Even the fourth operation didn’t
work. Cancer finally got Hugo Rafael Chávez,
rebellious ex-lieutenant colonel, failed coup
plotter and the US-hating, Cuba-loving left-wing
president of Bolivarian Republic of Venezuela from
1999 to 2013. There is no doubt the pugnacious,
loquacious and often funny Chávez was an icon among
many Venezuelans and others in Latin America.
He was popular across a sizeable section of the
citizens, having won four elections with 56 per cent
of the votes polled in the first, almost 60 per cent
in the second, 63 per cent in the third, and 54 per
cent in the fourth — this only recently when
everyone knew he was dying of cancer. Thousands
lined the streets of Caracas to pay their respects
as Chávez’ coffin made its way to the military
academy. Venezuela declared a seven-day period of
national mourning. While vice president Nicolas
Maduro promised to continue the leader’s
“revolutionary, anti-imperialist and socialist
legacy”, mourners on the street claimed that after
Jesus Christ, there was only Hugo Chávez.
Chávez transformed Venezuela. For the better and the
worse. Let’s start with the ‘worse’. According to a
2012 report of the Organisation of Petroleum
Exporting Countries, Venezuela has a proven oil
reserve of over 297 billion barrels, which is 12 per
cent higher than that of Saudi Arabia. Yet, thanks
to nationalisation, years of investment neglect and
Chávez diverting more and more of the oil money to
finance gargantuan social welfare schemes, the
sector is crippled. Shorn of critical investments
and bereft of a regular drilling programme,
Venezuela produces only 2.9 million barrels per day,
versus 9.3 million barrels in Saudi Arabia. Chávez,
then, was certainly guilty of doing his utmost to
kill the golden goose.
He was also guilty of huge fiscal profligacy,
especially in his last two terms. From 2000 to 2005,
the government’s revenues exceeded its expenditures.
That changed from 2006, with Chávez moving
progressively to the left and wanting to be the
Latin American leader of what he called ‘socialism
of the 21st century’. Soon, one major social
expenditure programme after other started getting
rolled out. And despite increasing taxes on the
nation’s oil, government expenditure started
exceeding revenue. Venezuelan official statistics
are notoriously poor. Even so, the country’s fiscal
deficit for 2011 is estimated at 8.5 per cent of
GDP. Some analysts claim a deficit of 15 per cent of
GDP in 2012. Despite oil revenues, government’s debt
has risen from 26 per cent of GDP in 2008 to over 51
per cent in 2012; indebtedness is estimated at over
US$27 billion; and almost a fifth of the budget only
goes towards debt servicing. Failure number two:
blowing up a sturdy exchequer in the name of social
Chávez’ third cardinal sin was his disregard for
inflation. In the last decade, annual inflation has
never been less than 13.7 per cent. In the last five
years, the lowest has been is 22 per cent.
Transferring huge amounts of cash to the poor
created a solid vote bank; but it also spurred
dangerously high inflation which was re-fed by more
subsidies and transfers.
His fourth sin was presiding over the failure of a
pro-investment business environment. Venezuela is
ranked 180th in the latest IFC-World Bank’s Doing
Business survey. Those worse than Venezuela were the
two Congos, Eritrea, Chad and the Central Africa
Republic. Incidentally, we were 132nd; Brazil was
130th; and Indonesia 128th.
There were positives as well. Poverty fell. When
Chávez first came to power, the head-count measure
of poverty was around 50 per cent of the population.
By 2011, it had dropped to under 32 per cent.
Unemployment, too, fell from almost 17 per cent in
2003 to below 6 per cent in 2012. Inequalities
reduced as well. There can be little doubt that he
empowered and re-entitled millions of poor.
Chávez’ death could cause a major political crisis.
The economy is tottering, with high inflation, empty
coffers and nothing but oil to live on. The masses
have tasted the fruits of political and economic
entitlement. There is no leadership worth the name.
Someone needs to rule sensibly. Or else, Venezuela
could take to the streets.
Published: Business World, April 2013