Venezuela has the largest oil reserves outside the Mideast and some of the largest known natural gas deposits. Yet the country is an economic shambles thanks to the mismanagement of its buffoonish and authoritarian president, Hugo Chavez. This past week he further crippled the economy by effectively banning private bond trading to stop Venezuelans from sequestering savings in dollar accounts.
He instituted currency controls of 2.60 bolivars to the dollar for priority goods and 4.30 for nonessential items. The black market rate is 8.20 bolivars to the dollar. Not surprisingly, there is a thriving black market, widespread shortages and soaring inflation of over 30 percent.
In 2003, when Chavez began experimenting with price controls, Venezuela was self-sufficient in beef. Last year it imported over half of what it consumed. After his police began rounding up butchers for selling beef at more than the state mandated price, beef disappeared almost altogether from the stores.
The same has happened with coffee. After expropriating roasting companies, coffee warehouses and plantations, production in coffee-producing Venezuela fell by over 16 percent last year.
Because of lack of investment in the national grid - and with some help from a drought - electricity is rationed and there are frequent blackouts and mandatory power cuts. Similarly, since he barred Western firms from participating in Venezuela’s oil industry, investment has fallen.
Chavez has been incapable of dealing with the country’s chronic crime.
He has spent $4 billion on Russian weapons against the imaginary threat of a U.S. invasion. His foreign policy consists of trying to build an anti-U.S. alliance of “21st century socialists” like Cuba, Nicaragua, Iran, Bolivia. He has been accused, convincingly in the case of Colombia, of aiding communist guerrillas and harboring violent Basque separatists.
In advance of next September’s congressional elections, he has begun jailing opposition leaders on assorted trumped up charges such as the crime of spreading false information, the false information being criticism of Chavez and his policies.
Venezuelans, to their credit, stubbornly cling to democratic traditions. Despite his control of the judiciary, suppression of the opposition media and lavish spending on his base in the sprawling slums, his reelection in 2012 is no foregone conclusion. There may be a limit to Venezuelans’ tolerance for lowered standards of living and diminished freedoms.
Chavez’ explanation: “There’s an economic conspiracy against the revolution to boost inflation, increase shortages and malaise among the people.” We know who the conspirator is.
