James Roberts writes an extensively-annoted report at The Heritage Foundation:
If Simón Bolívar had returned to Venezuela in 2007 for his 224th birthday, he would have encountered a large man sporting a red shirt named Hugo Chávez exploiting his legacy. Although President Chávez claims to be Bolívar's worthy successor, the Liberator would see red when comparing Chávez's "21st century socialism" with the reality of his regime.
Bolívar would be embarrassed to see Venezuelans being oppressed by the same kind of Latin American caudillo (strongman) from which he fought to free them two centuries ago. Bolívar championed a unified South America and strong constitutional government to provide the same freedom, equality, and prosperity that he saw developing in North America. He opposed precisely the type of one-party, personalized, dictato rial rule that is embodied by Hugo Chávez.
A self-declared enemy of the U.S., Chávez aims to dominate the Caribbean Basin and Andean region and fulfill the long-time dream of his hero and mentor, Cuban dictator Fidel Castro. Chávez is a much bigger threat than officials in Washington seem to realize, and they need to wake up fast.
[...] n his roles as president and liberator, Bolívar adhered to governing principles that contrast starkly with those of Chávez.
*Bolívar fought against the rule of the mob; Chávez uses a "mobocracy" to maintain power.
*Bolívar resisted any role for the military in Vene zuela's civilian political institutions; Chávez is steadily militarizing them.
*Chávez exploits racial tensions to acquire power; Bolívar was "committed to racial equality."
*Although he used caudillos in his battles to gain independence from Spain, Bolívar was never one himself. In fact, he despised the caudillos, refer ring to them as "tyrants," who were interested only in their own power and never saw the big ger picture. Bolívar would have instantly recog nized the "neo-caudillo" in Chávez.
Learning from Allende's Mistakes. If Chávez is not another Bolívar, then who is he? The real Hugo Chávez fits the mold of some of his leftist heroes: Omar Torrijos of Panama, Juan Velasco of Peru, Che Guevara, and (obviously) Fidel Castro. Almost as soon as Castro toppled the notoriously corrupt Batista government in 1959, he proclaimed that he would establish communism throughout the hemi sphere, using armed guerrilla violence (and later urban terrorism) to achieve power.
In the early 1970s, with Castro's support and thousands of Cuban "advisers," Salvador Allende attempted to transform mineral-rich Chile into a worker's paradise by gaining political power through constitutional mechanisms. Fortunately for Chile, President Allende created economic chaos, hyperinflation, and unemployment. He lost public support, and democracy was eventually restored.
Venezuela has been an even bigger target for Cas tro because of its oil and close proximity to Cuba. Early on, he focused on destabilizing it, and he began grooming Chávez as soon as the two met in 1994 after Chávez was released from prison for leading a coup attempt in 1992. Castro did not want to miss another opportunity as he had in Chile, so he coached Chávez to avoid the mistakes made by Allende. Following Allende's example, Chávez has used every legal means available to acquire and tighten his hold on power. Unlike Allende, however, Chávez has been more careful.
Slowly Tightening His Grip on Venezuela
When Chávez led the unsuccessful coup attempt against the democratically elected Venezuelan gov ernment in 1992, he made plain his belief that democracies can and should be overthrown by force. Since taking office in 1999, President Chávez has steadily tightened his grip on power in Venezu ela. He dissolved the National Assembly, and then his party, using rigged election rules, gained control of every seat in the Assembly, which "in January 2007 granted him ‘special decree powers' for 18 months, under which Mr. Chávez is empowered to issue decrees in 11 key areas without having to seek legislative approval." He has packed the courts at every level with party apparatchiks.
