The Institute for International Finance is predicting that Venezuela will experience a 42 percent inflation rate this year, one of the highest in the world and the highest in the Latin America and Caribbean region. They report that this will have a heavy impact on the prospects for growth in the country for many years to come.
Nobel Laureate Douglass North once said that, “if the institutional framework rewards piracy then piratical organizations will come into existence; and if the institutional framework rewards productive activities then organizations – firms – will come into existence to engage in productive activities.” Prof. North’s observation is proving to be awfully accurate in Venezuela.
The country’s recent bank scandals have exposed the internal workings of the so-called “boliburguesia” (boligarchs), a shady—piratical—network of businesses that thrives thanks to favors granted by the presidency. The boliburguesia’s plain and simple crony capitalism is even more regrettable in light of the government’s regular assaults on the market economy and its promotion of socialist practices.
By now, most people have read or heard about the Venezuelan government’s constant attempts to shut down media outlet Globovisión, including back in May 2009 after Globovisión reported on an earthquake that had taken place in the towns of Miranda, Vargas, and Aragua. At the time, the government accused Globovisión of destabilizing the country by reporting on the earthquake and creating fear among the people. It should be no surprise then that in August the National Assembly passed a new Institutional Education Act (Ley Orgánica de Educación) that may have severe consequences for independent media in Venezuela. As noted in a recent article in the Economist, President Hugo Chavez sees the mass media as one of the three most important institutions in educating children, reason enough to include several articles affecting it in his education reform. Among other things, the new law gives the government the authority to “immediately suspend” the publication of content that “causes terror in children,” promotes “indiscipline,” or goes against “the mental and physical health of the people.” Anywhere these days it’s hard to imagine the news showing anything that wouldn’t fit into one of these categories based on Chavez’s judgment call.
The Economist reports that President Hugo Chávez of Venezuela is contemplating another move to curb what he sees as the “excesses” of the media. The latest target is Globovisión, a 24-hour news channel that for now faces increasing pressures but shortly may end up with a government-imposed closing.
Globovisión is the last remaining national channel that is critical of the government. It was one of four such channels that during Venezuela’s political conflict of 2002-04, to varying degrees, egged on an opposition that was determined to oust Mr Chávez.
Yet some believe that this move could have the opposite effect:
Some officials think that shutting down Globovisión would be a big mistake. It commands less than 10% of the audience (partly because it is free-to-air only in Caracas and Valencia). The damage to Mr Chávez’s “revolution”, these officials say in private, would outweigh the benefits.
Curiously, the official justification for the anti-Globovisión legal assault coming in a form of unexpected tax fines, investigations, and night-time raids is the one in which the government portrays itself as the victim of media:
The president claims his popularity would reach 80% (rather than its current 50% or so) were it not for “media lies”. Globovisión must mend its ways, he insists. “Its time is running out”.
Last week, CIPE’s partner in Venezuela, the Center for the Divulgation of Economic Information (CEDICE) celebrated its 25th anniversary with a true show of intellectual force. Present at their two-day celebratory event entitled: “The Latin American Challenge: Liberty, Democracy, Property Rights and Combating Poverty,” were the renowned Peruvian author, Mario Vargas Llosa, writer Alvaro Vargas Llosa, former Mexican Foreign Minister, Jorge Castañeda, former President of Bolivia, Jorge Quiroga, and many other political and intellectual luminaries from the region.
The event presented a sharp contrast to the increasing infringement of political liberties being imposed by the Venezuelan government. Venezuela’s Minister of Education shut down a CEDICE-Cato Institute educational seminar held the week before at a local university. In addition, both Mario and Alvaro Vargas Llosa were detained for several hours at the Caracas Maiquetia airport upon their arrival and were told not to speak about politics during their visit.
The government clearly felt that it must somehow respond to the ideas being presented at the CEDICE conference. President Chávez called for a four day marathon of his “Alo Presidente” television program in order to counteract the visibility of CEDICE’s event. He also conducted a parallel conference with the government’s intellectual supporters several blocks away from the CEDICE event. The press coverage of CEDICE’s event was extensive by both television and printed press. That also placed the event in stark relief to the government’s imposition of draconian media control laws, its shutting down of Radio Caracas Television (RCTV) and its current efforts to shutter the last remaining independent broadcaster in the country, Globovisión.
CEDICE should be commended on the occasion of its 25th anniversary for its many years of service in promoting democratic principles in Venezuela. This conference represented a courageous effort to keep democratic dialogue alive in the country and to maintain the important role that independent civil society institutions play in Venezuelan society.
Last Sunday, Venezuelans went to the voting booths for the twelfth time in the last ten years. This time they voted on whether to allow the president and other elected officials to run for reelection indefinitely. Although Venezuelans rejected a similar constitutional reform in December 2007, President Hugo Chávez managed to ask the question one more time. On February 15, 2009 he got what he wanted. With a 54% affirmative vote, Venezuelans approved the constitutional reform. Hugo Chávez thanked his people for supporting him and confirmed his participation in the 2012 presidential election.
Contrary to what happened in Nicaragua last year where violence erupted on election-day and international observers and opposition candidates challenged the results of local elections, the results of the Venezuelan referendum have not been contested by the opposition or international observers. Opposition leaders accepted the results, though they legitimately condemn the advantage that the government had during the campaign. In fact, Chávez’s government used all means possible to channel the state apparatus to win the election. For example, a few days before the referendum took place, Hugo Chávez’s government promised the construction of major public housing developments.
The normality under which the referendum took place, however, does not mean that a path is clear for Venezuela’s prosperity or its democracy. As CEDICE, a Venezuelan think-thank, put it in a statement before the election:
It is not enough for citizens to chose freely their representatives, it is also important that there is alternation of power. (…) The Constitutional reform is freezing the power pyramid so it will remain like that for many years to come.
A democracy indeed has many more attributes than just the holding of elections. Yet many leaders reduce the concept of democracy to elections, purposely, to satisfy their own ends. President Alvaro Uribe, from Colombia, immediately congratulated his neighbor for his “democratic victory”. The Colombian president is still thinking about modifying his country’s Constitution to run for office for a third term. Advocating for the full set of attributes that encompass a democracy, and that allow a market economy to operate efficiently, is still a challenge in Latin America today.
Hugo Chávez mentioned in his victory speech on Sunday night that he will fight corruption and crime in the upcoming years. For Hugo Chávez to achieve those goals, he must do more than continue winning elections. Corruption and other maladies are fought effectively with a particular institutional system he is not willing to embrace.
Out of the oil-exporting countries that have benefited greatly from the record high prices over the last few years, Venezuela is among the leaders of spending its new-found riches rapidly and in a politically motivated way. The Christian Science Monitor reports,
With crude reaching $145 a barrel this year, [President Chávez] has been able to pour billions into social programs at home and lavish the rest abroad, sending subsidized oil from Nicaragua to New York – including up to 100,000 barrels of oil per day to Cuba, discounted by as much as 40 percent – and making pledges to invest in infrastructure, refineries, and agricultural programs everywhere in between.
But with the price of oil 55 percent less than its peak in July, continuing this largess may no longer be feasible, either internationally or domestically. A new report from Deutsche Bank implies this by showing that Venezuela needs oil prices to stay at a minimum of $95 a barrel to balance its budget.
Oil income accounts for more than half of the country’s federal budget and more than 90 percent of export earnings. At the same time, Venezuela relies heavily on imports, including most of its food, which makes it extremely vulnerable to oil price shocks. The current price dip and the risks it carries for countries like Venezuela is a reminder that oil-based fortunes can be vulnerable as a political tool and are no substitute for having a productive economy.