Hugo Chavez's Bleak Political Future

Hugo Chavez may have suffered a fatal political blow in Venezuela’s state and local elections held on Sunday November 23.

The results of the elections for 22 Venezuelan state governors and 327 town mayoralties have apparently inflicted a mortal blow to Hugo Chavez’s pretensions of modifying the constitution in order to be re-elected after his second term ends in 2012.

Remember that Chavez had already lost a referendum in December 2007 that would have allowed him to do just that. In converting these last regional elections into a plebiscite about his popularity, he put all his political eggs into that one basket and lost. If he had won decisively he could have claimed to have a popular mandate to be re-elected. As it happened, although his candidates won 17 state governorships and numerous mayoralties, he lost the five most important states of the country: Zulia (oil), Miranda (where the capital, Caracas, is mostly located), Carabobo (the main industrial state), Nueva Esparta (the tourist hub of the country) and Tachira (a prosperous cattle raising and agricultural state bordering with Colombia). Even worse, he lost four of the five mayoralties that govern the capital city, Caracas. All in all, the opposition to Chavez will now govern 45 percent of the Venezuelan population.

Obviously, Hugo Chavez is facing a new political ballgame. He will now have to account directly to the new governors and mayors for his management of national resources, after ten years of ruling the country without transparency, years in which he pilfered about $700 billion in improvised domestic social programs based on handouts and in prodigal gifts to ideological allies all over the hemisphere — money that also, in part, was spent for the acquisition of offensive weapons and promotion of international terrorist organizations such as the Colombian FARC and the islamic Hizballah.

Chavez’s grand scheme of a socialist Venezuela and of a Latin America “independent” from U.S. influence is almost certainly ruined forever. Not only has he suffered this significant political setback, but the collapse in world oil prices will force him to alter dramatically his future plans. He needs about $100 billion per year to fulfill his political objectives in Venezuela and abroad. Next year, however, Venezuelan oil sales might only be of the order of $30-50 billion.

Chavez will be faced with an immense fiscal deficit that he could only breach by doing one of three things: reducing his handouts to the Venezuelan poor, reducing his gifts to his regional cronies, or devaluing the Venezuelan currency, while raiding the Venezuelan Central Bank international reserves, something that he has already done in the past. He might have to do all three of these things in order to survive financially. But taking one or more of these actions will further erode his popularity among Venezuelans and Latin American “friends,” who will remain friendly only as long as the money keeps flowing their way.

The results of lower oil income will be less imports of food and other basic requirements, increasing food shortages, mounting popular protests, more crime and more unemployment. In this deteriorating social and economic environment, Hugo Chavez might not be able to survive for long, since his capacity for survival depends on the amount of money he hands out to his clients.

The opposition is already talking about calling for a referendum on his presidency in 2010, which is a step allowed by the constitution. If the Venezuelan financial situation keeps deteriorating and the newly empowered opposition increases their monitoring and control over what has been, so far, a chaotic handling of our national resources by Hugo Chavez, his so-called “bolivarian” revolution will soon become a historical footnote on how not to manage a country. Chavez’s sad legacy will be one of waste and destruction of Venezuela’s physical resources and social capital.