SPECIAL REPORT: Chavez dominates Latin American political debate

Dec. 3, 2007
Venezuelan President Hugo Chavez wields considerable influence in Latin America.

Venezuelan President Hugo Chavez wields considerable influence in Latin America. Aside from the countries aligned with policies that he favors and supports (i.e., Bolivia, Ecuador, and, to some extent, Nicaragua), Chavez is directly or indirectly part of the political debate in other Latin American countries.

Perhaps with the sole exception of the US president, there is no other political figure who is as well known and whose policies are talked about as much in the whole region. Chavez says his aims are to help the poor and redress inequalities, but what is subject to debate is the means he proposes to achieve that end and whether those means are sustainable over the long term.

Obstacles ahead

There are two fundamental obstacles to Chavez’s influence actually taking root in a wider area of Latin America. The first is economic: the availability of cash to pay for the revolution and feed, clothe, and house the people. Unlike prior socialist experiments around the globe, Chavez’s policies could have a chance of success in Venezuela, at least in the short term, given the massive amounts of cash easily available to his administration from the export of oil and the increasing global demand for that resource. Monopolizing oil revenue allows for the payment of subsidies in housing, food, health care, and energy and makes up for declining domestic productivity in Venezuela.

Unemployment can be masked by inflating the payroll of state-owned enterprises as needed. Chavez may assume total political control, monopolize all major industries, and take away the independent means for citizens to create wealth because there is state cash available to the president without any controls to pay for the subsistence of citizens.

There are politicians in other countries who would not hesitate to adopt the Chavez model, if they could. Bolivia illustrates this point. President Evo Morales thought that because Bolivia had large natural gas resources it was automatically a wealthy country and proceeded upon his election to dictate new terms to foreign investors (on a take-it-or-leave-it basis) while declaring that the natural gas was going to help to develop Bolivia and improve the condition of the poor.

Unfortunately for Morales, it is not playing out that way. With the private sector in (chased) retreat, Bolivia has no capacity to make the necessary investments to expand production infrastructure and to generate the revenues required to pay for the subsistence of the people.

Unlike oil, natural gas is not a readily marketable global commodity. With no cash, Bolivia’s Chavez-like experiment is imploding. Shortages of fuels are seriously affecting other industries, especially agriculture. Inflation looms behind the shortages. Chavez is offering to step in with the needed investments and cash, but he can’t spread himself too thin given that Ecuador is positioning itself to be next in needing this type of foreign assistance. Some politicians prone to this policy approach in other countries are watching this and putting their instincts on hold.

The second obstacle is political: some people just make different choices. Chavez’s influence has had intrinsic limits when tested at some elections against well-presented alternatives. Almost every single country in Latin America has had presidential elections in the last 24 months. In most of those elections Chavez and his policies were a factor.

Some of the candidates supported by him made it to the runoff elections. But more often than not, alternative policy models were voted for. Mexico and Peru clearly illustrate this different choice, where candidates proposing Chavez-type policies lost.

High political risks

Elections, however, will take place again. One can be fairly confident that a Chavez-like candidate is unlikely to win the presidency in a country like Chile, which seems to have consolidated a system based on a pluralistic democracy, the rule of law, and a market economy. Yet the fact remains that in many other countries such an event may still happen.

Only time will tell whether those countries that rejected a Chavez-like candidate in the last round of elections will do so in the next. In this sense, while in the short term a number of countries remain committed to open and free economies, the political risk long term is still somewhat high.