Especially since his December 2006 re-election— which political opponents claim he manipulated— Chávez has been moving steadily from dictatorship to a sort of "tropical authoritarianism." Chávez has "resorted to autocratic and authoritarian practices to consolidate his rule" and has "few, if any, checks and balances" on his "extraordinary concentration of power." He is currently choreographing a change to his Bolivarian Constitution that would permit him to remain in office indefinitely. Among the constitutional "reforms" Chávez announced on August 15, 2007, are provisions that "would extend presidential terms from six to seven years and elimi nate current limits on his re-election." Chávez "also wants the central government to have greater control over local government and would end the autonomy of Venezuela's Central Bank—potentially funneling billions of dollars in foreign reserves" into the regime's coffers.
Chávez has revised Venezuela's criminal code to impose penalties of up to 40 months in prison for expressing "disrespect" for the president or the government. Venezuela "is reverting to one-man rule of the most corrupt and primitive Latin American type." Chávez has militarized the government of Venezuela, once one of oldest democ racies in Latin America but now rebranded by Chávez as a Bolivarian Republic. He has put fellow military officers in charge of most of the provincial state governments, as well as the police forces. They also hold other traditionally civilian public administration posts. Under Chávez, Vene zuela is becoming the same kind of command-economy police state that Cuba became when Castro took power in 1959.
PdVSA: From Oil Company to Social Welfare Agency. In Bolívar's day, tobacco, not oil, was Vene zuela's big export. However, the temptation to divert revenues was the same then, and Bolívar opposed it strenuously. He ordered revenue from tobacco to be "ploughed back into production."
Faced with a similar situation, Hugo Chávez has done just the opposite. He has spent the huge reve nues generated by Petroleos de Venezuela SA (PdVSA), the giant state-owned oil company, to extend his political power and enrich his supporters. Billions have vanished into Fonden, the non-transparent national development assistance fund created by Chávez. According to critics, Chávez's social spending has made PdVSA resemble a state piggybank more than an oil company and has left the company with little focus. PdVSA has been spending nearly twice as much on social programs as it spent on its oil and gas operations.
PdVSA recently borrowed $4.5 billion from the central bank "to obtain resources...in order to strengthen its 2007–2008 budget," according to Finance Minister Rodrigo Cabezas. Jose Guerra, former director of the Central Bank of Venezuela, questioned the need for the funds, given record high oil prices that should provide the company with plenty of cash. "Something is happening (at PdVSA) that is weakening its cash flow." Minister of Energy Rafael Ramirez, a fanatical Chávista, is also the President of PdVSA—a clear conflict of interest.
Analysts report that higher oil prices have masked the decline in Venezuelan oil production. "Since Chávez took over, production in the state-run oil fields has fallen almost 50 percent, say ana lysts at PFC Energy, who spoke on condition of ano nymity rather than risk the wrath of the Venezuelan government." The Chávez regime denies this alle gation, but tellingly, the public company no longer publishes monthly, quarterly, or annual results. PdVSA's managers are overwhelmed by too many projects, including energy integration and plans for new pipelines, refineries, and liquid natural gas plants, along with taking majority control of major projects in the Orinoco Belt.
Cursed with Oil. Oil has rightly been termed "the devil's excrement" because of the noxious effects it has on the politics of its possessor. Former Minister of Economy Moises Naim notes that Venezuela is unique in Latin America for hav ing a government that claims to be wealthy rather than poor.
The popular misconception that Venezuela is a wealthy country has been perversely translated by the bulk of Venezuelans into "I live in a rich coun try, yet I am poor. Therefore someone stole my money." Chávez has ably exploited the resentment fostered by this myth, which, Naim maintains, explains the significant number of poor people and income inequality. In addition to reciting this ver sion of Venezuela's history, Chávez follows up in his speeches by pointing the finger of blame at the U.S. for imposing the painful Washington Consensus market reforms of the 1990s that seemed to reward only the elites and foreign investors through large-scale privatization.
