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The Great Caudillo Strikes Oil

An Analysis of Juan Vicente Gómez’s Regime in Venezuela and the Early Exploitation of Petroleum

Juan Vicente Gómez is a name that holds much significance in Venezuelan history. As one of the last caudillos in his country’s history, he successfully reformed the country’s economic and political framework from having a weak federal administration that answered to the whims of regional caudillos to a largely centralized and nationalized federal state. He was in power when the vast Venezuelan petroleum deposits were discovered and began to be exploited and thus entered Venezuela into a new era governed by the commodity of oil.

Gómez originally came to the political stage by throwing the support of his guerrilla henchman behind Cipriano Castro as he seized Caracas in a military coup in 1899. Castro installed Gómez, the nearly-illiterate cattle herder, as vice-president. Castro’s years of dictatorship were marked by incessant nonpayment and defaulting of outstanding international debts. Foreign financiers were constantly provoked, forcing a deep alienation between Venezuela’s economic elite and Castro’s ruling administration. The government’s continual failure to pay its debts ended in numerous blockades and even the bombardment of Venezuelan ports by European powers.

Castro’s inability to establish economic stability — especially by way of reneging on repayment of foreign debts — or to satiate the economic elite pushed the ruling class to embrace any alternative to Castro’s rule, a lesson well-learned and implemented by Gómez when he took power. As late as 1907, five years after the first European naval intervention in Venezuela, the economic blunders of the Castro regime forced another naval intervention. The stage was set for another caudillo to seize control — foreign creditors were furious with the government, relations with the domestic elite were extremely tense, and the economic condition of the country was substandard at best.

Gómez was able to seize power for himself in a bloodless coup shortly afterwards in 1908 when Castro left Venezuela for Paris in order to receive medical treatment. Castro, despite widespread lack of support for his regime, did not suspect that he would be deposed and exiled by his principal collaborator upon leaving the country. Upon taking the presidency, Juan Vicente Gómez was left with an economy in need of stability and a government in need of centralization.

Prior to Castro’s regime, and still somewhat throughout his rule, Venezuela had operated basically under the rule of rivaling regional caudillos. National governments were weak and had no capacity to exercise centralized control over the country. Regional caudillos retained militias and remained a powerful political force; they had the ability to initiate rebellion against the central government. Rule in Venezuela up to the turn of the twentieth century was little more than a sequence of constantly changing alliances between regional caudillos. In order to consolidate power and achieve an adequately centralized ruling administration, it was vital for Gómez to eliminate the rival caudillos as legitimate threats. By forming a centralized national army by the likes of which had never been seen in Venezuela, Gómez had the capacity to relatively easily exercise control over caudillos. His regime, supported by a national army far larger than the militia of any local caudillo, took a step towards political stability.

However, creating a large loyal national army would not necessarily guarantee political success for Gómez’s regime. Historically, many caudillos with poor political and economic plans, coupled with inadequate centralization, have fallen as quickly as they took power in a coup. Fortunately for Gómez, Castro’s administration had alienated the domestic elite — whose support and investment was wholly necessary for political stability — from the government. “In contrast to Castro, Gómez showed a much greater capacity to garner the support of economic and political elites. Gómez’s cabinets were integrated by some of Venezuelan society’s most prominent intellectuals.” Gómez embraced the domestic elite and promised a stable economy. After their immense alienation from the Castro regime, he was able to earn their support early on during his rule.

A third important facet of Venezuela’s political context upon Gómez’s entrance to power was the credibility of the government internationally. Castro, on top of leaving a very large foreign debt of Bs.225.5 million, had virtually destroyed Venezuela’s credibility to foreign investors. In dealing with this crisis, Gómez stressed an adamant policy of swiftly and promptly paying down its international foreign debt. Venezuela, still unindustrialized and primitive by world standards, depended heavily on the industrialized powers in terms of both trade and foreign investment. As such, the Gómez regime’s crowning financial achievement was paying off the enormous foreign debt. Originally standing at Bs.225.5 million, Gómez’s administration had reduced it 36 percent by 1918 and repaid it in full in December, 1930. With the support of international leaders and creditors, as well as of the ruling elite and of a large national army, Gómez was able to take control of Venezuela during a time of wretched economic and political instability and successfully maintain rule for the next 27 years until his natural death in 1935.

