Pefro/ecrr Society

When Carlos Andres Perez was elected President of Venezuela a year ago this week, his country faced an enviable economic crisis. Rising oil prices threatened to fill the national coffers at more than triple the 1973 rate of $3 billion. "The $10 billion will crush us," warned former Minister of Mines and OPEC Founder Juan Pablo Perez Alfonzo. "We have a President with a moun tain of gold to dispense. Everyone will be thinking how to put his hand in the bag."

As it turned out, Venezuela had a few creative ideas of its own about how to share the wealth. This week, at Perez's invitation, the leaders of six Central American nations will gather in Caracas for an economic summit. At the meeting, he is expected to detail plans to help Venezuela's smaller neighbors by 1 ) compensating them for holding back part of their coffee harvests in order to raise prices, 2) providing subsidies to countries particularly hard hit by the rise in oil prices, and 3) giving direct financial aid to economically depressed nations that need it most -- notably hurricane-devastated Honduras.

The Caracas summit symbolizes Venezuela's new position as an emerging power in Latin America. More particularly, it also signals the emergence of ebullient, indefatigable "Cap" Perez (see box page 48) as a Hemisphere states man to be reckoned with. Now 52, Perez began his political career at the age of 23 as personal secretary to Romulo Betancourt -- then President of the revolutionary junta that ruled from 1945 to 1948. When Betancourt's Democratic Action Party was outlawed in 1948 by the military dictatorship led by Marcos Perez Jimenez, Perez spent several years in prison and then in exile. Betancourt appointed Perez Minister of the Interior when he resumed power in 1958.

Ten years later, Perez became secretary-general of the party, but not until his election last December was he able to free himself from the relative obscurity of his role as Betancourt's shadow.

Perez campaigned on the platform that his election represented the "last chance" for democracy in Venezuela.* What he meant was that Venezuela was in grave danger of splitting into two an tagonistic nations -- one rich, the other hopelessly poor. One of these nations consists of a foreign-educated elite in Caracas, accustomed to air-conditioned Mercedes, plush skyscraper offices and country-club amenities. The other Venezuela includes more than 800,000 mi grants who have left the country's poor rural areas to make their homes in the tar-paper shacks that cling to the hills around the capital.

Operating under emergency powers granted him by Venezuela's legislature, Perez has issued more than 100 decrees in the past nine months aimed primarily at creating jobs for the some 600,000 Venezuelans (nearly 20% of the work force) who are either unemployed or underemployed. Some of the measures are obviously stopgap. To create immediate job openings, for example, the government decreed that all automatic elevators be manned by operators and that all public restrooms be staffed by attendants. In addition to such piecemeal legislation, however, Perez launched several ambitious long-term projects designed to curb unemployment by diversifying the economy.

A major aspect of his strategy has been to plow profits from the oil industry --which provides 40% of the nation's wealth but less than 1% of its jobs--into agriculture. Although Venezuela has vast tracts of potentially productive farm land, agriculture has been so mismanaged that the country will have to import $450 million worth of food this year. To curtail a rural exodus that has already concentrated 78% of his 12 million countrymen in the nation's major cities, Perez has offered incentives to lure people back to the fields. The government promised to assume past debts incurred by small farmers. It also removed price restraints on most agriculture products and established a $467 million fund to provide low-cost loans for purchases of farm machinery.

Perez's most extravagant economic project is a $5 billion plan for quadrupling the capacity of the state-owned steel plant at Ciudad Guayana, thereby doubling employment from 8,000 to 15,000 over the next four years. As part of the project, Perez has announced that the iron-mining operations of U.S. Steel and Bethlehem Steel will be nationalized by 1975 rather than in 2000 as originally agreed. It is presumed that the American companies will be fairly compensated with money from oil revenues. Oil leases and equipment held by foreign investors--principally Exxon, Shell and Gulf--will also be nationalized on a stepped-up schedule, probably within the next few months.

To produce the skilled managers required for this sudden industrial expansion, the government has set up a $70 million annual scholarship fund that will send 10,000 students abroad for training each year for the next five years. In choosing scholars for "Project Ayacucho," priority will be given to the children of the country's rural poor. By the time Project Ayacucho runs its five-year course, the government hopes to have set up university institutes of technology in each of the country's 20 states.

Perez has adhered to a policy of "administering abundance with the mentality of scarcity." To avoid the inflationary consequences of plowing more money into the economy than it can safely absorb, Perez has promised to channel $3 billion of this year's oil profits as well as 50% of all future oil revenues into the Venezuelan Investment

Fund. Loans of more than $500 million have already been made to the World Bank and the Inter-American Development Bank.

Although this year's oil bonanza has given Venezuela a brighter future and richer present than any other Latin American country, the sudden affluence has not produced universal euphoria.

Dr. Ernesto Mayz Vallenilla, rector of Simon Bolivar University, has become a vociferous critic of what he terms the petrolear mentality--a kind of psychological rolling in oil. Despite Perez's reassurances, many small businessmen fear an "inflation of abundance" that has already driven costs up 15%. No American companies have pulled out yet, but since Perez's intentions toward them are still unclear, they are wary about further investment. Foreign exporters, however, are quite happy at the prospect of a new luxury market--Venezuela has already become one of the world's largest importers of whisky, champagne and Cadillac Eldorados.

*After nearly 17 consecutive years of lawfully elected governments, Venezuela is in fact now the senior democracy in South America.

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