The maverick Chávez’s election in 1998 may have made Venezuela a left-leaning outlier in the region, but his open antipathy for the Washington Consensus and its bulwarks like the IMF became a sounding board for years of pent-up frustrations across the region.
Beneath Chávez’s rhetoric, he played the global-trade game amenably, making the country’s loan payments on time and remaining a top supplier of oil to the U.S. But he eventually moved to reform the nation’s lucrative petroleum trade, for decades a no-strings-attached free-for-all for multinational oil companies. In 2001, he passed a law requiring Big Oil firms to enter into joint ventures with the state company Petroleos de Venezuela SA, intending to reinvest the increase of public revenues in the country’s domestic infrastructure via education, medicine and poverty-reduction. During the Cold War, when upstart Latin American nationalists attempted to reign in American capital the response was generally martial – most infamously via its interventions on behalf of United Fruit in its 1954 Guatemala coup and for the benefit of ITT in Chile in 1973. The Bush administration, riddled as it was with linear, Cold War-era perceptions of the world, did not disappoint its Venezuelan allies.
When in late 2001 the administration openly colluded with Venezuela’s oligarchs and their military allies, funded anti-Chávez propaganda and ferried coup plotters to Washington and back, few failed to see the writing on the wall. Their collaborative, hamfisted coup the next spring included the installation of a U.S.-friendly dictator-for-a-day, businessman Pedro Carmona, who, true to previous U.S. coup beneficiaries, moved immediately to dissolve Venezuela’s National Assembly and Supreme Court.
Having seen that show too many times before, the community of Latin American nations reacted with the same revulsion as the Venezuelan people.
It is difficult to fully assess Chávez’s tense stand-off with the U.S. for influence across the region. But later that year, the populist Worker’s Party candidate Lula won the presidency in Brazil, and in 2003, Argentina elected Cristina Fernández’s predecessor and husband, Néstor Kirchner, president – both on strength of tough talk toward their nations’ creditors. In the wake of crippling economic crisis that saw Argentina default on $95 billion in loans in 2001, Kirchner simply refused to honor the nation’s debt, insisting IMF economic policies had “devastated” the country. He renegotiated the debt in 2005 to pay it back at 35 cents on the dollar. For his stand, Chávez showed solidarity, offering to buy some $2.5 billion worth of Argentine bonds, helping Kirchner buy himself completely out of his nation’s IMF debt at the beginning of the next year.
The move spurred a rebound in Argentina, whose economy grew 50% over the next two years, 11 million people, 28% of the population, climbing above the poverty line as unemployment shrank to 8.5% (from 21.5%) and real wages grew 40%. Even before his country’s actual metric resurgence, Kirchner told an audience prophetically, if much to Washington’s chagrin, “There is life after the IMF, and it’s a good life.” Lula, as promised, executed a similar buyout in 2006.
“Argentina standing up to the IMF was like an underdog knocking down the schoolyard bully,” Mark Engler, an analyst with Foreign Policy in Focus, wrote in an article on TomPaine.com in March 2006. “The aura of invincibility surrounding the Fund was dispelled, and the institution will likely never again inspire the same begrudging awe.”
In April 2007, new Ecuadorian president Rafael Correa booted the World Bank representative out of Ecuador, accusing the body of “extortion,” and paid off his country’s own IMF debt. Chávez similarly offered Ecuador a $500 million loan to underwrite that effort, along with another $1.5 billion to new Bolivian president Morales. Venezuela itself paid off all its debts to the IMF and World bank that same month, then the next month the country withdrew completely from membership in the organizations. Finance minister Rodrigo Cabezas announced the move on state TV with a telling pronouncement:
“My dear sirs at the World Bank, sirs at the International Monetary Fund, goodbye to you. Venezuela is free . . . and sovereign.”
In 2005 Latin America accounted for 80% of the IMF’s global portfolio. By 2007 that percentage had shrunk to 1% – a mere $50 million.