Water Shortages Threaten Chavez's Political Survival

These days Venezuelan strongman Hugo Chavez keeps looking at the sky for signs of rain. He has called on Cuban technicians and voodoo priests to try to bring rain to southern Venezuela, the site of Guri Dam. This huge structure on the Caroni River supplies 65 percent of the electricity to the country but shows record low water levels, good for only 90 more days of electrical generation unless significant rationing is put in place.

Rain has become a key ingredient of Chavez’s political survival.

He has blamed the meteorological phenomenon called “El Nino” for this desperate situation. However, Venezuelans prefer to talk about “El Nino Hugo” as the real culprit. For the last ten years the infrastructure generating both hydroelectric and thermal electricity in the country has been badly neglected, in favor of Chavez demagogic programs of handouts to poor Venezuelans and to friendly politicians in the region.

A severe drought has caught the government totally unprepared to deal with the crisis. In a country having so much oil, thermal generation of electricity should be the logical alternative to hydro-electrical shortages. However, thermal electrical plants are in sad state of disrepair. Four years ago the technical staff at the state-owned hydroelectricity company warned the government that about 1000 megawatts of electricity generation capacity should be added every year in order to keep up with the growing demand. This was not done.

An electricity-rationing plan put into effect by the government earlier this month ago collapsed in a matter of hours amid popular protests. Realizing that the political price was too high, Chavez ordered the rationing cancelled and dismissed the minister in charge of the program.

Although critical, the collapse of the Venezuelan electrical sector is only one of the several areas where the Chavez government is showing deep fractures. Just a week ago the currency was devalued in a complex two-tier operation that established a parity of 2.6 Bolivar’s per dollar for some transactions and one of 4.3 Bolivar’s per dollar for other type of transactions, a composite devaluation of about 40 percent.

The main objective of the devaluation is to supply the Chavez government with more local currency. Chavez needs to keep 2010 government spending at high levels since legislative elections will take place this year.  He needs to hand out significant amounts of money to recover from his significant loss of popularity during recent months. Although this devaluation will increase Chavez’s war chest it will also increase the rate of inflation, at 30 percent already the highest in Latin America.  

 In spite of almost one trillion dollars in national income during his eleven years in power the Chavez government has quadrupled national debt, which now approaches one hundred billion dollars. From 2006 to 2009 Chavez has borrowed some $16 billion from China and lesser amounts from Japan and Russia.  Since Venezuelan country risk is one of the highest in the world, next to Zimbabwe, Argentina and Ukraine, loans by the international financial community will become increasingly difficult to obtain.

To add to the financial crisis seven small to medium sized Venezuelan banks were closed down by the government in December 2009 for running Ponzi-like schemes. This has been a major scandal, still developing, and involves some of Chavez’s closest followers.

Mounting financial and economic problems have weakened the Chavez government to the extent that a scenario of implosion is becoming more and more likely within the next two years. The “Bolivarian” revolution seems to be approaching the end of its tragic journey.