Tag: Hugo Chavez

Chavez: The Death of A Populist … and His Currency?

By
Steve H. Hanke

Although Hugo Chávez, the socialist presidente of Venezuela, has finally met his maker, the grim reaper is still lingering in Caracas. As it turns out, Chávez was not the only important Venezuelan whose health began to fail in recent weeks: the country’s currency, the Venezuelan bolivar fuerte (VEF) may soon need to be put on life support.

In the past month the bolivar has lost 21.72% percent of its value against the greenback on the black market (read: free market). As the accompanying chart shows, the bolivar has entered what could be a death spiral, which has only accelerated with news of Chávez’s death.

 

Shortly before his death, Chávez’s administration acknowledged that the bolivar was in trouble and devalued the currency by 32%, bringing the official VEF/USD rate to 6.29 (up from 4.29). But, at the official exchange rate, the bolivar is still “overvalued” by 74% versus the free-market exchange rate.

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Topics: 
Finance, Banking & Monetary Policy, International Economics and Development

The Day After the Election in Venezuela

By
Juan Carlos Hidalgo

Unfortunately there was no upset in yesterday’s presidential election in Venezuela. Hugo Chávez handily won another six-year term with 54% of the vote. Despite running an inspiring campaign that at some point seemed to threaten Chávez’s rule, Henrique Capriles came up short with 44%. The vote was clean, even though the election wouldn’t be considered fair in any mature democracy.

What happened? It seems clear that Chávez was able to mobilize his people to the polls. Despite the mismanagement of the economy, the spike in crime, the crumbling infrastructure and widespread corruption, many Venezuelans still like Chávez. And he made sure to buy their love this year by increasing public spending in the last 12 months by 30% in real terms. Others might not like him, but still feel compelled to vote for him. Over 8 million Venezuelans receive some kind of permanent income or handout from the government. The regime wasn’t subtle letting them know that those goodies would be gone if they voted for Capriles. The Economist reported on the intimidation faced by an important segment of these voters:

Some public employees—whose ranks have more than doubled under Mr Chávez to over 2m—have been obliged to fill out forms saying exactly where they will be voting. Like the election ballots, these forms require a signature and a thumbprint: the implication that the government will monitor how they vote does not need to be spelled out.

This is certainly a heartbreaking defeat for the opposition. There is no doubt that Chávez will continue to lead Venezuela down the authoritarian path. However, this election has created a credible opposition leader who, unlike opposition candidates in the past, will have a prominent voice in national politics, especially as the economic and social conditions deteriorate markedly as they are sure to do. If Chávez really is terminally ill with cancer, as is very likely, then the stature of Capriles will continue to grow as the next leader of Venezuela.

Topics: 
International Economics and Development

All Eyes on Venezuela on Sunday

By
Juan Carlos Hidalgo

Venezuelans will go to the polls on Sunday for their most important presidential election in a generation. At stake is the end of the thuggish, corrupt, and autocratic 14 year-old regime of Hugo Chávez.

The opposition, led by Governor Henrique Capriles Radonsky, has a real chance of winning the vote—if it’s fairly done. The most credible polls show a very tight race with still a number of Venezuelans undecided. However, there are good reasons to believe that most of the undecided are actually “hidden” votes for Capriles, people who are intimidated or afraid to express their support for the opposition candidate.

As I’ve written before, it won’t be a fair election. Four out of the five seats in the National Electoral Council (CNE) are loyal chavistas. The CNE has resorted to increasingly dirty tricks. The latest has been to announce that people who mark one of Capriles’ pictures in the ballot won’t actually be voting for him, but for a lesser known third candidate (see the explanation here).

The electoral registry, which is controlled by Cuban operatives, has increased its size by 58 percent since 2001, even though Venezuela’s population has risen only 18 percent during that period. Fourteen of the country’s 24 states have more registered voters than total adult population. There is even the documented case of 2,272,706 voters that appear to live at the same address.

Thus, even though the opposition claims that it is well prepared to defend its votes at the polling stations, it is very likely that in the dawn hours of Monday, the CNE will announce Chávez as the winner. In my opinion, there is no real scenario under which Chávez would accept defeat by Capriles. The question then becomes: what happens next?

