Venezuela is Crumbling

Really? It has been crumbling for a while.

Venezuela is Crumbling
Economic misery in Hugo’s populist paradise.
BY Jaime Daremblum
May 14, 2010 12:00 AM

Recent weeks have brought more depressing economic news from Venezuela, where populist leader Hugo Chávez seems intent on destroying not only democracy but also the last remaining vestiges of private enterprise.

On April 21, the Latin Business Chronicle predicted that Venezuela would post the world’s highest inflation rate in 2010, ahead of even the war-torn Democratic Republic of Congo.

On May 5, the United Nations Economic Commission for Latin America and the Caribbean reported that foreign direct investment (FDI) in Venezuela dropped from $349 million in 2008 to negative $3.1 billion last year, “mainly as a result of nationalizations.” In other words, the Bolivarian Republic experienced a net FDI outflow of $3.1 billion in 2009.

On May 7, the Venezuelan central bank released data showing that consumer prices rose by 5.2 percent from March to April. As Bloomberg News noted, this represented the largest monthly increase since 2003. Meanwhile, the annual inflation rate hit nearly 32 percent.

On May 11, the Chávez-controlled National Assembly introduced legislation designed to clamp down on currency trading and strengthen the bolívar, Venezuela’s national monetary unit. “This is a very negative measure for the Venezuelan economy,” Barclays Capital economist Alejandro Grisanti told Dow Jones. “It will increase the pressure on prices and will deepen the contraction of the economy.” In January, Chávez devalued the bolívar in order to facilitate greater social spending. Since then, the currency has plummeted, making Venezuela’s already dire inflation problem even worse.

Chavez Watch II

Chavez is the worst president Venezuelans have had. He is destroying the fragil Venezuelan economy........ I am so glad that the new Chilean government won't follow Chavez thinking.

vdebate reporter

Chávez Watch II
BY Jaime Daremblum
January 21, 2010 12:00 AM

In case you were wondering what U.S. military forces are doing in Haiti, allow Hugo Chávez to explain: “I read that 3,000 soldiers are arriving, Marines armed as if they were going to war,” the Venezuelan leader said Sunday on his national TV show. “They are occupying Haiti undercover.”

It gets worse. Chávez has also accused the U.S. military of causing the Haitian earthquake by testing a weapon. Really. We’ve come to expect such risible comments from Chávez, but that doesn’t make them any less outrageous.

Given the deteriorating situation in Venezuela, the buffoonish autocrat should be more humble. His country has been rationing water, electricity, and health care services. Its government finances are a mess, its public health system is falling apart, its physical infrastructure is crumbling, its capital city (Caracas) is the most dangerous in Latin America, and its inflation rate is surging. (Morgan Stanley projects that Venezuelan inflation will hit 45 percent this year. That would be its highest level in 14 years.)

Chávez has always been more concerned with cultivating his ideological allies abroad than with tackling Venezuela’s domestic economic troubles (which own disastrous policies created). He is now planning to visit Nicaragua and give $130 million to his close friend Daniel Ortega, another radical leftist who is busy trying to turn his own country into a mini-Venezuela. The money will reportedly be spent on agribusiness. However, considering Chávez’s track record of announcing grand investments that never materialize, not to mention Venezuela’s shaky finances, Ortega may ultimately be disappointed.

Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.