Though Gómez and his followers obtained power in a bloodless coup, it was a coup nonetheless; he exercised power in a manner similar to dictatorial caudillos of the past. “Gomez persecuted relentlessly those who betrayed him. He mounted an espionage network that utilized the telegraph system, the foreign ministry, and even the oil companies to monitor the activities of his Venezuelan adversaries abroad.” His regime was wholly authoritarian — the government repressed civil rights, outlawed political factions and dissent, utilized secret police that strong-armed and murdered political adversaries, and utilized puppet leaders to keep Gómez in power until his death in 1935.

Gómez did not achieve power democratically, but despite his position as an omnipotent dictator, he was well-liked by his subjects; rebellions were generally small and easily squashed. What separated Gomez from most other dictators and regional caudillos was his successful implementation of a strategy to centralize and consolidate Venezuela politically and snuff out internal conflicts to a point where his regime could maintain power indefinitely. The biggest obstacles he faced in achieving a centralized and politically-unified state was the threat of uprising local caudillos and of the rise of opposing political factions. Thus, an important aspect of the Gómez regime was the creation of a patronage-based political system. Political office was appointed for followers and friends of the Gómez clan and the state’s political structure was used for the satisfaction of individual demands. When Gómez came to power, he sought to squash political dissention and unrest not simply with force — which was ubiquitous with the presence of the secret police and national army — but with favorable economic opportunities and social stability.

Historically, a common characteristic of caudillos that have risen to national power is a generally weak economic strategy and inability to exert adequate control over the country. Once the well of finance and power runs dry, a coup takes place and another strongman has a chance to rule. Gómez, unlike most caudillos of the past, came to power with a sound strategy to stabilize Venezuela’s already chaotic economy and to consolidate power to put forth adequate control of the country. By strategically creating a web of interlocking local and political loyalties and a patronage-based political apparatus for the allocation of economic rewards and sanctions, Gómez established strongly federalized systems which were capable of stabilizing Venezuela and bracing it for the distribution of oil revenues as petroleum quickly became its most important resource.

It has been argued that without the discovery of vast petroleum resources, Gómez’s achievement of a centralized state and consolidation of power would have been impossible. However, this is untrue; the apparatus by which oil revenues were to be dispersed were well established by the time the vast deposits in Maracaibo Basin were discovered in 1918. As early as 1909, mining codes were reestablished to stimulate foreign investment in the industry and to extend government supervision and control to the exploitation of asphalt, oil, and similar substances. At the same time, an extensive road building and repair program was initiated, linking together the infrastructure by which the economy would be centralized. Nearly a decade before Venezuela’s petroleum wealth was realized, Gómez established an economic infrastructure that was capable of distributing the wealth derived from it.

The economic strategy employed by Gómez was instrumental to his maintaining power. He established a system where patronage kept the domestic elite satiated. An efficient, albeit unindustrialized economy increasingly based on oil revenues swiftly reduced both foreign and internal debts, reestablishing Venezuela’s image on the international stage in the eyes of foreign powers and creditors. Coupled with the authoritarian political system of omnipresent secret police and military entities to squash any internal political threat, Gómez’s regime implemented effective strategy in order to stabilize the country, both internally and internationally.

The legacy of Gómez's rule of Venezuela is probably more evident than with any other leader of that country. He is a very controversial figure and opinions regarding his impact on Venezuela vary. Some historians view him as a brutal despot — guilty of political corruption and a host of human rights abuses — tossing him in a bandwagon of past Latin American caudillos. Others praise him as the first leader to bring Venezuela out of its primitive, weakly-structured shell and establish an effective federalized state.

The issue of petroleum and the manner in which Gómez dealt with oil revenues are historically controversial as well. Having taken power after Castro, repayment of foreign debt was among the highest of political priorities; much of the oil revenue that did not enrich Gómez and his clan went to the repayment of the enormous outstanding debts. However, he is widely criticized for failing to spread the prosperity stemming from petroleum past the military and his close family and associates. He did almost nothing in the way of public education and health care or improving real wages and high food prices. This lacking stemmed not from a lack of patriotism or devoted leadership; it stemmed from technical shortcomings and inefficiencies within the government.

Despite establishing an economic infrastructure capable of adequately allocating petroleum and oil revenues early on, the oil industry proved not to be a sure road to prosperity, at least for the majority of Venezuela:

“Gómez attempted to maximize government income and showed concern for the welfare of workers but failed to promote a technically competent bureaucracy capable of monitoring the oil companies, which were always bent on evading their obligations.”

