Highwire president balances radical reform and profits

The resounding weekend referendum victory of President Hugo Chavez of Venezuela gives him substantial backing in his plan to …

The resounding weekend referendum victory of President Hugo Chavez of Venezuela gives him substantial backing in his plan to dissolve congress and rewrite the constitution. Eighty-eight per cent of the voters backed his initiative.

"The peaceful revolution has begun," said Mr Chavez, a retired colonel who led a failed coup in 1992 after refusing an order to fire on civilians protesting at economic austerity measures.

Mr Chavez (44) was elected last December, promising "radical reforms" to reverse sharp economic decline. Eighty per cent of the population lives in poverty in a country which has the largest oil reserves outside the Middle East.

The high abstention rate in last Sunday's vote, estimated at 60 per cent, owed more to certainty of the outcome than to apathy. Yet, critics claim the Chavez magic is beginning to falter.

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Under the terms of the referendum initiative, voters will go to the polls once more, in June, to elect a 131-member assembly which will sit for six months and draw up legislation to "transform the state and create a new juridical order that permits the effective functioning of a social and participatory democracy".

The president has introduced a personal style of rule, by-passing political parties in the name of all citizens fed up with corrupt and inefficient rulers. He has suggested he needs to rule until the year 2009 in order to implement his "peaceful revolution".

The intentions of President Chavez remain unclear, however, as he has pledged to mobilise the nation's resources behind a revolutionary social project yet has reassured investors that he has no intention of altering existing safeguards for corporate profits.

Since he took office last February, he has been locked in a bitter power struggle with the country's two main political parties, Democratic Action (AD) and the centre-right COPEI, which have watched their power base crumble in the face of "hurricane" Hugo's prolonged attack on congress, the supreme court and the senate.

Late last week, Mr Chavez convinced congress to pass an "enabling" law which permits him to rule by decree on economic matters and social reforms for the next six months.

By Monday evening he had decreed a 20 per cent wage increase for state workers, financed by an additional sales tax and new bank charges. "Our philosophy is that those who have more, pay more," he said.

In the first test of his will, the new president watched as 10,000 land-less squatters occupied sites around the country, including the home of a state governor and a rural airport.

Mr Chavez refused to send in troops to retake the buildings, despite calls for order. "I'm not going to massacre them," he said, "so send me to jail if you want".

As the presidential honeymoon persists, the president's radical bluster silences his critics, but the months ahead will be a stiff test of his ability to walk Venezuela's political high-wire.