Random posts on all sorts of things designed to inform and provoke.
Hugo Chavez’s 14-year reign as president of Venezuela ended today as the long-time leader succumbed to the cancer he had been fighting for the past two years. Chavez, who had not been seen or heard from since December 11, had nevertheless been elected to a new six-year term that started on January 10.
Consequently, his death formally begins the campaign season for the next presidential elections, which, according to the country’s constitution, have to be held within 30 days. The two major candidates in this contest are expected to be the current vice-president, and Chavez’s handpicked successor, Nicolas Maduro and the man who the late-president defeated in the most recent polls, Henrique Capriles.
Even before announcing Chavez’s death, Maduro began his campaign in the tried and true tradition of accusing the United States of conspiring against the Venezuelan people and expelling the military and air attaché’s. He also accused his opponent of being a spy while simultaneously telling the opposition to show some dignity and stay quiet; clearly, the man has learned from his mentor.
The vice-president will also be assisted by the relatively short campaign season since it’s long enough for him to make promises but too short to actually implement or pay for them.
Maduro’s focus will initially be directed towards the military (unlike Chavez, he didn’t serve in any armed service) and members of his party. He will then turn his attention towards the people and we all should expect lots of promises of new funding programs. We should also anticipate a lot of anti-US rhetoric and speeches espousing the good times of the Chavez-era.
Fortunately, the former president has left his vice-president with an infrastructure effective at distributing these funds as the former had history of generously doling out resources; Venezuela rose up the Gini coefficient index, which measures income distribution, during the Chavez era.
In addition, promises such as building three million homes by 2018 helped maintain Chavez’s popularity and all Maduro has to do is assure people of his commitment to his mentor’s policies and ride those coattails to a victory.
However, regardless of who wins the election, that person will have to lead a country with significant resources weighed down under decades of mismanagement.
Venezuela’s resources come from its being South America’s biggest and the world’s 11th largest crude oil exporter, and, according to OPEC, with crude oil reserves larger than those of Saudi Arabia.
Unfortunately, a political establishment more interested in influence than administration has, heretofore, squandered the potential of these assets. The former president’s tendency to impose short-term solutions through expropriating foreign-owned firms, regular currency devaluations and generous public-sector pay raises hurt productivity and reduced government resources.
This mismanagement of the oil sector is particularly devastating since over 90 percent of Venezuela’s hard currency comes from oil exports. While this lack of economic diversity is not troubling by itself – practically all countries in the Middle East follow the same pattern – the refusal to professionally manage this sector has had a long-term detrimental impact on the country’s revenue stream.
Government generosity, in light of below-potential revenues, has widened Venezuela’s fiscal deficit and, while the economy is estimated to have grown by more than 5% during 2012, it is forecast to expand by only 1.8% in 2013. The country also faces double-digit inflation and billions in debt.
As a sign of the change in Venezuela’s fortunes one need only consider that many of the countries that Chavez once supported through deliveries of low-cost energy and soft loans, now have better economies than Venezuela.
Regardless of one’s opinion about Hugo Chavez’s policies, the fact is that he brought people to the table by spreading wealth in a country not used to this kind of fairness. However, it is also undeniable that his actions such as taking over the oil industry and replacing the efficient private sector with the inefficient crony sector made the table smaller thereby hurting the entire nation.
One hopes the next Venezuelan president understands that using private sector experts will help his country’s recovery and realize its true potential. In the meantime, the next 30 days will be full of accusations, threats and promises – not unlike democratic elections in every other part of the world.