However, as Naim points out, "Venezuela's prob lem is not too much globalization but too little." Market reforms would have worked if they had been fully implemented, but they never were. Naim also blames the rise of Chávez on the failure of Acción Democrática and Comité de Organización Política Electoral Independiente (COPEI), the two major political parties, which were weakened by over 50 years of pervasive corruption among Vene zuelan politicians who yielded to the temptations posed by easy oil money.
Naim believes that the Chávez era has a low probability of making Venezuela's poor more pros perous and free. He predicts that the Chávez admin istration's failure after eight years in office to deliver on its promises of a better life for the majority will "create political instability that could lead to the ero sion of civil liberties."
Full Nationalization of the Economy. In Decem ber 2006, Chávez was re-elected to another six-year term in a landslide while major opposition parties stayed on the sidelines in protest. Almost imme diately, in January 2007, an emboldened Chávez "shocked the market by declaring the energy and telecommunications sectors to be ‘strategic' and therefore subject to nationalization."
His first targets were major U.S. corporations. His government began to buy back controlling interests in a number of Venezuelan firms from U.S. compa nies that had invested in Venezuela during the mar ket reform era in the 1990s. In February, Chávez forced Verizon to sell its 28.5 percent stake in CANTV, the country's biggest telecommunications company, and his government is buying back all remaining CANTV shares traded on the New York Stock Exchange. Chávez also instructed AES, a U.S. firm, to sell back at a loss its 82 percent interest in Venezuela's largest private utility company.
In his most dramatic move toward centraliza tion, on May 1, Chávez ordered PdVSA to take 78 percent interest in joint ventures in the Orinoco heavy oil fields. ExxonMobil and ConocoPhillips, two major U.S. companies, were forced to abandon their multibillion-dollar investments.
Banks and steel companies appear to be next on his acquisition list. Many observers accuse Chávez of using nationalizations to distract people's atten tion from the problems that his government has cre ated. The Venezuelan private sector has been in turmoil since the nationalizations began. Meanwhile, Chávez is swelling the ranks of already bloated government ministries with jobs for his supporters, straining the budget.
One measure of the loss of economic freedom in Venezuela under Chávez is its ranking in the annual Index of Economic Freedom, published by The Heri tage Foundation and The Wall Street Journal. In 1998, before President Chávez took office, Venezuela ranked 107th out of 154 countries. By 2007, after eight years of Chávez in office, Venezuela's ranking had dropped to 144th out of 157 countries.
Ignoring the disastrous lessons of Soviet collec tivized agriculture, Chávez has targeted private pro ducers and large landowners for nationalization, saying that they are not producing enough. He has directed "regional and municipal governments to expropriate food growers and cattle ranchers with idle capacity, and to investigate private industries that are attempting to block the new socialist-based enterprises." Other cattle ranches and large land holdings are being taken over with the excuse that their ownership titles cannot be traced to colonial times, and Chávez is giving the land to squatters. Even chicken farmers are not beyond the reach of Chávez, who said that if they "and ranchers refuse to take their animals to the slaughterhouse, we will seize the cows within the framework of the consti tution and the country's laws." Among proposed constitutional "reforms" announced by Chavez on August 15, 2007, are provisions that will enable his regime to expropriate virtually all land in Venezuela:
[Chavez's] new property rights regime envisage[s]…"communal and collective" forms of ownerships. Large landholdings, the so-called "latifundios" against which the government has battled since the 2001 Land Law was introduced, will simply be considered a banned type of ownership.
The clear threat to any kind of investment has had the predictable result of creating ongoing short ages of staples—including eggs, milk, meat, chicken, and cooking oil—that disproportionately affect the poorest Venezuelans.
Chavez's 21st Century Socialism. Although an apt student of history and charismatic military leader, Chávez has no real understanding of the democratic free-market economies of the West. While Simón Bolívar favored the economic liberal ism of Adam Smith and advocated free trade with few restraints on land ownership and labor flexibil ity, Chávez's role models appear to be Joseph Sta lin, Mao Zedong, and Castro. Perhaps Chávez has forgotten that the Soviet bloc collapsed under the weight of its inefficiency and corruption.
