Obama's Test From Chávez

Of all the foreign policy messes George W. Bush is handing off to President-elect Barack Obama, Venezuela's Hugo Chávez is the worst. On the two tests where Chávez is the key -- shaping a respectful long-term relationship with Latin America and the short-term terrorist threat from Venezuela -- Bush scored an F. Obama's got real work carved out for him.

With 200 of its 550 million people living on $2 or less per day, Latin America suffers from a long-term inability to develop a win-win relationship with the economic colossus to the north, where the GDP per capita is seven times greater than below the Rio Grande.

The success of 45 million Hispanic Americans, who on a per capita basis earn three times what their relatives do back home, dramatizes the long-term solution. The modern system of lawful wealth creation is inefficacious in Latin America, which consequently has not developed as rapidly as Asia or much of Africa, and that in turn has spurred immigration to the states including 12 million illegally.

The solution was supposed to be the Washington Consensus policies -- budget balancing, more taxes, fiscal austerity, free trade, fighting government corruption and privatization of state enterprises -- which became loan qualifications for IMF, World Bank and US aid. But these stern policies -- which Washington rarely applied to itself -- failed to reduce poverty and backfired especially against the Latin American political leaders who had the courage to apply them. That backfire gave rise to the virulent strain of anti-Americanism that produced Chávez.

In 1989, there were riots against the Washington Consensus reforms imposed on President Carlos Andres Perez of Venezuela, which were followed in 1992 by a coup attempt launched by Chávez against Perez, who was impeached shortly afterward. Then Chávez rose from the ashes of prison to win the presidency in 1998. He has been savaging American capitalism and power ever since while being subsidized by American gasoline buyers.

A few years later, similar riots against Washington's rules ousted President Gonzalo Sanchez de Lozada of Bolivia, whose request for a $50 million loan to President Bush was dismissed in the Oval Office with the crack "Who am I, Santa Claus?" The upshot in 2005 was the election of the indigenous leader Evo Morales to Bolivia's presidency, who gladly took Chávez's money and imitated his savage anti-American discourse.

Argentina, Ecuador, Nicaragua, Dominica, and Honduras then fell like dominoes into the oil-funded anti-American camp of Chávez, who had simultaneously aligned fifty billion dollars worth of business with the FARC narco-terrorists in Colombia, OPEC, Iran, Syria, Hamas, Hezbollah, China, Russia, Belarus, North Korea, and anyone who would trash Bush -- who ignored it all, pretending everything was OK.

Bush is thus handing off to Obama a Latin America that is deeply suspicious of America; where Iranian, Russian and Chinese weapons and businesses are found everywhere in the Chávez circle of countries; where the growing threats of nuclear weapons proliferation, terrorism, money-laundering, human and narcotics trafficking have become the norm; where two US ambassadors were kicked out of Venezuela and Bolivia; and where a global recession that is blamed on U.S. profligacy will worsen immigration, poverty, violence and instability in the whole region.

More than any of his predecessors since World War II, President Obama needs a dramatic change in the relationship with Latin America. To attack poverty, the underlying problem, Obama needs to get the tools of wealth creation -- education, private property, enterprises, and cheap credit -- to the 200 million Latin Americans who live on $2 per day. He could use a Marshall Plan involving the public and private sectors of the rich democracies to interact with Latin America on the ground in the barrios and directly with poor people. The "community organizer" Obama once was in Chicago is precisely what the Latin American poor need in their corner today.

As for Chávez's short term terrorist threat, Obama has to move fast. Even though the recession has cut Chávez's oil income by more than half, he still has the largest and best-equipped standing army in Latin America, Russian submarines and fighter jets, Iranian missiles, uranium mines, Hezbollah and FARC training and rest camps, and a cocaine and money-laundering operation that makes Bernie Madoff's Ponzi scheme look like tiddlywinks.

Chávez is armed, scared, trapped and dangerous. He's scared of being prosecuted for crimes against humanity if he's removed from office. He's trapped by falling oil income that props up his personal army, a huge bureaucracy, and half the payrolls in Venezuela. A paranoid sociopath, Chávez has lost his bugaboo -- Bush -- and is facing a cool, intelligent black replacement. In such circumstances, he may fabricate a crisis so he can declare martial law and wage war against the U.S. as Fidel Castro did in Cuba 50 years ago. Expect Iran, Russia and maybe China to be denying involvement in it.

To counter Chávez, Obama should eliminate U.S. dependence on Venezuela's oil and thus stop subsidizing Chávez's state sponsorship of terrorism. This is not as difficult a task as Bush thought, because Venezuela's fuels are not needed in a recession. But without U.S. revenues to subsidize his megalomaniacal fanaticism, Chávez will face new enemies among the military closest to him, including thousands of Cubans loyal to Chávez's money not his dreams of grandeur. By protecting America, Obama could really help the suppressed democracy of Venezuela.