One thing to watch for is the reaction of the so-called Bolivarian militia, which consists of die-hard chavistas that have been well armed with Russian rifles and trained by the government to “defend the revolution.” Some estimates put their number at 25,000 people, enough to terrorize those opposition supporters who might consider going to the streets to protest against electoral fraud. It is still a mystery what the reaction of the army would be if chaos broke out in the streets of Caracas and elsewhere. Several generals have profited enormously from the regime, and they would loath to see Chávez go. But the extent to which they actually control the troops is unknown.

The Obama administration has been wise to avoid making statements about Venezuela’s election prior to the vote. Any comment by a U.S. official will play into Chávez’s hands as a gross interference by the “Empire” in Venezuela’s sovereignty. Nonetheless, Washington should keep an eye on the election and its aftermath. The outcome will likely have far-reaching consequences for the region.

Topics: 
Foreign Policy and National Security, International Economics and Development

Chávez’s Electoral Fraud Cushion

By
Juan Carlos Hidalgo

The onslaught against Henrique Capriles Radonsky by Venezuelan state-run media has begun after his decisive victory in Sunday’s presidential primary. Capriles is now the nominee of the opposition coalition and he will face Hugo Chávez in October’s presidential election. As the Wall Street Journal reports, the vicious attacks against Capriles include, among other things, insinuations that he was a homosexual and that he is a Zionist agent.

This election will not be a fair one. Not only does Chávez control most of the Venezuelan media, but his government is also dramatically increasing spending on popular social programs. About 8.5 million Venezuelans already receive some kind of permanent income or assistance from the government (4 million of them are public employees). The Chávez regime threatens and intimidates those who receive government handouts and dare to support the opposition. Moreover, since voting is electronic in Venezuela, many people fear—perhaps with good reason—that their votes aren’t secret. The government tacitly encourages these perceptions.

But that’s not the end of the story. Chávez also controls Venezuela’s National Electoral Council. Due to the inability of the opposition to monitor every voting station in the country, the stated results of the vote may not be accurate. The Electoral Council usually takes longer than is necessary to tabulate voting results from electronic systems, which has raised concerns of fraudulent activity.

A main concern is the electoral registry, as documented by Gustavo Coronel in a Cato study back in 2006. Coronel wrote that an independent analysis of the electoral registry found many irregularities:

such as the existence of 39,000 voters over one hundred years old. This is a number equal to that of the same age group in the United States, where the population is 10 times greater. Of these 39,000 people, 17,000 were born in the 19th century, and one is 175 years old and still working! Nineteen thousand voters were born the same day and year in the state of Zulia. There are thousands of people sharing the same address.

So on top of the support of his followers (some enthusiastic, others intimidated), which fluctuates around 45 percent of the population, Chávez can also rely on a margin of error due to electoral fraud if he doesn’t get enough votes for his reelection. I’ve talked to some Venezuelans who say this margin can be as high as eight percentage points. That is, if the election is decided by less than that (very likely the case), Chávez can doctor the results in his favor.

The opposition promises to have people in every single voting station in the country watching the vote. The National Electoral Council will probably bar international observers from monitoring the election. This sets up the potential for conflicting results from the opposition and the National Electoral council. What would happen next is anyone’s guess.

Topics: 
International Economics and Development

The Opposition in Venezuela Doesn’t Get It

By
Juan Carlos Hidalgo

Venezuela is in full campaign mode as six candidates vie for the nomination of the Coalition for Democratic Unity (MUD is its Spanish acronym), the opposition movement that will nominate a single candidate to face Hugo Chávez in the October 2012 presidential election. The MUD primary will take place on February 12.

After 13 years of socialist rule that has crippled Venezuela’s economy, and even created shortages of fuel in the oil-rich South American nation, one would expect the opposition candidates to signal a bold U-turn from the failed big-government policies of Hugo Chávez. Unfortunately, that doesn’t seem to be the case.

Let’s look, for example, at Primero Justicia (Justice First), the party whose candidate, Henrique Capriles Rodonsky, is leading in the polls. Capriles doesn’t say much about the economic model he favors. His statements are limited to generalities such as “the only thing I’m obsessed about is that Venezuela has progress.” As governor of the state of Miranda, Capriles likes to compare his approach to that of former Brazilian president Lula da Silva: decent macroeconomic stewardship complemented by generous social programs.

