End of Hugo Chavez era in Venezuela appears near

Scott Tong Jan 9, 2013
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End of Hugo Chavez era in Venezuela appears near

Scott Tong Jan 9, 2013
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As far as we know, Venezuelan leader Hugo Chavez is in a Cuba, dealing with complications from cancer surgery. Today the Supreme Court postponed his inauguration for another term, scheduled for Thursday. Chavez has picked a successor, in case he can’t continue.

Confused yet?

Suffice to say, the Chavez era may be coming to a close. True or not, we look back now at how this socialist strongman fused his ideas and his country’s oil money to refashion the country in this image, for better of worse.

Chavez economics starts with Chavez ideology. He took office in 1999, pledging to fight corruption and share the wealth.

“People tend to vote with their pocketbooks, even here,” says business publisher and consultant Robert Bottome in Caracas. “And so Chavez was offering a change. He was going to get the economy growing again. Throw the bastards out. He has tremendous personal appeal.

Early on in his administration, Chavez took control of biggest piece of the economy: oil.

Foreign companies like Exxonmobil and Conoco Phillips operated there. But Bottome says Chavez was unsatisfied with the royalty payment negotiated in a contract. So he doubled it.

“And then he doubled it again,” Bottome says. “He didn’t like the tax scale. And then finally he said he didn’t like my partners. So he told them from now on instead of being majority owners and operators, you can be minority partner if you like. And I am going to run the show. “

Speaking of show, Chavez hosted his own talk show every Sunday. As in him talking.

“He once fired all the top management of the national oil company” during the show, says former Venezuelan trade minister Moises Naim, now with the Carnegie Endowment for International Peace. “In other instances of his show, he would nationalize a bank or the electricity company.”

What you and I consider independent economic data is hard to come by in Venezuela.

But there’s no question Chavez spent money on the poor — on health care, appliances, subsidized gas. And he drove out lots of foreign companies and private-sector investors.

Today, Pomona College historian Miguel Tinker Salas says Venezuela’s a hybrid economy — part socialist, part consumption capitalist.

“You can have one the one hand a discourse about socialism, but the malls are full,” Tinker Salas says. “Venezuela is the highest consumer of scotch whiskey per capita in the world.”

Chavez also sent money to neighboring countries, often in the form of cheap energy.

Some were friends of the ideological revolution, like Cuba. Others were marriages of political convenience.

“So if there are votes in organizations that come up about Venezuela,” says Michael Shifter of the Inter-American Dialogue in Washington, D.C., “those countries are more likely to be influenced if get good deal on oil to vote with Venezuela as opposed to against Venezuela.”

It’s been a potent fusion of power, ideology, and economic leverage, says Shifter.

Which raises the question: is this how every strongman economy tends to work?

“I don’t think it necessarily has to go this way,” Shifter says. “You have Evo Morales who is a close ally of Hugo Chavez. But the Bolivian economy is much better managed than the Venezuelan economy.

Today, Venezuela faces double-digit inflation, billions in debt, and remains highly dependent on the oil sector. When energy prices fall, the economy goes with it.

And yet the Chavez socialist experiment continues.

Why? Oil money to bankroll it, says Moises Naim at Carnegie.

“That allows you to experiment, and provides you a cushion to cover your mistakes,” Naim says. “The ‘oil curse’ allows for sustained bad ideas to linger over time.”

On his show late last year, Chavez picked a successor, in case he can’t go on.

So whenever the era ends, what happens next?

“I don’t think there’s any going back,” says Tinker Salas. “Venezuela has changed. People who have been in power are not going to retreat into the margins any more. Venezuela will not change, whether Chavez is there or not.”

But others say if and when Chavez dies, his magic does, too.

Which could leave the question open — whether the Hugo Chavez strongman economic model outlives him.

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