Tuesday, January 12, 2010

Trouble in Argentina

After Hugo Chavez passed a constitutional referendum removing Venezuelan presidential term limits, he jubilantly declared that “this soldier is a pre-candidate for the presidency, for the period 2013-2019.” Though he is still the dominant force in Venezuelan politics, 2010 has started poorly for Chavez. The recovery of oil prices from their early 2009 lows has given Chavez some welcome budgetary slack, Friday’s announced devaluation of the bolivar suggests that all may not be well with Venezuela’s public finances. As an analyst quoted in the Financial Times points out, such a politically costly move in an election year means that the country’s budgetary situation is likely grim. Much of this miscalculation stems from the fact that Venezuela’s budget assumes production of 3.4 million barrels of oil a day, while according to OPEC and other independent sources, the country only produces 2.4 million barrels per day.

Mr Chavez’s popularity stems largely from the fact that he portrays himself as a fighter for Venezuela’s poor, who by all accounts had a very raw deal in the period running up to his election in 1999. One surefire way to erode one’s base of middle and lower class support is to create high inflation. According to the Economist, consumer prices have increased 28.6% in the year up to last November. The rush of consumers to spend their newly-devalued bolivars before stores can raise their prices will only create more inflationary pressure and will further erode the wealth of his power base.

Many Venezuelans angry with the disappearance of their purchasing power will be forced to stew about it in the dark, as low water levels in the country’s main hydroelectric dam will likely lead to increased blackouts across the country. The 2002 coup against Chavez dissolved due to a disorganized and inopportunistic opposition. At some point, blame for the country’s problems will have to fall somewhere besides the “oligarchs.” A opposition leader who can voice support for the country’s poor while honestly criticizing Chavez’s mismanagement could make electoral success for Chavez in 2013 less certain than it seems.

No comments:

Post a Comment