However, Primero Justicia’s platform seems to be a little more specific in its views on the role of government in society. It claims to support a “social-humanist state” that stands between the “social bureaucratic state that provides inefficient social services in a monopolist way and the minimalist neo-liberal state that gives up on its social responsibilities.” As for the economic model that Primero Justicia favors, the platform says that it “stands against the socialist planned economy and … the [classical] liberal tendencies that turn the market into a dogma.” In simple terms, Primero Justicia sees itself as a Third Way alternative between Hugo Chávez’s “Socialism of the 21st Century” and what it claims to be the “neo-liberal dogma.”

I believe that Venezuela needs a decisive rupture from the failed big-government policies of the past, and not just a lighter version of socialism. Nonetheless, a modern social democratic party is certainly a far better alternative for the country than Hugo Chávez. Unfortunately, on the campaign trail Primero Justicia’s officials seem eager to out-compete Chávez in promising more government handouts to Venezuelans. For example, the daily El Universal published a statement [in Spanish] yesterday from Primero Justicia’s chairman Julio Borges where he lambasted Chávez for not spending enough on social programs. He said that his party would use oil revenues to create a Social Security Fund that would give pensions “to all Venezuelans, regardless of whether they had formal employment or not, and even to housewives.”

Any observer of Venezuela’s modern history would say, “Here we go again.” For many decades, Venezuelan politicians, either in government or in the opposition, have seen the government (and particularly oil revenues) as an infinite source of wealth that simply needs to be distributed among all Venezuelans. As Borges previously stated, “every family would have 1.6 billion bolivares [approximately $375,000] if oil resources were distributed fairly.”

Henrique Capriles will formally launch his presidential candidacy tomorrow. Venezuelans have other pressing concerns besides the economy that will play a major role in next year’s election, such as the staggering rise in crime (Venezuela stands now as the most violent country in South America) and the steady erosion of civil and political freedoms. However, Capriles is ill-advised in thinking that he can beat Chávez by playing the populist card of offering yet more government handouts to Venezuelans.

Venezuelans deserve a real alternative to Chávez. They deserve not only a candidate that promises a return to democratic rule of law, but also someone who pledges to break their dependency on government. The election in October 2012 should be something more than choosing a distributor-in-chief at Miraflores Palace.

Topics: 
International Economics and Development

Après Chávez, le Déluge?

By
Juan Carlos Hidalgo

Rumors abounded this weekend about Hugo Chávez’s apparent critical health condition. The Nuevo Herald reported that the Venezuelan president could be suffering from prostate cancer. On June 9, while visiting Cuba, Chávez fell ill and was treated for a “pelvic abscess.” Since then, the loquacious caudillo, who for over a decade has flooded Venezuelan airwaves with endless TV addresses, has been conspicuously out of sight. All we have is a picture released to the media showing a frail Hugo Chávez holding onto Fidel Castro (aged 84) and his brother Raúl (aged 80).

Speculation increased on Saturday after Nicolás Maduro, Venezuela’s Foreign Relations Minister, said that Chávez was waging a “great battle for his health” while admitting that he wasn’t doing well. But perhaps the most ominous statement came from Chávez’s older brother, Adán, governor of the state of Barinas, who warned yesterday that supporters of the president should be ready to take up arms to defend his revolution. “It would be inexcusable to limit ourselves to only the electoral and not see other forms of struggle, including the armed struggle,” said the elder Chávez.

This is where things can get extremely ugly. Nobody knows what could happen to chavismo without Hugo Chávez. Many people expected Chávez to resort to violence next year in case he lost his reelection bid (a real possibility given popular discontent due to rising food prices, food and energy shortages, and increasing crime). This is why he created a socialist militia with tens of thousands armed civilians bent on “defending the revolution” no matter what. Also, Chávez promoted General Henry Rangel Silva as head of the Armed Forces after Rangel stated that the army would not allow the opposition to win the presidential election in 2012. However, in all these scenarios, Chávez was always the one calling the shots.

