New Venezuela Leader Aims to Overcome ‘Crisis’ : Inauguration: Rafael Caldera reassumes presidency 20 years after leaving it. He pledges austerity and integrity.

CARACAS, Venezuela —  Rafael Caldera took the oath of office Wednesday as modern Venezuela’s eighth president, promising a government of austerity and integrity and proposing sweeping economic reforms to overcome “the gravest and most complicated crisis of the last 20 years.”

Speaking to a somber, almost funereal joint session of a fractured and largely antagonistic Congress, the 78-year-old Caldera drew only scattered applause as he outlined the policies he said will lead Venezuela successfully into the 21st Century.

Caldera, who also was Venezuela’s president from 1969 to 1973, said the nation’s high inflation rate and enormous deficit are his “main concerns” and called for a solution of austerity, honesty, tax reform and government reorganization.

The government deficit of about $2.5 billion represents more than 25% of the total government budget--one of the highest proportions in the world and the leading cause for Venezuela’s inflation rate of 45%, which is growing.

As both a sign of the need for austerity and a symbol of the difference between his administration and that of his predecessor and chief rival, Carlos Andres Perez, Caldera asked that his inauguration not be accompanied by celebratory events. He also ordered most of the $600,000 allocated by Congress for the inauguration to be returned unspent.

Perez spent at least that much five years ago for three days of parties, dinners and other festive events celebrating his own inauguration.

Reading from a speech he held close to his face, and without looking at either his audience or the cameras televising the event nationwide, the new president sought to calm concerns of both the domestic business sector and the international financial community when he proposed policies he said reject radicalism but will “create a rational approach.”

He had set off worries during his campaign last year when he attacked the free-market policies implemented by Perez and promised to restore the prosperity the country enjoyed during his earlier term as president, when Venezuela was awash in oil revenue.

However, he promised Wednesday to live up to international financial obligations and sought to encourage foreign as well as domestic investment by saying that “in my government there will be neither a devaluation nor any foreign-exchange controls”--both anathema to business sectors and free-market economists.

One of Caldera’s most important steps in seeking to attract foreign investment was the appointment of Julio Sosa Rodriguez as minister of finance. Sosa, a former ambassador to the United States, is widely respected in the international business community for his conservative economic views and his political wisdom.

The new president made other reassuring remarks, promising to reduce dependence on oil, which now accounts for about 70% of the overall economy; open the system to more competition; modernize the precarious banking industry, and reform both the tax code and its enforcement mechanism.

Caldera also sought to take advantage of what one diplomat later said was his “strongest selling point--that he is not Carlos Andres Perez”--by pledging to end corruption and reduce government bureaucracy and inefficiency, all hallmarks of the previous administration.

While this was aimed at comforting both the domestic business sector and the international financial community, Caldera did little to offset conservative nervousness when he later stressed a need for a “significantly higher minimum wage,” rejected demands for a new labor code to weaken union power and called for revocation of a national sales tax seen by many economists as essential to recovery.

Caldera also fed the uncertainty when, with the exception of Sosa and perhaps one other minister, he named a Cabinet heavy with relatively unknown personalities with little government experience, weak political contacts and generally unknown views, particularly about economic approaches.

He was met with total silence when he repeated his campaign proposal for constitutional reforms that would greatly strengthen the presidency by taking away large amounts of legislative power.

The main points--enabling the president to dissolve Congress if he decides the legislators “are not meeting the wishes of the citizenry” and permitting a public recall of all elected officials--would require congressional approval, and the charter reforms are thus seen by most experts as Caldera’s most difficult task.

Much of his 45-minute speech was devoted to listing the negative effects of what he said were “the disastrous” policies of the past 20 years: increased government debt, a large drop in living standards, increased unemployment and inflation and “dangerous instability” throughout society. He made no specific mention of the causes of that instability, but lurking in the political background were two serious coup attempts in 1992, criminal charges that forced Perez to resign last year and a criminal indictment of another former president, Jaime Lusinchi.

To some observers, Caldera did not help his cause when over the weekend he fired the defense minister, Vice Adm. Radames Munoz Leon, and the entire military high command. Munoz is widely credited with holding most of the armed forces together in defense of the government in the face of the two coup attempts, and the high command was due to change in July.

“I think he did it to show who was boss,” a diplomat said of the dismissals. “He won’t be hurt in the short run, but he insulted the military . . . and that has left a bad taste that will require some serious bridge-building.”

A greater short-term danger to Caldera’s success, at least for now, will be the Congress and the fact that he won the election with the smallest mandate since Venezuela ended a military dictatorship in 1958 and began South America’s longest democratic tradition.

While he took 30% of the ballots cast, Caldera’s share represented only 18% of eligible voters, nearly half of whom abstained.

That outcome will make it difficult for him to use a claim of popular support to pressure Congress.