REMEBERING VENEZUELA…BEFORE HUGO CHAVEZ

Shortly after Chavez took over in Venezuela ten years ago, we predicted that in a few years he would ruin the country. We further predicted that he would become increasingly authoritarian. It wasn’t a hard call, because he was implementing all the old shopworn socialist programs that have failed over and over around the world. Let us catch up with Hugo and his Bolivarian revolution today.

Hugo is presiding over an inflation rate of 31%, the highest in Latin America. Crime has risen. Last year, Venezuela had about 15,000 murders versus about 6,000 when he took office. The government has not been favorable to private property, so not much building has taken place, and there is a shortage of rental housing.

The upper and middle classes have been mostly dismantled. Many middle class technocrats have left the country after being fired by the national oil company, to make way for new employees who were more vociferous in their support for the Bolivarian revolution. For example, Venezuelan geologists and petroleum engineers can be found working in Canada and other oil provinces around the globe. Venezuelan oil production fell substantially when Chavez actively fired most of the knowledgeable energy technocrats who ran the oil industry.

In spite of this period of higher oil prices (as compared to ten years ago), the poor in Venezuela have been treading water economically. Now that the price of oil, the main resource for the Venezuelan economy, has fallen, signs of an economic implosion are becoming more visible. The state owned oil monopoly is months behind in payments to suppliers, and the currency has fallen in value. Also, as expected, Hugo is becoming increasingly authoritarian.

We anticipate that over the next few years the bad management, corruption, and incoherence of the Chavez administration, will lead to a severe economic crisis…even if oil prices recover. Sadly, the poor, who Chavez purportedly set out to benefit, will be sucked into the morass with everyone else.