Posted on 19-01-2010
Filed Under (Current Affairs, Economics) by Rashtrakut

It is not a pleasant start to the new year for Venezuela’s populist strongman Hugo Chavez.  With oil prices in decline there simply is not enough money for him to toss around for his pet domestic projects and to fund his rogues gallery abroad.  Economic trouble at home and rising crime are denting his popularity.

Then he commenced the year with a devaluation of the currency.   One suggested rationale was that it gave him more money to spend domestically to buy goodwill before the Presidential election (something his buddy Iran’s Ahmadinejad tried to do before rigging the elections).

But there are natural effects to such a move.  As Venezuelans worried that imports would double in price (and Venezuela is heavily reliant on them) they started shopping furiously.  So the next diktat went out to store owners warning them not to raise prices.  Now inevitably comes the next phase of nationalizing banks and supermarkets.

Venezuela is yet another country to be cursed with natural resources.  It makes it too easy for corrupt leaders to siphon off the money (Nigeria, Indonesia, Chad) or to blow it on populist largess (Saudi Arabia, Venezuela).  It is easy to sympathize with Chavez’s assertion that the oil wealth has been used to enrich a few, because it is true.  But rather than using the wealth to create sustainable avenues for growth in the future, he has squandered it on populist subsidies and quixotic support to Cuba and other dictatorships to tweak Uncle Sam’s nose.  Venezuela is now facing the effects of his mismanagement.  But with no viable opponent to his regime in sight yet, Venezuela’s caudillo is likely to be re-elected in the elections this fall.

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