If Chávez passes away or is permanently incapacitated, the question becomes: Who will take over Venezuela and his political movement? The Constitution requires the Vice-president Elías Jaua to be sworn it as president. However, it is very likely that Chávez’s absence will open a fratricidal struggle within the ranks of chavismo for the control of government power. During his 12 years in office, Chávez has diligently made sure that no apparent successor takes the spotlight. Caudillos don’t have real VPs, a situation that could lead to chaos if the caudillo dies while in office.

A historical parallel can be drawn with the passing of Juan Domingo Perón in Argentina in 1974. His wife, Isabel, was his Vice-President and she took over the presidency after Perón’s death, as required by the Constitution. However, her tenure was marked by the increasing violence of the “Montoneros,” a radical left-wing terrorist group that claimed to uphold the leftist legacy of Juan Domingo Perón. The situation reached a critical point when the Armed Forces deposed Isabel Perón with a military coup in 1976 and led a “Dirty War” against left-wing elements of society that resulted in the killing and disappearance of approximately 30,000 people in 7 years. Perón’s death and lack of a viable successor led to chaos and slaughter.

The driving force behind the different forces within chavismo is graft, not ideology. As Gustavo Coronel documented in a paper published by Cato in 2006, corruption is rampant in Hugo Chávez’s Venezuela, and it permeates all levels of government, including powerful elements of the military. It is unlikely that those who have been enriching themselves in the last 12 years would call it quits if their leader passes away. A violent struggle could therefore ensue within the ranks of chavismo for the control of government.

Venezuela’s democratic opposition movement should play its cards carefully. If Hugo Chávez dies or is incapacitated, the opposition should demand that the Constitution be respected and Vice-President Jaua take over until next year’s presidential election. The international community, and in particular the Organization of American States, should also be assertive in stating that Venezuela would face international diplomatic ostracism (e.g., expulsion from the OAS, travel ban for regime leaders, freezing of their bank accounts, etc.) if elements within the government stage a coup or try to stay in power through armed struggle.

We will know the gravity of Hugo Chávez’s health condition by July 5th. He had called for a big international summit that day to celebrate Venezuela’s bicentennial anniversary. If he calls off the jamboree, or if he is absent, it will signal that his health has very likely gravely deteriorated, and speculation about his succession will be overwhelming.

Topics: 
International Economics and Development

Venezuelans Vote on Sunday to Defend Their Moribund Democracy

By
Juan Carlos Hidalgo

Venezuelans go to the polls on Sunday for a legislative election that will test the extent to which democracy still exists in their country. It’ll be the 13th election since Hugo Chávez became president in 1998 (these include constitutional referenda, gubernatorial, legislative and presidential elections, as well as a recall vote).

Some would say that all these elections prove that Venezuela is a true democracy. I would argue that democracy means more than simply voting. It involves separation of powers, constitutional checks and balances, and freedom of the press. None of these exists in Venezuela anymore.

Even the electoral process is deeply flawed. Just as in previous elections, nobody expects the vote on Sunday to be fair: Independent international observers have again been barred from entering Venezuela. Most of the media are owned by the government, and the remaining private outlets must submit to the constant cadenas (presidential addresses) that the government requires private TV and radio stations to air. From 1998 to September 19th, broadcasters aired 2,072 cadenas for a total of 1,430 hours of transmission (almost two months of 24-hour broadcast).

Moreover, prominent opposition figures have been disqualified from running due to technicalities and dirty tricks. Others have been imprisoned or have fled the country. The electoral body is controlled by the Executive and the voters’ registry has not been independently audited in the recent past. It contains such anomalies as 32,000 people older than 100 years, persons registered multiple times, and 2,000 voters that share the same address.

Despite this daunting scenario, the opposition stands a good chance of making significant gains in the National Assembly. However, it remains to be seen if Chávez will allow even a modest voice of dissent in a country where he has long exerted total control over all government institutions. There will be a three-month period between the legislative election and the installment of the new National Assembly. It wouldn’t be a surprise if, after Sunday’s vote, Chávez moves to curtail the powers of Congress, just as he did with the powers of governors and the mayor of Caracas after the gubernatorial elections of 2008.

Topics: 
International Economics and Development, Law and Civil Liberties

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