Tutored in economics by Castro, Chávez either ignores the disastrous economic outcomes of com munism or blames them on the West. Chávez wants to "accelerate Venezuela's transformation into a society where a ‘new man' is free of selfish urges and devoted to the common good." Yet "nine years into Chávez's rule, some analysts say [that] the idea of creating a ‘new man' and a classless soci ety has even less chance of success in Venezuela than past attempts in other countries, from Russia to Nicaragua and Cuba." As U.S. Secretary of Commerce (and Cuban–American) Carlos Gutierrez recently noted, while people around the world have been enjoying prosperity, buying homes, and earning higher wages, the average monthly income in Cuba is about $10, and pensioners receive about $4 a month.
Notwithstanding the proven failure of the social ist economic model, President Chávez has set his country on a backward journey, complete with state ownership of all assets, monstrously inefficient bureaucracy, a growing military machine, and state-owned factories that produce inferior goods. This retrograde policy of 21st century socialism harkens back to the statist and protectionist import substitu tion policies based on Argentine economist Raul Prebisch's widely discredited dependency theory. Caudillos in South America implemented "import substitution" in the 1950s and 1960s with disas trous consequences. One of the worst outcomes occurred in Argentina under the rule of Juan Peron, another populist strongman. "From 1880 to 1930 Argentina became one of the world's 10 wealthiest nations based on rapid expansion of agriculture and foreign investment in infrastructure." By 2005, it was in 33rd place.
Reaching Beyond Venezuela
President Chávez's number one goal is to reduce the role and influence of the United States. He asserts that the international financial institutions (IFIs), especially the International Monetary Fund (IMF) and the World Bank, are mere instruments of U.S. domination and imperialism.
Typically, Chávez ignores the 60 years of sus tained prosperity that millions of people around the world have enjoyed under the Bretton Woods sys tem. Although they clearly need reforms to mesh better with today's globalized economy, the IFIs continue to be useful as instruments to encourage difficult but ultimately productive reforms. The vague alternatives to the IFIs put forth to date by Chávez would clearly point countries in the oppo site direction toward socialism.
Chávez wants to abolish the Washington Con sensus, a series of policy reforms needed for an economy to enter the modern world—macroeco nomic discipline, microeconomic liberalization, and participation in the global economy—that was put together in 1989 by IMF economist John Will iamson. The IFIs have prescribed these measures to press governments to limit spending, raise interest rates, and open their economies to foreign trade and investment.
Chávez fiercely rejects that advice, mistakenly blaming it for the series of financial and political cri ses that struck Venezuela beginning in 1989. In fact, these reforms succeeded in beating back infla tion, increasing capital inflows and investment, and contributing to modest growth in Latin America. Chávez took advantage of the disillusionment caused by the reforms' failure to reduce extreme poverty and income inequality or to deliver the hefty economic growth that is dramatically reducing poverty in China and India.
To further his goal, Chávez has paid off Venezu ela's IFI debt. Blaming IFIs for continued poverty throughout Latin America, he has declared that he will pull Venezuela out of the lending bodies. He has also used his country's oil wealth to pay off IFI loans of Ecuador, Bolivia, and Argentina. With their loans paid off, the IFIs have little leverage to keep those countries on the right track.
Meanwhile, investors have begun selling Vene zuelan bonds amid confusion over Chávez's announcement that the country would exit the IMF. Investors could demand quick payment of billions of dollars of these bonds if Chávez follows through and leaves the fund, setting off a possible default.
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Not content to spreading his noxious with the other caudillos of Latin America, Chávez is now partnering with Iran, perhaps in forming another "Axis of Evil," and supplying Ahmadinejad and the Mad Mullahs with the desired nuclear material which could be mined and processed in Venezuela, and give Islamism another foothold in Latin America.
Perish the thought!