Wednesday, June 01, 2005

Beacon No. 42: Explaining Hugo


Juan Forero offers a good summary today of why Latin Americans and others idolize Venezuelan president Hugo Chávez: He's Fidel Castro, but with land borders and natural resources at a time when he can charge neighbors (and the U.S.) a premium for oil.

Record prices for petroleum let the left-ish Chávez bluster against real and imagined American sins, export freely to neighbors, enact popular social programs and crack down on what's left of Venezuela's judiciary and press, all while enjoying big approval ratings at home and abroad.

But unlike Chávez, Castro was (and is) geographically isolated and had powerful patrons in the old USSR, making political control and budgeting easier than in most mainland economies. The only powerful patron in Chávez's neighborhood today is the one he spends his free time insulting, so I imagine he will face serious political problems when oil's price drops.

Unfortunately, many Venezuelans will also suffer when that happens—and just a generation after the oil crash of the 1980s, which ruined economies from Caracas to Riyadh to Denver! Chávez will begin to look like a loser for having overplayed his hand, and failing to diversify his economy when he had the chance.

Currently, oil accounts for about 80 percent of export earnings and half of Venezuela's operating revenue. For this reason, I don't worry about Chávez being a public-diplomacy thorn for the U.S. when oil's price falls. In the long term, Chávez's most likely outcome is exile—probably in Cuba.

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