Globalaffairs

Issue 14/April-May 2009
By Juan Luis Dorado Merchán

This article could perfectly be titled “Hugo Chávez’s nationalizations” or perhaps “Chávez’ economic politics”, but considering Chávez’s policies and manners, it is more suitable for the reader to write a crazy and a bit incomprehensible title.

Everyday Hugo Chávez clings more and more to power in Venezuela. His victory in the last elections gave him carte blanche in every regards, especially in controlling his main aim: oil.

Threatening foreign companies settled in Venezuela seems to be one of Chavez’ favourite sports in his thirst for nationalizing everything, taking the companies’ goods to give them to people. But, to which part of Venezuelan people does it belongs?

“Chávez threatens more nationalizations”, the media reported some months ago. Nothing new. No. This time it is different. Now Chávez has all the power he could achieve and he has got the option to remain in power all the years that the Constitution will establish, which means: all the time he will wish to keep in it.

We imagine that his economic and politic analysts, his nearest advisers, tell him about the misfortunes such as the slowdown to foreign investment will cause in Venezuela. However, Chávez doesn’t care because he has got oil.

Crude oil, black gold. This has been Hugo Chávez’s main sticking point and he is going to exploit it and take advantage of it for all purposes despite giving it to his firmest allies, as Cuba and Bolivia. Those advisors should explain Hugo Chávez that oil is not a renewable energy. It is running out.

Will Chávez’s power run out some day? Only time will bring us the answer. Although it seems that Chavez believes he has a response; He shall stay in command and keep on taking absurd decisions for as long as necessary, on a time scale that appears to be unlimited.

Slowdown to foreign investment

The first point to draw from Chávez’s nationalizations is clear: Foreign companies will stop investing in Venezuela (they have already done it).

Let’s put ourselves in the place of the executives of an important multinational company. They have seen business opportunities in Venezuela and they think of making a significant investment. They analyze the situation and they observe that, whenever Hugo Chávez feels like, they can lose everything they have invested in that country, because their company would belong to Venezuelan Government.

Any report that would be asked by a company would advise against an investment in Venezuela from the first moment without doubts. They will look for another destination for their money and infrastructures, and they will go there without hesitates.

1st problem: Venezuela, a country which needs money, jobs and great investments would remain without an important income. Moreover, thousands of jobs, which would have an effect on the well-being of thousands of Venezuelan families, wouldn’t be created.

2nd problem: Hugo Chávez’s power in the region and his higher influence on some of the neighbouring countries and on the rest of Latin America and the Caribbean would make the company even think of investing in any region of the rest of the continent. Whenever a new Chávez could appear in Colombia, Peru or Dominican Republic.

What if Chavez’ madness was contagious?

One of Hugo Chávez’s greatest aims, maybe the most pharaonic, is to turn himself into the new Liberator, the new Bolívar, the new “Che” Guevara. Hugo Chávez longs to export socialism of the 21st century to the American continent. And Chávez does have an advantage: Oil at good price.

The USA and Europe multinational companies know it and they faithfully follow the current political situation of all countries. This is happening in Venezuela, Bolivia, soon in Ecuador and maybe in Nicaragua. And better not to talk about Cuba. Could a wave of nationalizations break out in Latin America?

Regarding economy, this is Hugo Chávez’s virus, which the rest of the world is most afraid of, in case it will be spread out through the rest of Latin American countries. Most companies, therefore, if they invest in Latin America and the Caribbean, will play safe. And the rising countries are Brazil, Colombia, Chile, Argentina and Mexico.

What’s the link between those countries? Their political stability above all.

In the last 20 years, Latin America and the Caribbean have gone to a fourth and a fifth level of the world economy. Even that popular expression of its being “the courtyard of the United States” has fallen into disuse.

Companies, which where previously settled in this region of the earth, have been moving to Africa lately and to Asia, particularly in the South East.

Obviously reasons are not at all praiseworthy: Child exploitation, cheap labour force, higher probability of having control over the leaders, etc.

What is clear is that there has been a sharp slowdown to foreign investments in Latin America in the last few years and for many reasons, the region should encourage foreign investment, mainly for the citizens’ well-being.

Latin America and the Caribbean have to fight for their economic situation, and above all, for achieving the social cohesion among their citizens. This is a goal, which seems to become more difficult every day. Although many policies may be implemented, if there is no money or work to benefit society, they do not make any sense.

Moreover, it casts doubts on the best way of enriching the country and increasing the Gross Domestic Product is nationalising companies, which have invested in your country and frightening others which want to make a great investment.

