Fisher Investments Editorial Staff
Politics

Viva, Venezuela!

By, 03/07/2013

Venezuelans potentially got a bit more free Tuesday. Venezuelan dictator Hugo Chavez died, quite fittingly, on the 60th anniversary of Joseph Stalin’s death.

When Chavez was first elected in 1998, Venezuela was hardly a model of political stability and transparency. A popular military hero, Chavez vowed to quash corruption, foment stability and bring greater economic vibrancy, specifically for the poor. Fifteen years later, Venezuelans are vastly worse off, and no group has suffered more than the poor Chavez claimed to champion.

With the backing of a fiercely loyal military, Chavez quickly orchestrated constitutional changes consolidating power under his person. Sure, he was “elected” four times—thanks to ballot stuffing and threats levied at public employees—not to mention his overturning the constitutional two-term limit.

Under Chavez and his United Socialist Party (PSUV), Venezuelans were subjected to some bizarre behavior—Chavez claiming to be a reincarnated Simon Bolivar, making hours-long televised speeches, denying 9/11, willfully creating new time zones. Beyond kooky behavior, he was vocally and actively anti-Semitic and kept company with the world’s worst rogue regimes. At home, political opponents were jailed or disappeared; dissenting journalists silenced, jailed or disappeared; professionals stripped of their businesses, silenced and disappeared. Courts were politicized and populated by Chavez’s supporters. Coveted public jobs were auctioned off to favorites. Private property was seized (including private property of foreign firms and individuals) and enterprises nationalized. This was all allegedly to give poor Venezuelans food, basic goods and health care. Marvelous. Except if you seize private businesses and run them badly and run doctors out of the country, who’s providing said food, goods and health care?

Evidently, fewer and fewer people. Venezuelan food costs were already skyrocketing due to mismanagement, and shortages were common thanks to quotas and price caps. Add to that Venezuela’s miserable monetary policy and strict capital controls (allegedly to protect domestic business owners from unfair foreign competition), and prices have skyrocketed. This hurts Venezuelas poor most of all. Unsurprisingly, there’s a thriving black market for most goods—which mainly benefits the rich (who haven’t fled yet) who can afford way-above-market prices.

Venezuela also has one of the highest murder rates in the world, having tripled under Chavez. Kidnapping-for-ransom is a regular trade, organized crime flourishes with tacit government approval and a major drug highway runs straight through Caracas.

So what’s next for beleaguered Venezuelans? Chavez, who spent the entirety of his final term in a hospital bed in Cuba, named Vice President Nicolas Maduro his successor. (It was Maduro who informed the press that American spies had given Chavez cancer.) However, Venezuela’s constitution calls for a new election within 30 days and for the National Assembly chief (akin to the speaker of the House—currently Diosdado Cabello) to serve as interim president. It doesn’t look like Maduro is making way for Cabello yet. Not that it matters—they’re both Chavistas.

If Maduro doesn’t preside indefinitely over a junta and elections are held, his likely opponent is a non-Chavista, Henrique Capriles. Capriles lost to Chavez in the last two elections, most recently by 55% to 44%—impressively narrow considering the degree of manipulation.

Capriles is currently governor of Miranda, Venezuela’s second most populous state. He founded the center-right Movimiento Primero Justicia party which espouses free market policies, shoring up private property protections, increased transparency, separating the military from the legislative process and a strong social safety net for the poor. Which sounds fine—but Venezuelan politicians have a long history of saying one thing, then using brutal means to centralize power and glorify themselves. (Chavez’s fortune is estimated to be $2 billion—not bad for someone who claimed to be a freedom-fighter for the poor.) Except, under Capriles, Miranda now ranks highest among Venezuela’s 23 states on the Human Development Index (HDI)—vastly outranking Venezuela as a whole. (The HDI measures factors like health, education and living standards.) And crime rates are falling.

For this, Capriles was brutally attacked during the campaign by (Chavez’s) state-run media. They called him, among other things, a “Zionist agent” trying to destabilize Venezuela. (Capriles himself is Catholic, but his Jewish grandparents survived the Holocaust and emigrated to Venezuela from Poland. Also, who’s accusing whom of destabilizing Venezuela?) They also tried to link him to a fascist, white supremacist group. Venezuela’s Supreme Court also ordered the release of Capriles supporters’ names. No wonder his supporters were often threatened with violence, and armed Chavez supporters opened fire at one Capriles rally.

The powerful Chavista election engine could hold, almost guaranteeing Maduro’s presidency. Or the Chavista foot soldiers, tired of the inflation and crime, might be found singing and dancing in the streets. A Capriles presidency wouldn’t be smooth sailing, however. Military officers likely remain intensely loyal to the PSUV—for now. And the courts are heavily stacked with Chavistas. Now, a lot of that loyalty could simply be the pragmatic submission to a thuggish regime. And Capriles may find more support if Venezuelans believe the risk of reprisal has diminished. But either way: Viva, Venezuela! You deserve much, much better than what you’ve gotten.

Click here to rate this article:



*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

Subscribe

Get a weekly roundup of our market insights.Sign up for the MarketMinder email newsletter. Learn more.