysis (Hey, 1997, p631). In searching for a discernible pattern of behaviour in the foreign policy of Latin American states, Hey postulates that three explanatory building blocks can be used to explain their foreign policies. These are: pro-core versus anti-core; autonomous versus dependent; and economic versus political tendencies. Each of these blocks gives the analyst a different perspective ‘cut’ on a state’s foreign policy and may serve as an enriched basis for understanding the dynamics and pressures involved. These building blocks will serve to analyse the degree to which Venezuela managed to engineer and take advantage of room for manoeuvre within its constrained foreign policy environment.

In analysing Venezuelan foreign policy from this perspective, the period since the death of long term dictator, Juan Vicente Gomez in 1935 to the demise of the first democratic government in 1969 has been chosen. The death in office of Gomez is considered by many commentators as the beginning of modern Venezuelan politics. Although he was not the last of Venezuela’s dictators, his lengthy rule is normally cited as the true line of demarcation between democracy and an authoritarian caudillo past (Rudolph, 1993, p16) with the years between 1936 and 1958 marking a transition from dictatorship to democracy. 1969 saw the peaceful hand-over of power from one democratic government to the next and as such represents a useful watershed for analytical purposes.

The battle for control by the state of significant oil wealth and the transition towards, attainment and maintenance of a democratic system are the key underlying historical trends of the period. This paper will analyse the shifts in Venezuelan foreign policy within this context from 1936 to 1969 and conclude on the key determinant factors of Venezuelan foreign policy of this period.

Immediately post Gomez, Venezuela was ruled by first General Eleazar Lopez Contreras (1936 to 1941) and then by Isaias Medina Angarita (1941 to 1945). This period is marked by the beginnings of attempts by the Venezuelan government to modernise its economy. Initial social improvements were influenced and encouraged by the US, which in the 1930s was engaged in its own New Deal reforms. Thus, an expanded role for labour, modest social welfare measures and government intervention in the economy, in particular in utilities, were implemented. Political protests and unrest in 1936 and 1937

3

placed a halt on any further potential political reforms however, and renewed emphasis was placed upon economic modernisation (Ewell, 1996, 147).

The initially modest efforts by Lopez were soon replaced by those of the more progressive Medina. 1943 saw the imposition of a limited industrial protection policy, resulting in substantially increased revenues and renewed development efforts. Politically, more freedom was allowed, with the major opposition party, Accion Democratica (AD) being legalised and congressional elections held in 1944, which were won by the party set up by the Medina government. This democratically elected government was not to last, however, as it was toppled in an AD supported military coup in 1945.

Foreign policy in this post Gomecista period was driven primarily by internal factors and in particular the desire of both Lopez and Medina to begin economic modernisation. The key to any such modernisation lay in the ability of the state to secure a reasonable share of oil revenues from the foreign, mainly American owned oil companies operating in Venezuela at the time. This policy stance was popularised by the slogan ‘sembrar el petroleo’ of Lopez (Rudolph, 1993, p17). Initial attempts by the state to increase tax revenues from oil companies in 1938 were largely ignored. Multinationals did not feel themselves compelled to contribute more to the Venezuelan economy at that time. The limits of economic autonomy can also be seen in the negotiations leading to a new trade treaty between the US and Venezuela from 1936 to 1939. Venezuela sought an agreement that would allow an element of domestic protectionism and development of non-oil export markets. Such a plan ran counter to US free trade economic interests, however, and in the end the Venezuelans accepted the US draft of the treaty after pressure from both the US Congress and oil companies (Bethell, 1996, p738).

The advent of war changed this relative balance of power. Venezuela maintained a pro-Allied neutrality for most of the conflict, with US troops stationed in the country from 1942 onwards, ostensibly in a training capacity (Ewell, 1996, p148). Venezuela ultimately declared war on the Axis powers in the final months of conflict, guaranteeing it immediate UN membership. The increased international elbow room enjoyed by Venezuela during the war can be seen in its success in securing an increased share of oil revenues. In 1943 Medina issued a new law which required oil companies to share profits equally with the nation through initial exploitation taxes and higher royalties. It also ended

4

the companies’ exemption from customs duties and promoted domestic refining. This policy was facilitated by the US government encouragement of greater hemispheric co-operation (driven by the needs of its war economy). This was reinforced by the desire on the part of the oil companies themselves for greater security for their concessions, given the uncertainty of the war and Mexican oil nationalisation in 1938 (Bethell, 1996, 734).

