Chávez Regime Braces for Impact

Although Venezuelan dictator Hugo Chavez insists he is making a miraculous recovery from cancer, a series of revelations in recent months paint the picture of a regime bracing for impact.

In mid-August, opposition congressmen denounced a plan by the Chavez regime to move the nation's $29 billion in international reserves out of traditional havens in Switzerland, Britain and the United States to banks in Venezuela's principal creditor nations, China and Russia. Just last week, it was disclosed that Mr. Chavez is planning to renounce a respected world panel for settling business disputes, further undermining investor confidence in doing business in his country.

These momentous decisions by the ailing leader and his nervous cronies suggest they are more concerned with their ability to hold on to power when Mr. Chavez falters than with the well-being of the Venezuelan economy.

Regarding the reserves, Mr. Chavez rushed to explain that he is merely securing his country's capital by withdrawing it from unstable financial institutions in the West; he failed to mention that China and Russia keep most of their international reserves in U.S. and European banks. As for $11 billion in gold, it will be relocated to the vaults of the Venezuelan Central Bank-a risky operation that will cost about $400 million. Mr. Chavez says this is a "healthy decision," but to his opponents, it looks like a slow-motion bank heist by a government known for its corruption. One Venezuelan economist told me that the country will be left effectively with no international reserves, casting doubt on its ability to function in the global economy.

The recent decision to abrogate agreements with the World Bank's International Center for the Settlement of Investment Disputes (ICSID) is another troubling sign. Eighteen claims against Venezuela totaling $40 billion are outstanding, having been brought before ICSID by foreign companies cheated out of their investments during Mr. Chavez's tenure. Although Venezuela cannot jump bail on these pending claims, the decision to abrogate the ICSID process suggests what the regime has in mind for current or future foreign investments. Without some recourse to the sort of independent arbitration offered by ICSID, all bets are off for anyone looking to put capital in Venezuela.

Taken together, this series of highly unorthodox measures will burn to ashes Venezuela's credibility among investors and within global capital markets. Why would Mr. Chavez, who recently professed his wish to govern until 2031, do such self-inflicted damage to his nation's economic viability?

For a decade, many observers in and out of Venezuela have blamed incompetence for Mr. Chavez's infamous mishandling of the economy. Others have recognized his policies as purposely destroying the private economy to decimate the ranks of potential opponents-except for a few favored opportunistic and pliant plutocrats who benefit from sweetheart deals with the regime.

Another entirely plausible explanation is that Mr. Chavez is a devout socialist who is committed to putting politically reliable state apparatchiks in command of strategic industries. His 2001-02 purge of the state-run oil company, Petroleos de Venezuela S.A. (PDVSA), was a politically risky move that sparked a costly strike and popular uprising, but he emerged from the crisis with PDVSA in his grip and its trillion dollars in revenue as his petty-cash fund. PDVSA is treading water, but everyone knows who's the boss.

There may be a more proximate cause for the recent decision to move the international reserves. Confidential documents from Mr. Chavez's desk, which were leaked to the opposition, suggest that the regime is seeking to minimize its vulnerability to Libya-style sanctions should it have to resort to violence or electoral fraud to hold on to power. Recent reports that Col. Moammar Gadhafi looted $1 billion of his country's gold reserves in a desperate bid to buy time is another clue about what Mr. Chavez's team has in mind.

Whatever the reasons behind these recent foolhardy economic moves, the impact on Venezuela's economic viability will do deep and lasting harm to the people. Mr. Chavez would not be the first dictator to hold his own people in contempt or show more regard for his selfish interests than for the nation. That's what dictators do.

Venezuelans may have to wait to sift through the rubble of the Chavez regime before they get a clear explanation for Mr. Chavez's recent reckless decisions. In the meantime, regardless of whether Mr. Chavez knows he is dying sooner or hopes he is dying later, it is apparent that he doesn't give a damn about the harm he is doing to the Venezuelan people or the mess he will leave behind.

Roger F. Noriega is a visiting fellow at AEI

Bernardo Londoy/Flickr/CC

Also Visit
AEIdeas Blog The American Magazine

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 27
    MON
  • 28
    TUE
  • 29
    WED
  • 30
    THU
  • 31
    FRI
Monday, October 27, 2014 | 10:00 a.m. – 11:30 a.m.
State income taxes and the Supreme Court: Maryland Comptroller v. Wynne

Please join AEI for a panel discussion exploring these and other questions about this crucial case.

Tuesday, October 28, 2014 | 9:30 a.m. – 12:15 p.m.
For richer, for poorer: How family structures economic success in America

Join Lerman, Wilcox, and a group of distinguished scholars and commentators for the release of Lerman and Wilcox’s report, which examines the relationships among and policy implications of marriage, family structure, and economic success in America.

Tuesday, October 28, 2014 | 5:30 p.m. – 7:00 p.m.
The 7 deadly virtues: 18 conservative writers on why the virtuous life is funny as hell

Please join AEI for a book forum moderated by Last and featuring five of these leading conservative voices. By the time the forum is over, attendees may be on their way to discovering an entirely different — and better — moral universe.

Thursday, October 30, 2014 | 2:00 p.m. – 3:00 p.m.
A nuclear deal with Iran? Weighing the possibilities

Join us, as experts discuss their predictions for whether the United States will strike a nuclear deal with Iran ahead of the November 24 deadline, and the repercussions of the possible outcomes.

Thursday, October 30, 2014 | 5:00 p.m. – 6:15 p.m.
The forgotten depression — 1921: The crash that cured itself

Please join Author James Grant and AEI senior economists for a discussion about Grant's book, "The Forgotten Depression: 1921: The Crash That Cured Itself" (Simon & Schuster, 2014).

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.