Chávez is playing with fire but he is not aware of it. Perhaps some of the nationalised companies have done a negative job that has affected the future of Venezuela. What is doubtful is that Spanish Bank Group Santander, which is an example of management all over the world, has had a negative effect on Venezuela economy.

The nationalisation of Banco de Venezuela, subsidiary of Spanish Bank Group Santander in Venezuela, has not been made by chance. One of Hugo Chávez’s main interests is controlling one of the main Banks of Venezuela.

The complex of the square under siege

Someone should lend Hugo Chávez a book about the development of socialist systems in the 20th century. He assures that his “Socialism of the 21st century” will help his country (and the entire region) to achieve social and economic well-being. Time will bring the truth.

Furthermore, it is not difficult to understand that nationalisations (except in cases of extreme need and rescue unit) have not entirely had positive effects on a State’s Economy. We only have to observe the economic situation in Cuba with his idolised Fidel Castro.

It is not profitable to economically isolate from the rest of the world, while the markets follow a capitalist system. But Chávez might be an exception, as he possesses the main motor of all these mechanisms, he has got the oil.

However, knowing this figure, his thousands of crazy decisions and his passion for Fidel Castro, the answer to nationalisations could be very simple, as well as more political and economic: The theory of the square under siege.

And maybe behind his arrogant image, Hugo Chávez is afraid.

He is afraid of his people turning against him, of the opposition parties strengthening, of Venezuelan people having the freedom of speech, of American TV series being watched by Venezuelan young people…That is why he has nationalised the media, and why he closed radio stations, and why he appears so much in Venezuelan television.

He wants to have everything under control, including the Economy. And if for that purpose, he has to throw out some foreign investors, breaking any legislation he will do it. Who cares if they are removed from their money, their investment, their factories, their buildings, their offices, etc? It is good for Venezuela and therefore it is good for Hugo Chávez.

That is why he always attacks foreign companies. Hugo Chávez needs an enemy and Venezuelan people need to feel the pressure of the evil, which comes from other countries. In these cases the companies that come to create new jobs and bring money to Venezuela. This is quite ironic.

Hugo Chávez makes capitalism and its money the evil for society, and he will continue doing so until he is prevented. One day he may come to realise that Venezuela can’t continue without foreign investment and change his political stance to suit.

Now that his great excuse of the last years – George W. Bush- has gone away and everybody likes Obama, Chávez must focus on another goal, foreign companies: they are the enemy. He wants Venezuelan people to be aware of that evil, to that capitalist money which is coming to help them.

Have you heard before of this speech? If you have, you will immediately think of Cuba. If you haven’t, you should take a quick look at any speech of Fidel Castro. The Cuban leader has been a great teacher for many Latin American politicians, and Chávez seems to be his cleverest student.

Castro stands out for his high abilities; he adapted himself to the Cold War, to goodwill policies and to the 21st century. But, will Chávez be able to adapt himself to the future events?

The entire world is living a sharp economic crisis. The recession is knocking on doors and Chávez only has one asset in this fight: Oil. It is a need of the whole world, but demand has reduced and its price is dropping down. Venezuela will soon stop giving free oil to its allies. Chávez will start charging affordable prices, but he will end up putting it on the same level as the rest of the oil market.

One of Chávez’s last ideas has been criticising Christopher Columbus, and they have nationalised a statue. A statue of Columbus has been removed and Chávez suggested that instead of Columbus, a statue of an Indian should be erected at the spot.

Abroad Venezuela Hugo Chávez looks like he is always driven by political impulses, without using any rational. This means, one day he praises you and the other he attacks you from the back. The worst that could happen to Venezuelan people would be to know all the impressions and parodies made of him, and that he appears more in humorous slots than in the serious news.

It is also true that Chávez thinks of nationalising the citizen’s thoughts. This would be the definitive step to make Venezuelan people forget in a few years all the measures that are being taken in case Chávez continues as he has begun.

No one can doubt that the world’s economic system has clearly failed. Capitalism is not a perfect system, but it is the board table over which the game is being played. Therefore, countries that went out from that system have come back to it, and those that renounced it, such as China, have been forced to accept it and seek their position and their own benefit.

Chávez plays his own cards and he goes against everyone. He will keep on nationalising until the only thing left to nationalise would be himself. But, what would happen if Venezuela runs out of oil? Then, probably it will be another one who will face the consequences and who shall seek solutions for Venezuela.

Juan Luis Dorado Merchán
Journalist specialized in Latin American affairs.

Global Affairs is not liable for author’s opinion.