Analysing the post Gomecista transitionary period using the Leys model shows a strong core emphasis on the part of Venzuelan policy makers. Venezuela was an extremely important part of the US war economy – being a secure source of oil, and as such, it had little choice but to support the US. It was not alone in this pro-Allied stance, however, as all Latin American countries with the one exception of Argentina largely followed and profited from, the same approach (Williamson, 1992, p332). Considering the autonomous versus dependent ‘cut’, one can discern the initial stages of an autonomous approach, driven by the overriding need to gain more control over its oil industry. The prewar period demonstrates clearly the weakness of Venezuela vis à vis both the US and (mostly US) multinationals. The changed circumstances of the war offered a major opportunity for a greater degree of economic autonomy, which was duly taken advantage of. This is significant at it represented Venezuela’s first success in this area. Venezuela’s declaration of neutrality (albeit in reality a proAllied one) also shows an element of autonomy, though tempered significantly by the presence of US troops in the country from 1942 onwards and Venezuela’s ultimate declaration of war in 1945. Finally, regarding the economic / political dichotomy, one can perceive a clear emphasis on economic development during this period.

The Trienio period of 1945 to 1948 remains a controversial period of Venezuelan history. Presented by some as a significant step on the road to democracy, the AD led government of the time nevertheless came to power as a result of a military coup. The US recognised the new government quickly, after receiving assurances of their ‘realistic’ approach to the question of the oil industry (Ewell, 1996, p149).

AD itself presented a nationalistic social democratic programme, despite the more left wing communistic background of its leading members. On foot of this nationalism, AD immediately adopted a firmer public line with the oil companies, securing a 50/50 profit sharing arrangement, announcing its

5

intention not to grant any further oil concessions to foreign multinationals and expanding refining capacity in Venezuela. While portrayed by AD as a tremendous leap forward, these changes were in reality little more than a continuation of Medina’s policies (Bethell, 1996, p744).

AD did however, adopt a more aggressive foreign policy stance, with Betancourt, a leading figure in the administration, condemning dictators and countries withholding democratic elections. What became known as the ‘Betancourt Doctrine’ led to Venezuela breaking relations with Franco’s Spain and withdrawing ambassadors from the dictatorial governments of Somoza of Nicaragua and Trujillo of the Dominican Republic (Bethell, 1996, p746). This increasingly combative approach on the part of the Venezuelan leadership gave rise to US concern. In particular, a threat by Betancourt to cut oil supplies to Brazil because of an agreed arms sale to the Dominican Republic was viewed with alarm as a threat to US control over the Venezuelan oil industry (Ewell, 1996, p152). US policy under Truman was also changing, with an increased emphasis on anti-communism, rather than support for democratic governments. This also led to an increasingly negative attitude in US circles towards the Trienio government. The modest social reforms of AD, together with perceived rising expectations of the masses and the left wing background of the leadership cadres meant that the Trienio government ultimately came to be considered a threat to US interests (Ellner, 1992, p167). When the government was eventually overthrown by a second military coup in 1948, the US was quick to legitimise the new military junta through diplomatic recognition.

Analysing Trienio foreign policy initiatives, one begins to perceive an increasing tension between core and non-core. The position of the US remains important, with attempts by the AD government to articulate a foreign policy in other areas resulting in US concern, particularly when the threat of oil sanctions is introduced. On the autonomy front, the advantages secured in relation to the oil industry of the war years was built upon; however this change did not represent a radical departure from previous policy. Finally, from a political versus economic perspective, this period is significant in giving rise to a new political emphasis to foreign policy. The role of a particular individual - Betancourt, in articulating this policy appears as a significant causative factor.

6

The immediate post coup period saw Venezuela ruled by a military junta, composed of Delgado Chalbaud, Perez Jimenez and Luis Felipe Llovera Paez. The more moderate Delgado was assassinated in 1950, leading to a consolidation of control in the hands of Perez. This period saw the country slide back to the worst excesses of the Gomez period, with the government ruling through repression and fear.

On the foreign policy front, it is unsurprising to find that diplomatic relations were renewed with Franco, Trujillo and Samoza. The government maintained close ties with other military leaders, including Peron of Argentina and Odria of Peru. The period also saw a closer alignment with the US, with Venezuela hosting the 1954 Inter-American Conference and co-operation with US efforts to overthrow the reformist government of Jacobo Arbenz in Guatemala. Venezuela also co-operated closely with the US in defence matters, strongly aligning itself in the anti-communist camp. Increasing oil revenues, cold war pressures and military control of the government resulted in increased military expenditure and a higher profile for the armed forces. This was reinforced through US military training and assistance which emphasised the strategic importance of Venezuelan oilfields to the Western hemisphere (Ewell, 1996, p160).

