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The news from Caracas is bleak: "Today, there's no milk, no rice, no beans, no chicken, no meat, no butter, and no cooking oil," reported one Venezuelan as he shopped at a government-run store selling subsidized staples for the poor. Despite record oil revenue, Venezuela's oil-dependent economy staggers as inflation
Download Audio as MP3 soars to 30 percent and economic growth slows to its lowest rate in five years. Any government revenue that remains has been sapped by massive corruption and inefficiency; unaccounted social spending; growing debt; and President Hugo Chávez's costly coalition of client states, including Bolivia and Nicaragua.
What does Chávez's unconstitutional attack on private enterprise and brazen economic disregard portend for the Venezuelan people, who are already in the midst of an economic crisis? What will it take to revive Venezuela’s consumer spending and fiscal stability? What does the crisis in Venezuela mean for other countries in the region? Moisés Naím, editor in chief of Foreign Policy, will deliver a keynote address, followed by a panel of distinguished Venezuelan political and economic experts. AEI’s Roger F. Noriega will moderate.
||Moisés Naím, Foreign Policy
||Antonio Canova, Bolinaga Levy Márquez & Canova
|Luis Vicente León, Venezuelan political pollster
|Asdrúbal Oliveros, Ecoanalítica
|Moderator:||Roger F. Noriega, AEI
WASHINGTON, JULY 27, 2009--Despite sustained oil revenue, Venezuela's economy is in crisis. While President Hugo Chavez recently accelerated his plan to move his nation toward socialism, nationalizing industries and seizing private property unconstitutionally, inflation--already at 30 percent--continues to rise, and stagflation threatens to cripple the country. At an AEI conference, distinguished panelists discussed the economic crisis in Venezuela, and what it means for the future of Hugo Chavez.
Moises Naim, editor-in-chief of Foreign Policy, discussed many contradictions in the Venezuelan economy and policies. While government policies have encouraged an increase in aggregate demand, for example, by offering free health services at private clinics to all citizens, they have simultaneously decreased incentives to meet that demand; Chavez regularly talks about nationalizing the health sector, which prevents investors from helping private clinics improve or expand. Naim also described the contradiction between Chavez's words and actions: while he denounces countries like Colombia and the United States, both countries have increased trade with and investment in Venezuela. In fact, Colombia is one of the main suppliers of food to the country. Similarly, although the Venezuelan economy depends on oil revenues, which tend to rise as aggregate global demand rises, Naim says, "not a day goes by" when Chavez does not denounce the capitalist system and claim that it will collapse. This contradiction is fascinating: a collapse of capitalism would almost certainly precipitate the collapse of Venezuela's economy.
Asdrubal Oliveros, a partner-director of Caracas-based Ecoanalítica, stated that during this economic crisis, Chavez has increased his use of the discretionary spending budget, raising the public debt to $61 billion with the possibility that it will reach a record $90 billion in the near future. Oliveros also predicted that Chavez's tight control on oil will prompt industry leaders to focus instead on other, lesscentrally controlled industries such as telecommunications, concrete, and steel. Many businesses still fear Chavez's intervention in their activities for good reason; seven of the ten largest companies in Venezuela are now controlled by the state.
Antonio Canova, a partner at Bolinaga Levy Márquez & Canova, said that the government take-over of private businesses has become quite common in Venezuela. Chavez claims the companies are mismanaged and in need of government regulation so he can seize control of them without following Venezuela's Constitution, allowing a court ruling, or paying the owners. Furthermore, Chavez justifies his actions by saying that no one person owns property-- property belongs to all the people. The state concentrates much of its control in the oil and agriculture industries.
Luis Vicente Leon, a Venezuelan political pollster and a partner at Datanalisis, Tendencias Digitales, and DTA, commented that Hugo Chavez further justifies his control by appealing to both the ideology and actions of the "Bolivarian revolution." While 55 percent of the people voted for Chavez in the last election, 59 percent now say they have no confidence in his abilities as a leader. To maintain his authority, Chavez censors the media and "controls everything with fear, and fear means a decrease in private investment," Leon said. Indeed, Chavez has been using fear to maintain control: he has strategically placed his military officers at the head of large corporations.
