Chavez’s dangerous convalescence

Written by: Bruno Lucas ˑ 

Flickr/ChavezCandanga

As Venezuelans went to sleep on July 3rd, a cloud of uncertainty loomed over their heads. President Hugo Chavez was in Cuba undergoing cancer treatment and had been gone for a month. In his absence, Venezuelans had to cope with recurrent power shortages and worrying episodes of violence, notably in the overcrowded Venezuelan prisons. Capitalizing on the President’s moment of weakness, the opposition started to question the legality of having a President govern the country from abroad for an extended period of time. Uncertainty was becoming unbearable for Venezuelans.

That might explain why Mr. Chavez’s return on the early morning of July 4th was so wildly celebrated in the streets. As the President made his way back to the Miraflores Palace, flocks of supporters followed him, chanting and waving Venezuelan flags. From the balcony of the Palace, Mr. Chavez proved he hadn’t lost his well-known showmanship, haranguing the thousands of people standing outside the Presidential residence in a performance that included a rendition of the national anthem and a speech where the President promised to “overcome all difficulties.” To see the man that has governed Venezuela with an iron grip since 1999 certainly brought back a sense of normalcy to the people. His presence isn’t enough to save him, however, as confidence in his capacity to retain office is at its lowest, and not because of his poor health.

Flickr/chavezcandanga

With the 2012 elections rapidly approaching, the illness came at a moment when Mr. Chavez needs to reinforce the aura of savior of the nation that has followed him since his debut in national politics, which began with a failed coup in 1992. Despite the variety of wealth redistribution programs his administration created, evidence that Venezuela is more prosperous is scant; Caracas has earned the dubiously honorable title of the most violent city in South America, with 140 murders for every 100,000 people. This number is more than fourteen times the figures for Sao Paulo and Mexico City. From 1998, when Mr. Chavez won his first election, until now, the number of murders in the country tripled.
A few successes were registered: unemployment rates are lower than their historical average, and the share of GDP of the poorest 10% has increased in the last 10 years. However, those figures are largely due to the government’s overspending, supported by high oil prices. What successes Mr. Chavez does enjoy depend on Caracas’ financial good health to be maintained, which doesn’t bode well for Mr. Chavez considering Venezuela’s grim economic outlook.
Though high oil prices in the last five years meant a boom for the Venezuelan economy and an opportunity for the government to improve the country’s infrastructure and diversify the economy, it was truly a curse in disguise. The country is a perfect illustration of the Dutch Disease; the economy is organized around the state-owned oil company, PDVSA, whose exports are responsible for 80% of exports earnings and 50% of the federal budget revenues. This specialization drains human and financial capital from other sectors, and toothless courts means that corruption around PDVSA is rampant. More worrisome, reduction in oil prices or oil reserves would be catastrophic for a country that is heavily dependent on this single commodity.
Despite the Venezuelan economy’s vulnerability to volatile oil prices, Mr. Chavez and his administration continue to squander the country’s resources. Deficits have been registered in all but 2 of the last 10 years. Driven by this spending spree, inflation rates are now around 30%. Because of attempts to control prices, basic products –such as milk, sugar, and eggs – have disappeared from store shelves. Worse yet, the country’s decrepit infrastructure has failed to keep pace with the population growth in the last few years. In 2010, power shortages due to droughts pushed the government to halt production in state-owned factories. Blaming the crisis on consumer wastefulness, Mr. Chavez asked people to reduce the time taken for showers, arguing that 3 minutes is “more than enough.” At the same time, utility prices are frozen, the government heavily subsidizing scarce resources for the sake of an outdated socialist program.
The opposition’s reticence in the last few years is justified by Mr. Chavez’s incalculable spending on propaganda, in addition to the abuse of government power in harassing political opponents. The opposition though now has a golden ticket to re-conquer the Miraflores Palace in 2011 with the economic troubles Venezuela is facing. It will have to muster the solidarity it displayed in the 2010 Congressional elections, when it took around 40% of the seats. To be able to come back to power, the opposition must prove it has a comprehensive economic plan for Venezuela.
Designating himself “the people’s president,” Mr. Chavez came to power vowing to destroy the oligarchies that had dominated Venezuelan politics since the 1950’s. Though he has been successful in placing the poorest of Venezuelans at the top of the country’s political agenda, 12 years later his revolution has been dangerously destabilizing for Venezuela.
The opposition should invite Venezuelans to look to its thriving neighbors in Latin America as an indication of the successes their country is capable of attaining, but which have been denied to them by Mr. Chavez. It should also promise to maintain some of Mr. Chavez’s social programs, which continue to be important for a large segment of the population. Additionally, the opposition should balance the budget by diversifying the economy, creating new revenue streams. Taking these actions, the opposition will transform the election into a clear choice between reckless revolution and sustained prosperity.  A country that dreads uncertainty might well choose the latter.
About the author: Bruno Lucas is a Franco-Brazilian citizen, born and raised in Rio de Janeiro. He pursues an Economics & Government degree in Cornell University, and manages a longstanding addiction to football, debate and late-night writing. Reach him at bruno.lucas@globalaffairsmag.com