Caracas lurches left and rejects markets

HUGO CHAVEZ, the hugely popular President of Venezuela, has vowed to lead his country away from the market economy and urged the new Constitutional Assembly to extend his potential term of office from five to 12 years. Mr Chavez, who took office six months ago on a left-leaning, nationalist ticket, claims he has won a revolution without firing a shot.

In the new assembly he addressed for the first time on Thursday, 121 out of 131 members are fervent loyalists. "We are fighting against neo- liberalism and searching for equality, employment and justice to cover the needs of the people," Mr Chavez thundered. "Venezuela is rising out of its ashes." He lambasted the neoliberal economic model as a "dogma of individualism" that had led the world to "fighting like savages against each other".

Last week Mr Chavez took the sword of the 19th century liberator Simon Bolivar from the national vault, paraded it through the streets of Caracas, and unsheathed the golden blade from its diamond-studded scabbard to hold it aloft over the cheering crowd.

An estimated 80 per cent of Venezuela's population is mired in poverty, and they view Chavez as a hero, though most of the nation's elite scorn him.

"I do not have absolute power nor do I wish to have it," Mr Chavez says, but not everyone believes him. Soon after Mr Chavez changed the country's name to the "Bolivarian Republic of Venezuela" Congress suspended its sessions before serious conflicts could arise.

Since Mr Chavez declared a national emergency which requires the dismantling of all corrupt institutions, the Supreme Court is increasingly wary. The president says his popular mandate, with an approval rating of 75 per cent, means his assembly holds sway over the judiciary and legislative branches of the government before a new constitution is ratified in six months. And the assembly can steamroll any opposition.

All Latin America is watching as the charismatic ex-paratrooper, jailed for two years after leading a failed military coup in 1992, manoeuvers his military backers with the flair of a demagogue. Since Mr Chavez was elected last December, he has appointed 173 officers to oversee the running of most state institutions and holds council in his Miraflores Palace with 20 military advisers. Fifty thousand soldiers are on the streets, directing his "theatres of social operation" and deciding which roads to repair and where to construct hospitals and schools.

Foreign aid workers, accustomed to watching 80 per cent of their project money trickle away in Venezuelan "administrative costs", are watching the pragmatic results of the changes with a sense of wonder.

Venezuela is the world's No3 oil exporter and Mr Chavez plans to revive Cuban oil refineries to process Venezuelan petroleum as part of an idealistic economic scheme, which sets aside a quarter of the country's bank loans for agricultural projects. Inflation is pegged at 30 per cent, but soon expected to drop to 20 per cent because many Venezuelans no longer have cash to buy much.

Political opponents mince no words. "The constituent assembly is nothing more than a camouflage to make the world think that the coming dictatorship is the product of a democratic process," said Jorge Olavarria, an opposition figure who lost the assembly election.

Alfredo Pena, a former investigative reporter elected to the assembly, sits amid a motley group of Chavez hangers-on that range from Mr Chavez's brother and his wife, Marisabel, to grizzled guerrillas, retired military brass, a folksinger and a racetrack announcer.

"With the power Chavez has now, he could ignore democracy," says Mr Pena. "But there is democracy here because he wants it."