In Venezuela, some are mourning, and some are not, for Hugo Chavez, the country’s polarizing president, who died yesterday. Supporters see him as a champion of the poor. Critics say he ruined the country’s economy. Chavez’s economic legacy is a mix of both.
If you consider the impact of Hugo Chavez by traditional economic benchmarks, like inflation, he ended on a low note.
Javier Corrales is a political science professor at Amherst College.
“He’s leaving the country in the midst of a serious economic crisis. A very large fiscal deficit. A devaluation was announced that is going to have enormous inflationary effect, as well as productivity declines everywhere,” says Corrales.
The country’s economy is less diversified than when Chavez took control. Venezuela is now almost totally reliant on oil revenues.
But, for a long time, oil profits worked in his favor, allowing Chavez to invest heavily in his populist agenda. Corrales says other Latin American leaders had mounted similar progressive campaigns in the past, but always ran out of money.
“What Chavez was able to do was to sustain that much longer than any other Venezuelan president or Latin American president simply because the oil windfall that Venezuela enjoyed between 2003 and today has been enormous,” says Corrales.
At the same time Chavez depended on the oil industry, he also undermined it. When oil industry administrators went on strike early in Chavez rule, he fired 18,000 industry workers. Oil production levels fell.
“Large numbers of its revenues were going, rather than to reinvestment in the industry, were going directly to fund social programs,” says Alejandro Velasco, assistant professor of Latin American Studies at New York University. “The criticism is that an oil company shouldn’t have as its major focus social missions. It should have as its major focus the production of oil.”
But from the perspective of the poor, Chavez was seen almost like a god. He focused the country’s oil wealth on improving the lives of the dispossessed.
“It’s meant a tremendous amount both in economic assistance. But more significantly, I would say, it’s meant more in terms of how people imagine their roles in society. No longer cast aside. No longer marginalized,” says Velasco.
The poor have been empowered, both economically and politically.
“It’s really undeniable. And even the opposition has had to come to terms with, that no longer can you sort of take for granted the voices of those who were economically marginalized. Now they have formed sort of an integral part of peoples' political calculus,” says Velasco.
But by starving the private sector, Chavez may have also worked against the interests of the unemployed in Venezuela.
“Chavez has hurt the poor by making sure that the private sector in Venezuela underperforms. The job growth, the investments that you see in the private sector are very weak. They’re not generating job growth,” says Corrales.
Corrales says that reforming the country’s oil industry would not only help the economy, but would also help the poor in the long run.