Venezuela had enjoyed democratic stability since 1958, and also a degree of prosperity. This prosperity was greatly enhanced in the 1970s, when oil prices increased substantially, and Venezuela, a large petroleum exporter, received large revenues, which increased per capita income by about 40%. Venezuela experienced modernization and had one of the highest GDP per capita in its history, while also having an exchange rate of 4 bolivares per 1 US dollar.
However, in the 1980s, other oil producers (especially Saudi Arabia) raised their production, and oil prices dropped. Venezuela's oil revenues dropped substantially, and per capita income declined by about 25%. This imperiled economic and social stability in general. The government's overspending on programs caused massive levels of debt with poverty, inflation and unemployment rising while income declined. Corruption was also widespread with crime increasing yearly, making the Venezuelan public, primarily the poor who especially felt neglected, become outraged.
The IMF offered assistance to Venezuela with these debts, but on condition of Venezuela enacting budgetary and fiscal reforms to curtail the deficits. In 1989, President Pérez put these neoliberal policies into effect, reducing social spending and many commodity subsidies, and removing longstanding price controls on many goods. These policies bore heavily on Venezuela's working class and lower class majority. The resultant discontent erupted in the "Caracazo" riots of 27 February 1989.
Many of the participants in the coups had been members of the Partido de la Revolución Venezolana (PRV) in the 1970s. The PRV was created by ex-Communist and guerrilla fighter Douglas Bravo, who after failing in an armed insurrection, sought to infiltrate the Venezuelan armed forces to reach power. Thus, preparation for the coup began more than ten years before Pérez was re-elected in 1988.
The coup organizers rejected the dominant political consensus of Venezuela, known as puntofijismo, which had been established in 1958. Under puntofijismo, political power was held by two political parties, Democratic Action and COPEI, which they saw as the two arms of a corrupt, clientelist establishment.
The Movimiento Bolivariano Revolucionario 200 (MBR-200) was founded in 1982 by lieutenant colonel Hugo Chávez Frías, who was later joined by Francisco Arias Cárdenas. They used the Venezuelan revolutionary hero Simón Bolívar as their group's symbol. Their main complaint was the corruption of Carlos Andrés Pérez as well as Venezuela's ongoing economic difficulties and social turmoil. In the view of these two men, the entire political system had to be changed in order for social change to occur.
In February 1989 shortly before the Caracazo, Cuban president Fidel Castro placed sleeper agents in Venezuela to create unrest, with Cuba recently entering its Special Period and experiencing economic difficulties as a result of the Soviet Union's Perestroika, Castro allegedly sought to establish an ally in Venezuela so Cuba could also enjoy funds from oil profits. As the Revolutions of 1989 occurred in Soviet states, Castro had allegedly began to organize a coup in late-1989 that would indirectly use sleeper agents who participated in the Caracazo. Castro, who was allegedly one of the main organizers according to Venezuelan Major Orlando Madriz Benítez, would instead use Chávez as the face of a civil-military action in order to avoid retaliatory actions from the United States.