Venezuelan dealings with other Latin American governments were not so amicable, however, as relations were broken with Chile over the mistreatment of a Chilean citizen by Venezuelan security and with Argentina after the overthrow of Peron in 1955 (Bethell, 1996, p 752).

Ultimately, attempted electoral fraud in 1957 by Perez led to his downfall in early 1958, as a result of an attempted coup followed by massive civilian demonstrations. The electoral campaign of December 1958 was distinguished by the Pact of Punto Fijo, whereby the leading parties agreed to a common policy agenda and a division of cabinet posts, no matter the electoral result – the establishment of Venezuelan democracy was guaranteed (Rudolph, 1993, p23).

Looking again to Leys model, a shift to a more pro-core position can be observed, with the military junta identifying itself more readily with US interests in the region. No further progress was made towards economic autonomy, with the economy remaining dependent on revenue earned by foreign

7

owned oil companies. Finally, what focus there is in foreign policy terms is on the political side, supporting US initiatives and like minded Latin American military governments.

The AD led government of Betancourt that can into power in 1959 was to rule Venezuela until 1969. By far the most significant international event that the government had to face was the Cuban revolution, with Fidel Castro coming to power less than one month after the Venezuelan elections. During this period, Betancourt in particular, strove to maintain the legitimacy of democratic government, trying to avoid the mistakes that led to the fall of the Trienio government. Maintaining this legitimacy meant balancing AD’s commitment to greater social equality with keeping conservative elites and military on board.

Paradoxically, the threat of communist subversion assisted Betancourt in this respect, as it gave the military a role in protecting the existing state from the Fuerzas Armadas de Liberacion Nation (FALN), a Cuban inspired guerrilla group. The FALN threat also guaranteed the qualified support of the conservative elites as AD represented the best of a bad lot. Reintroducing the Betancourt doctrine, the Venezuelan government broke relations with Castro and Trujillo. After a Trujillo backed assassination attempt on Betancourt himself, Venezuela was successful in implementing OAS sanctions against the Dominican regime. Venezuela was also a strong supporter of OAS sanctions against Cuba. Further calls from Venezuela to isolate other non-democratic governments were rejected by OAS fellow states, as an unwarranted interference in the affairs of neighbouring countries. The isolation of Cuba and the Dominican Republic were justified on the grounds of their threat to regional security, rather than on internal factors.In the area of principle concern to Venezuela – the oil industry, a more aggressive approach was taken by the Betancourt regime. 1958 saw a new tax law, giving 65% of oil profits to the government. More significantly, a longer term strategy was being developed for ultimate Venezuelan ownership of the industry. The Corporation Venezolana del Petroleo (CVP) was formed in 1960 and given authority to explore, exploit, refine, transport and market oil as well as to acquire shares in other companies. While the CVP was little more than a training ground for Venezuelans during its first decade of existence (Bethell, 1996, p759), it nonetheless signalled an important step towards ultimate national control of the industry.

8

Of global importance was Venezuela’s participation in the First Arab Petroleum Congress in Cairo in 1959. It was Venezuela who introduced the concept of an oil producers organisation, which ultimately formed as the Organisation of Petroleum Exporting Countries (OPEC) in 1960. Again, while the immediate impact of this grouping was not significant, it signalled an international initiative of some importance to Venezuela. Indeed, the alliance did not live up to initial Venezuelan expectations as the goal of Arab states at the time was price increases, while Venezuela was more firmly committed to national ownership and control of the industry (Bethell, 1996, p759).

The ongoing limits of AD scope for action is illustrated by Venezuela’s failure to join the Latin American Free Trade Association (LAFTA) – joining was strongly opposed by sectors of the business community strongly tied to foreign capital who perceived a threat (Bethell, 1996, p761). Potential advantages to be gained in diversifying the economy away from its near total reliance on oil were therefore lost.

1963 saw the withdrawal of Betancourt from national politics and his replacement by Raul Leoni, the victorious AD candidate in the elections of that year. The demise of Betancourt saw a resultant toning down of Venezuelan foreign policy for the remainder of the AD period to 1969. The holding of the initial UN Conference on the Law of the Sea in Caracas in 1968 saw some increased interest in territorial rights to adjacent waters and stirrings of a dispute with Columbia. Relations with its other regional neighbour, Guyana were stabilised by an agreement reached with Britain to suspend territorial claims for 12 years from 1966, while a Venezuelan-Guyanese committee considered the issue (Bethell, 1996, p763).

Taking up Leys’ analytical tools once more, the Betancourt years of the AD administration signal a stronger anti-core, autonomous foreign policy stance than ever before from Venezuela. This stance was confined largely to the economic sphere, with ongoing efforts to gain more control over the oil industry internally bringing some success through increased government revenues and the building of national capacity to run the industry. Internationally, Venezuela’s key role in the formation of OPEC is noteworthy. OPEC would later become a key player in the global economy of the 1970’s.

