Hugo Chavez's implosion continues in Venezuela
May 26, 2010
Hugo Chavez has been keeping a relatively low profile of late -- there have been no grand world tours, no fiery speeches at the United Nations. The Obama administration, which once promised to “engage” the Venezuelan caudillo, is instead quietly shunning him.
There’s a simple reason for this: the implosion of Chavez’s self-styled “Bolivarian socialism” is accelerating.
Figures reported Tuesday by the Chavez-controlled central bank portrayed an economy that is completely out of sync with the rest of the region -- and perhaps unique in the world in the degree of its current distress. Gross national product fell by 5.8 percent in the first quarter, while inflation remained at 30 percent. Private investment plummeted by 27.9 percent as capital continued to flee the country.
Private economists suspect the economic contraction is even worse than what the official figures concede. But let’s assume they are correct. Venezuela’s crash compares with quarterly growth rates of 8 percent in Brazil, Argentina and Mexico. It comfortably exceeds the collapse of Greece, which contracted by 3 percent in the first quarter.
Inflation in Caracas is triple the next highest rate in Latin America (Argentina) and is more than double that of the next worst economy (Pakistan) among the 56 tracked by the Economist’s website . Even Zimbabwe, which used to be considered the world’s economic basket case, looks good compared to Venezuela: it is expecting 6 percent growth this year, while inflation is under 5 percent.
In short, economic recovery is taking hold across the world -- except in Chavez’s Venezuela.
When I pointed out back in January that Chavez’s revolution was collapsing, a chorus of left-wing bloggers rose up in protest.
The extremists among them claim that Venezuela is actually doing better than the rest of the world, because (loony version) Chavez is destroying evil capitalism or because (slightly less loony version) Venezuela’s implosion is irrelevant to the rest of the region.
But, of course, Venezuela really is cratering -- and Chavez’s desperate measures to stop the freefall are only making it worse. A couple of weeks ago, for example, he abruptly moved to abolish the private currency market, which supplies the dollars for 30 to 40 percent of Venezuela’s imports. The dollar exchange rate was soaring, so the government arrested a bunch of currency traders and announced that sales of dollars henceforth would be controlled exclusively by the central bank. The result will almost certainly be another drastic decrease in imports, the worsening of already widespread shortages in food and basic consumer goods, and the creation of a new black market in dollars.
And, of course, the implosion of Chavez’s potted socialism does matter to the rest of Latin America. It’s not just that the Obama administration no longer needs to bother with the strongman, since he is doing an excellent job of self-destruction. It’s that Venezuela’s clients and imitators -- especially in Bolivia and Nicaragua -- stand to lose both subsidies and ideological sustainment from Caracas. Chavez’s decade-long attempt to create a bloc of like-minded countries around the region is in tatters.
The caudillo’s popularity rating around Latin American is now below 40 percent, and his backing in Venezuela has dropped below 50 percent. With an election for the National Assembly coming up this fall, he has resorted to the Iranian tactic of disqualifying prominent opponents from the ballot. He will try to steal the election; if that doesn’t work he will try to strip the legislature of power.
No matter: Chavez appears powerless to stop the unraveling of Venezuela’s economy -- and with it, his “revolution.” He will be left with a choice: surrender to his country’s mounting discontent, or rule entirely by force.
By Jackson Diehl May 26, 2010; 2:26 PM ET
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