Throughout the discussion, panelists commented that Chavez's tight control on the Venezuelan economy leaves no breathing room for its survival. If Chavez loosened his hold on the economy and permitted better relations with its foreign economic partners, such as the United States, the Venezuelan economy could stabilize more easily. Instead, Chavez's ruthless control of Venezuela's economy will continue to stifle business development and further economic misery for the poorest citizens in his country.
Antonio Canova is a partner at the firm Bolinaga Levy Márquez & Canova and a professor at the Universidad Catolica Andres Bello, the Universidad Central de Venezuela, and the Universidad Monteavila. In 1997, he won the National Prize of the Academy of Social and Political Science in Venezuela. Mr. Canova is also the author of various books on law, constitutional reform, and public administration. His latest book is El Modelo Iberoamericano de Justicia Constitucional (Rasgos Generales y Originalidad) (EJV, 2009). He has also served on the editorial councils of various legal reviews and published regularly in Venezuelan and international legal publications.
Moisés Naím is the editor in chief of Foreign Policy magazine. He has written extensively on international economics and global politics, economic reforms, and the unintended consequences of globalization. He is the author or editor of eight books. His latest, Illicit: How Smugglers, Traffickers and Copycats Are Hijacking the Global Economy, was selected by the Washington Post as one of the best books of the year and was translated into eighteen languages. A documentary based on Illicit was produced by National Geographic and PBS and was recently nominated for two Emmy Awards. Mr. Naím’s columns are published every Sunday by Spain’s El Pais and reprinted by leading newspapers in the Spanish speaking world and across Europe. He served as Venezuela’s minister of trade and industry and played a central role in the initial launching of major economic reforms in the early 1990s. Prior to his ministerial position, he was professor and dean at Instituto de Estudios Superiores de Administración, IESA in Caracas. Mr. Naím was also the director of the projects on economic reforms at the Carnegie Endowment for International Peace and served as executive director at the World Bank.
Luis Vicente León is a partner with Datanalisis, Tendencias Digitales, and DTA and is considered one of the top political pollsters in Venezuela. He is the director of the Venezuelan Associations of Executives and the Caracas Chamber of Industry and Commerce. Mr. León is also a professor at the Universidad Catolica Andres Bello and IESA, a business school in Caracas. He is a frequent political analyst in the Venezuelan media and writes a weekly column for one of Venezuela’s main daily newspapers, El Universal.
Roger F. Noriega is a visiting fellow at AEI, coordinating the Institute's program on Western Hemisphere issues. Twice appointed by President George W. Bush (and confirmed by the U.S. Senate) and with a ten-year career on Capitol Hill, Ambassador Noriega's breadth of experience offers strategic vision and practical insight on the Americas. As assistant secretary of state for Western Hemisphere affairs, he managed a three-thousand-person team of professionals in Washington, D.C., and fifty diplomatic posts to design and implement political and economic strategies in Canada, Latin America, and the Caribbean. As U.S. permanent representative to the Organization of American States (OAS), Ambassador Noriega coordinated complex and sensitive multilateral diplomacy in a thirty-four-member international organization to bolster OAS efforts to promote trade, fight illicit drugs, and defend democracy. Ambassador Noriega has held various other positions, including senior policy adviser with the U.S. mission to the OAS, many program management and public affairs positions with the U.S. Agency for International Development and the U.S. Department of State, press secretary and foreign policy adviser for former representative Robert Whittaker (R-Kans.), and research assistant for the secretary of state of Kansas.
Asdrúbal Oliveros is a partner-director of Ecoanalítica, an economic and financial advisement company located in Caracas. He is also a member of the editorial committee of the magazine PODER for Venezuela. For five years, Mr. Oliveros held the position of senior economist for Santander Investment in Caracas. Five years consecutively, his group of analysts at Santander won an award, given by the magazines LatinFinance and Institutional Investor, for the best team in the Andean region. Mr. Oliveros has also taught at the Universidad Católica Andrés Bello and the Universidad Central de Venezuela.