9

The ability of the Venezuelan government to adopt this stance was undoubtedly aided by its strong procore, dependent political position, where both the Betancourt and Leoni administrations adopted a strong anti-Castro / anticommunist line. Similar to the war years, Venezuelan policy makers can be seen carving out elements of an independent economic policy – gaining more control over its oil industry, as a result of external US political concerns. The Leoni government did not succeed in building on the progress made during the Betancourt administration, being content instead to consolidate gains already made, rather than continuing to push for further progress.

To conclude, one can clearly see the limited scope that Venezuela had in the exercise of foreign policy during this period. While the role of a particularly committed individual, such as Betancourt clearly can make a difference to the ability of Venezuela to express an independent foreign policy, real constraints existed – in particular the attitude of the US. Betancourt’s first attempts at an independent foreign policy in the Trieno government ultimately ran contrary to US political interests. Equally, the growing expectations of the Venezuelan masses potentially ran against US and certain vested Venezuelan interests. The resulting coup was quickly legitimised by US recognition. On the other hand, the Betancourt government post 1959 was perhaps the most successful in articulating an independent foreign policy. Its increased room for manoeuvre was directly as a result of external US cold war concerns. Betancourt’s newly acquired anticommunist credentials meant greater autonomy in other areas. Venezuela also showed tremendous vision in its key role in the formation of OPEC, which it construed as another step towards securing full control of its oil industry.

In Strangian (Strange, 1994, 22-42) terms, Venezuela’s foreign policy during the period can be construed in terms of relational power. Venezuela’s relative ability to exercise a non-core, autonomous foreign policy in either political or economic spheres being defined by the relative importance of Venezuelan political support for the US against external threats to the US national interest. In the absence of such external threats (or the absence of Venezuelan leaders willing or capable of taking advantage of the opportunities such threats presented), Venezuelan foreign policy regresses towards a core, dependent approach in both economic and political spheres.

10

Looking more broadly, however, one can clearly discern that Venezuela’s room for bargaining and domestic gains was fundamentally restricted by the rules of the game as set by its regional hegemon. The modest gains and room for manoeuvre engineered most successfully by Betancourt still represent a foreign policy shaped by the dependent position of the country vis à vis the US. Perhaps the most significant foreign policy initiative instigated by Venezuela throughout the period under review was the establishment of OPEC as it was characterised an attempt to fundamentally alter structural relationships both in the region and globally, rather than merely bargaining in a constrained dependent environment.

11

Bibliography Bethell, L., 1996: The Cambridge History of Latin America Volume VIII, Latin America since 1930, Spanish South America. Cambridge: Cambridge University Press. Ellner, S., 1992: ‘Venezuela’ in Bethell, L., and Roxborough, I. (ed.s) Latin America between the Second World War and the Cold War, 1944-1948, Cambridge: Cambridge University Press. Evans, P.: ‘Dependent Development: The Alliance of Multinational, State and Local Capital in Brazil’, New Jersey: Princeton University Press. Ewell, J., 1996: Venezuela and the United States: From Monroe’s Hemisphere to Petroleum’s Empire. London: University of Georgia Press. Hey. J.A.K., 1997: ‘Three building blocks of a theory of Latin American foreign policy’, Third World Quarterly, Vol. 18, No. 4, pp 631-657. Moon, B.L., 1983: ‘The Foreign Policy of the Dependent State’ in International Studies Quarterly (1983), Vol 27, 315-340. Norden, D.L., 1998: ‘Democracy and Military Control in Venezuela: From Subordination to Insurrection’, Latin American Research Review, Vol. 33, No. 2, 1998, pp 143-166. Rudolph, J.D., (1993): ‘Historical Setting’ in Haggerty, R.A. (ed.), Venezuela: A Country Study. Washington: Research Library of Congress. Strange, S. (1994): States and Markets, London:Pinter. Urquidi, V.L. and Thorp, R., 1973: Latin America in the International Economy, London: Macmillan. Williamson, E., (1992): The Penguin History of Latin America, London: Penguin.

i

This paper is heavily indebted to a number of key texts cited herein which provided the empirical meat upon which the analysis rests, in particular Bethell (1996); Ellner (1992), Ewell (1996), Norden (1998) and Rudolph (1993). The paper has its roots in an assignment completed for a course in Latin America taught by Prof Peadar Kirby as part of a Masters in International Relations at Dublin City University. The author would like to acknowledge his debt to Peadar in this regard.

12