Presidency of Luis Herrera Campins

Background

When the next elections came around in 1979—in Venezuela, presidents and congress were elected in the same election for five-year terms—AD fielded the unexciting Luis Piñerúa Ordaz and the COPEI selected Luis Herrera Campins. The latter did not have anything new to offer except rhetoric, but in the campaign he was like a charging boar. It really didn’t matter what he said, because the adecos were in a no-win situation disillusioned as they were with Pérez and unexcited by Piñerua, and Herrera defeated his adeco adversary although not by a large majority. Venezuela had demonstrated once again that at the ballot level it was a working democracy.

Presidency

Few presidents had practiced winner-takes-all as Herrera Campins did. Even full-blooded Social Christians who had worked for the Pérez administration were fired. But Herrera did have in his cabinet a few figures that were not copeyanos, among them Manuel Quijada, the former anti-democracy conspirator. (Later, Quijada was one of the political advisors of Chavez before the former paratrooper won the presidency.) He named the economist Leopoldo Díaz Bruzual to the Venezuelan Central Bank. Díaz Bruzual was a protégé of and advisor to Reinaldo Cervini, a very rich man who had life-time tenure at Pro-Venezuela, a kind of semi-official institute founded to promote Venezuelan industrialization. Cervini doubled as Maecenas to communist intellectuals, who would physically confront anyone who dared criticize their patron. Herrera Campins toned down the showiness of his predecessor, even though his government had another windfall when oil prices rose dramatically again in 1983. Venezuela had increased its indebtedness beyond the levels attained by the Pérez government. There was much talk at the time of "bipolarity", the belief that Venezuela was stuck forever in the cycle of AD-COPEI ruling alternatively but following the same policies of high-spending, high-bureaucracy, and a statized economy. One brash foreign policy initiative taken by Herrera either should have gladdened or encouraged militarists in Venezuela. When the Argentine military dictator and "dirty war" veteran Leopoldo Galtieri had the Falklands invaded in 1982, Venezuela officially, though not materially, backed the Argentine move, although most Venezuelans were not aware of Argentina's claim on the islands and weren’t even fully informed of the government's action.

When dollars flooded Venezuela again, economists began talking of "overheating", although it wasn't clear whether they knew what they were talking about. It was pseudo-technical jargon, but Díaz Bruzual was among the adherents to this idea, if not actually the economist who got the "overheated" ball rolling. In the USA, president Jimmy Carter was fighting inflationary pressures and interests rates there, and in the industrialized nations generally, went up to unheard of levels. In Venezuela, a Canadian bank was offering interests as high as 21%. But because of the overheating thesis, Díaz Bruzual applied an old law whereby interest payments above 12% were considered usurious and illegal. Dollars started flowing out of Venezuela in the billions, and the central bank, which had always been zealous about national reserves, took fright at their growing depletion, but instead of counter-acting with incentives to reverse the outward flow, the bolivar was officially devalued by over 50% on its previous 4.30 to the dollar. The government, in brief, was not going to subsidize the bolivar at its previous rate. But the measure encouraged a further massive flight of dollars, and the government then clamped full currency control.