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CAN: A new flank for Hugo Chavez's revolution

By Veneconomy

22.07.05 | This week Venezuela took over the rotating presidency of the Andean Community of Nations (CAN) for a term of one year. The general impression is that, in his capacity as president of the regional organization, Chávez will focus on two areas of action: first, on promoting and spreading his Bolivarian revolution throughout the Andean countries; and, second, on undermining the strategic interests of the United States. And his most powerful ally in this quest will unquestionably be oil money.

President Chávez already made his grand entrance on this flank of the struggle, opening the gates with “a small contribution” of $1 million (to square the accounts of the CAN general secretariat) and, as is his wont, promising to work with "body, soul and heart for the social integration of the peoples in the region."

To achieve his goal of turning the CAN into an institutional front line for the Bolivarian revolution, Chávez will be wielding two strategic tools: One is PetroAndina, a new regional initiative proposed by President Chávez, quite similar to his PetroCaribe. Through PetroAndina the CAN member countries —Bolivia, Colombia, Ecuador and Peru— will be able to buy crude oil, refined products and natural gas from Venezuela under preferential payment terms, with financing of 5% to 30% of amount of their purchases over a 15 year term at 2% interest.

In addition, Chávez, as happy as a kid with a new toy, also offered to invest money in improving oil production and refining capacity in the Andean region. And, not surprisingly, he also promised to buy debt bonds of the Andean countries to help fund their budgets and free up money for social spending.

The second strategic tool in his plan to “reinvent” the Andean Community as a pro-socialist Bolivarian entity is the administration of Ecuadorian president Alfredo Palacio. He is the weakest president in the Andean region, and the one most likely to cooperate in Chávez’s political goal since he was not voted in and lacks any known political or military backing. Furthermore, Ecuador faces the risk of a financial crisis next year with nothing to work in its favor: no economic strategies or contingency plans for dealing with the crisis; secondly the IMF and the World Bank have suspended disbursements of more than $300 million in aid until Palacio can come up with a reasonable economic plan, which he is unlikely to do; and, thirdly, although earnings from oil exports are up considerably due to the high prices of crude, PetroEcuador’s production capacity is waning. This makes the Palacio administration vulnerable to outside manipulation based on money. Chávez knows it, and what he has more than enough of is money. That is why, without giving it a second thought, he has offered Palacio a cornucopia of assistance that includes a possible purchase of up to $500 million in Ecuadorian government debt bonds, plus more than $1 billion worth of natural gas per year under preferential terms of payment, the use of Venezuelan refineries to process Ecuadorian crude as well as economic and technical backing through PDVSA to help PetroEcuador expand its crude production capacity. In Ecuador, Chávez may find fertile ground and a spearhead for launching the expansion of his revolution.

If Chávez is successful in this endeavor, the Bush administration will be the loser in geopolitical terms. Ecuador’s announcement of neutrality in the Colombian conflict and the possibility that Palacio might rescind the agreement granting the U.S. rights at the Manta air base would weaken the southern flank of the struggle in Colombia and undermine the United States’ war on drugs and terrorism in the Andean region.

There is no denying that Chávez has made some very able moves, is circling the wagons around the Bush government and drastically reducing U.S. influence in the region. Yet, while aware of the threat, Washington is moving its pieces slowly and hardening its position gradually. Meanwhile, the Venezuelan is gaining ground.

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