Here is a independent economic assessment by a economist that I get info from:
Now that Hugo Chavez has died there has been a rather intense discussion over what really happened during his 14 years as the dictator in charge of Venezuela. One of the more common references has been to Chavez as “champion of the poorâ€. This bears some looking into. Did Chavez make the life of the poor better in his country? Is there anything that could be considered praiseworthy about the policies pursued under the rubric of the new Bolivarism?
A look at the actual numbers would suggest that this reputation is not all that deserved. If this is what one’s champion delivers one would hate to see what would come from someone not so “dedicatedâ€.Perhaps the single most serious issue is the inflation rate that has been hammering the country for years. The currency has been devalued repeatedly in an attempt to cope with the problem and every time that happens the population sees their spending power diminish dramatically. Through the course of the last14 years the inflation rate has averaged 22%. That has been utterly devastating to what was left of the middle class and it certainly has done the poor no favors. The nationalization and expropriation policies that have been in place have all but eliminated foreign investment – even the oil companies gave up after a few years. When Chavez took office for the first time FDI was at 2.9% of the nation’s GDP and today it is half that. In contrast the rate of FDI in Colombia and Brazil has been growing at six times the rate in Venezuela.
There are basically two ways to cope with inflation of this intensity. The first is to allow the prices to rise to a point where the market can no longer sustain them. This eventually results in a reversal but not until there is severe distortion. During that period of inflation most nations will attempt to hike interest rates as a means to slow down the price growth and there are generally attempts to boost investment as a means to bolster competition. This is not a painless process by any means but the alternative is worse. This is the policy that was pursued by the old Soviet Union for years. Instead of high price the problem was shortages. The government imposes price caps on various sectors so that they can’t hike their price to the consumer. Unfortunately nobody is capping the price they pay and in short order these companies stop producing anything at all. In Venezuela that meant that they would be nationalized and forced to produce at a loss.
The problem with that strategy becomes pretty evident when one looks at the money that should have been made from oil. The oil sector is 95% of the national income. That is a vulnerable position to be in but nations have been able to thrive in that kind of economy (think of the Persian Gulf states). In Venezuela the oil money was used to subsidize the nationalized companies and precious little of the revenue made it back to the cash cow of oil development. Today the per barrel output from the country is far less than it was when Chavez started – from 3.2 million barrels a day to less than 2.5 million. In the process the oil industry has become the single most dangerous industry in all of Latin America. The average number of injuries per day in the *****ian oil fields is two. In the US there are two injuries per month and in Venezuela the average has been 15 injuries a day
When one translates these economic issues to other social concerns the situation gets worse. The number of homicides per 100,000 population is 73 – a total of 21,700 murders last year. In contrast the Columbian rate is 32 per 100,000 and in Mexico the rate is 19 per 100,000. The drug wars in Mexico and the insurgent conflicts in Columbia do not produce close to the same numbers as murder provoked by desperation and destitution in Venezuela,
Analysis: This is not to belabor the point. The death of a leader tends to bring out all kinds of statements of praise and honor, especially when that leader had charisma and a platform on the world stage. Chavez was larger than life for the majority of his 14 years and he had an impact on Latin America that will far outlast him. The regimes of Evo Morales in Bolivia and Rafael Correon in Ecuador owe their existence to Chavez. In the midst of this assessment it is important to understand the real situation in Venezuela. In terms of the numbers Venezuela is far worse off today than it was 14 years ago – despite the fact that oil prices were $17 a barrel when he took power and have been at or above $100 for most of the last several years. The opportunities that have been provided to this oil rich nation have been squandered and the “champion of the poor†has left a legacy of deprivation behind.
im sure you, Ahmadinejad and Sean Penn can all cry together....