The shortcomings of the regime’s bureaucracy may have stemmed from Gómez’s policy of placing officers of the old guard in positions of power rather than letting younger, well-educated officers ascend the ranks. The men placed in positions of political significance were often from previous military positions; they were mostly uneducated and thus unable to foresee issues with the country’s oil industry. This fact, combined with Gómez’s laissez-faire policies and strong belief in market forces, created an environment where Venezuela became a financial heaven for overseas investors:

“Although the economic recession of the 1930s is partly to blame because it demonstrated poignantly the constraints acting on the government, nevertheless the government can be severely criticized for its failure to create a force that would control and supervise the [oil] industry.”

Probably unintentionally, Gómez prominently became known for being a servant of powerful international interests and as an instrument of foreign control of the Venezuelan economy. There is no doubt that upon his death in 1935, he left the Venezuelan economy more dependent on foreign trade and world economic booms; he allowed the capital-intensive oil industry displace the agricultural economy. Upon his death, Gómez had taken a chaotic society still susceptible to caudillo rule and turned it into a relatively effective, centralized entity with political consolidation. He had impressively achieved the repayment of outstanding foreign debts and nearly paid off internal public debts. However, the vast oil deposits, despite having the potential to bring great prosperity to Venezuela, were not utilized favorably by the Gómez regime.

Though Gómez and his followers had their shortcomings in the implementation of an effective oil policy, one must also wonder: If Gómez had not successfully federalized the country’s economic and political systems, would other governments in his regime’s place have effectively exploited Venezuela’s petroleum and achieved lasting prosperity? Many historians “view his twenty-seven-year rule as marking a fundamental break with the past. Until then, Venezuela was even more fragmented and subject to continuous internal warfare than its Latin American neighbors.” Castro had initiated steps towards a more stable federalized state, but by the time he was deposed, the country was on the brink of one of the worst crises in its recent history.

Gómez’s Venezuela had the first administration in independent Venezuelan history capable of handling such a demanded commodity as oil. The legacy left by Gómez for his country was enormous, and the lessons left for posterity numerous. His regime’s actions regarding the oil industry made a clear warning to Venezuela and Latin American countries that displacing the agricultural economy in favor of promoting capital-intensive industries (without ensuring a fairly-priced supply of foodstuffs) is a dire mistake. The Gómez regime’s displacement of the domestic agriculture led to a dependency on imported foodstuffs at prices higher than were affordable. In addition, dependence on a single commodity — Venezuela increasingly depended on the export of oil — can also lead to shaky economic conditions at times when demand for the commodity is low: “The difficulty was that during the depression years Gómez needed the companies more than the companies needed the country’s oil resources.” The Gómez administration failed to realize the detrimental effects on the Venezuelan economy that came with any blow to the oil industry. A lasting lesson that the Gómez legacy has left is that to prosper as an industrialized country, a government must diversify and cease to be dependent on world economic trends — a notion seen far too often in the history of Latin America.

Notes

  1. Rómulo Betancourt, 1978, Venezuela’s Oil (Great Britain: George Allen & Unwin (Publishers) Ltd), 96-119.
  2. Steve Ellner, “Venezuelan Revisionist Political History, 1908-1958: New Motives and Criteria for Analyzing the Past,” JSTOR, 1995, 95-101, http://www.jstor.org/view/00238791/di000669/00p0045y/0?frame=noframe&userID=a87acb1d@bu.edu/01cce4405d00501bd5109&dpi=3&config=jstor, 8 April 2007.
  3. B.S. McBeth, 1983, Juan Vicente Gomez and the Oil Companies in Venezuela, 1908-1935, 1st ed. (Cambridge, Great Britain: Cambridge University Press), 109-214.
  4. Francisco Rodríguez and Adam J. Gomolin, “Anarchy, State, and Dystopia: Venezuelan Economic Institutions Before the Advent of Oil,” Wesleyan University, 2006, 10-14, http://frrodriguez.web.wesleyan.edu/docs/working_papers/Anarchy_State_and_Dystopia.pdf, 8 April 2007.
  5. Franklin Tugwell, 1975, The Politics of Oil in Venezuela (Stanford, CA: Stanford University Press, 1975), 8-37, 145-175.

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