VENEZUELA’S CHAVEZ: PRODUCER OF OIL AND POVERTY

By Dr. Henry A. Fischer, President, The American Security Council Foundation

Media darling and Venezuelan strongman Hugo Chavez is good for at least a headline every other day if not more so.

Recently Chavez called for the creation of a new bank to promote The Bolivarian Alternative for the Americas* (ALBA) for his friends and supporters. He has asked them to remove all their assets from US banks and the International Monetary Fund and put them under his control. This he followed almost immediately with a proposal to create a mutual defense pact to include his country, Cuba, and any nation seemingly willing to ally itself against the US.

Whenever Hugo Chavez gets in trouble, he attacks; and it appears he is beginning to realize he’s in trouble – plenty of it. He is attacking in all directions, but his biggest victims are his own people. Sitting atop one of the world’s largest deposits of oil, Chavez, along with his country and his dream of a Bolivarian socialist union of Latin American states, has had serious setbacks.

How long they will continue depends upon the speed at which the Venezuelan situation continues to decay, along with measures the Venezuelan government is willing to take to avoid even greater disasters. It also depends upon the courage of the Venezuelan people, who must unite in a determined effort to again see their country, once considered an exemplary democracy, become one again. They must also see that the state oil company, Venezuelan Petroleum (PDVSA), once one of the world’s most important companies, is properly managed for the good of the people. This is as opposed to its being used alternatively to coerce and threaten – as was the case with Chavez’s bluff to cut off exports to the US just days ago.

Inflation in 2007 in Venezuela exceeded 22 per cent – the highest in the Americas and one of the highest in the world. That’s like every wage earner in Venezuela getting a 22 per cent pay cut. Like most people anywhere, few make 22 per cent more than it takes to get by, so average Venezuelans last year were faced with giving up not just the few extras they had but also many basics including food itself. So how have they survived?

Facing growing shortages of basic foodstuffs and supplies such as milk, cheese, flour, meat and toilet paper, and with prices of certain products spiraling upwards seemingly out of control, last year President Chavez threatened to nationalize food stores. The government established a rigid system of price controls eliminating, among other things, the right of consumers to choose products on the basis of quality and price. That policy inevitably created shortages of basic items for the average person.

Since Venezuela imports the vast majority of the basic items the country consumes, access to dollars to pay for imported goods and materials is essential. Chavez takes care of his friends, establishing a system of money exchange for them that is two or three times cheaper the rate available to others. Such an unlevel playing field forced thousands of Venezuelan businessmen to quit. The products and services they would have provided are lost to all Venezuelans, but primarily to the poor Chavez pretends to champion. They are left with empty stomachs and no alternatives.

For years, Hugo Chavez survived by using oil profits – to create jobs for supporters (regardless of whether they were qualified) and to set oil prices artificially low. As a political ploy, he has provided cheap oil to Cuba, Nicaragua and to select friends in other parts of the world – including parts of the United States and Great Britain. He is also contributing millions of dollars to projects of his would-be friends – in places like Bolivia, Uruguay, Argentina, Ecuador and Honduras among many others – for the construction of new roads, bridges, schools and hospitals. Meanwhile, in Venezuela, roads, bridges, hospitals and schools are falling apart. Long live the Bolivarian Revolution!

Hugo Chavez has surely made many promises and set lofty goals; but unfortunately for the Venezuelan people the promise has never been made that can be eaten. This helps explain why last December in the Constitutional Referendum voters handed Chavez his first electoral defeat since first taking office.

* The agreement establishing The Bolivarian Alternative for the Americas was initially proposed by the government of Venezuela as an alternative to the Free Trade Area of the Americas (FTAA or ALCA in Spanish) proposed by the United States. Members of ALBA today include Nicaragua, Cuba, Bolivia, Dominica and Venezuela.