The Powder Keg That is Venezuela

Hugo Ch??¡vez is on a free fall and the uncertain transition may not bode well for the stability of the country with the largest oil reserves in the western hemisphere and one of the US main energy suppliers. The signs that started last year with his losing the referendum that would have prolonged his power have become quite pronounced as any cursory visit in the country can see.

The ascent of somebody such as Ch??¡vez could have been predicted by observers of the country. After years of failed and corrupt governments from the elite, he came to power via a type of populism still attractive in South America, where Che Guevara is a cult hero and Fidel Castro, not so covertly, is one of the most admired leaders by huge parts of the population.

Nor is Ch??¡vez unique. Vladimir Putin in Russia, Mahmoud Ahmedinjad in Iran and others ride sentiments loaded with empty nationalism and class warfare. Anti-Americanism is essential to rally the people, tapping on thinly disguised jealousy and frustration at their failure to absorb modernity and development. Dissatisfaction with Anglo-Saxon dominance of international business and pop culture sometimes takes whimsical turns. One can become a Chavista just by an inability to correctly pronounce the name Bush, the devil incarnate himself. Support of the regime becomes the face of inferiority complexes with vengeance.

Ch??¡vez would be a comical figure had it not been for $100+ oil prices which have papered over his shortcomings and are delaying the inevitable day of reckoning.

The trouble with ideology and fanaticism is that they are not particularly suited to run countries. Venezuela has perhaps the unhealthiest economy in South America. All productive sectors have been thwarted. Nationalization has been used to castrate companies from any profitability. After the usurpation of the national oil company PDVSA, the only enterprise that could barely afford it, next in line were the telecommunications and utilities but Ch??¡vez did not stop there and continued on to the cement and iron industries. None can really survive.

Lands have been confiscated and artificial price and wage controls are imposed on everything. Food shortages suddenly spring up and, not surprisingly, people are hoarding. There is virtually no investment in infrastructure and deterioration is evident everywhere. What is not obvious to many Venezuelans is that current government actions will take decades to remedy, even if Ch??¡vez is gone.

To bolster the regime, services are given away and at a time of sky high oil prices, gasoline sells for 2 to 5 US cents a liter, less than 20 cents per gallon.

The Venezuelan currency — the Bolivar — just shed three zeros to become Bolivar “fuerte.” The official exchange rate is 2.15 Bs to a dollar but nobody in the country seems to buy that. All over the Caracas airport people accost passengers offering four to the dollar. The Bolivar dropped to as low as 6.5 and then climbed a bit after massive infusion of dollars by the Venezuelan Central Bank. A more realistic rate would probably be seven or more.

The country’s economic predicament may not be the worst part. Even more palpable is the prevalent social animosity. Ch??¡vez has directed such a venomous attack on the productive middle class that it has led to a counter-reaction. The polarization between the Democrat and Republican bases in the United States is nothing compared to that between Chavistas and their opponents. Few leaders are reviled by people in their country like Ch??¡vez. But what is far more worrisome is the hatred that now exists both ways between the poor and the middle classes, a hatred mostly generated by the incendiary Chavez rhetoric.

The unavoidable unraveling of the regime and the rate of its decline is not compensated by the buildup of the alternative. Some of the more thoughtful anti-Chavistas express the reluctant sentiment that it may be better to let time take its course until the presumed end of the nightmare, four years from now. Any crisis such as even a small drop in oil prices because of US or international recession, or food riots, with a decimated and unprepared opposition, could lead to frightening possibilities for filling the vacuum.

Chavismo has been such an anachronistic version of socialism that after the monumental collapse of social engineering and the end of the Cold War two decades ago one would think that it could not surface again. Equating support for the government with patriotism has practically eliminated the possibility for any smooth transition. That’s why one of the anti-Chavistas hoping for a smoother exit, in a dose of pessimism, said “Can you imagine Ch??¡vez voluntarily passing to anybody else the presidential sash?”