Chavez was a clown whose policies cost a ruinous price

The late president squandered vast resources, leaving the poorest still mired in poverty and Venezuelans burdened by double-digit inflation

PUBLISHED : Thursday, 07 March, 2013, 12:00am
UPDATED : Thursday, 07 March, 2013, 6:25am


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From a distance of 10,000 miles, it was easy to see Hugo Chavez as nothing but a clown.

It was pretty easy from up close, too. When the newly installed Venezuelan president visited Hong Kong in October 1999, his staff presented reporters with portraits of El Presidente dressed in gilded military uniform, complete with scarlet sash of office.

The effect was much as if the most corrupt and brutal police sergeant on the force had decided to put on Ruritanian fancy dress.

Few of his compatriots found Chavez so amusing, however.

Venezuela is blessed with greater proven oil reserves than Saudi Arabia. But thanks to Chavez's policy of resource nationalisation, under his presidency the country's crude production slumped 23 per cent, from 3.5 million barrels a day in 1998 to just 2.7 million in 2011.

Meanwhile, the Chavez government lashed out some US$20 billion a year on energy subsidies, more than twice the amount it spent on education. Ordinary Venezuelans were able to buy petrol at just 1 per cent of the price paid by motorists in Hong Kong, while the handouts for business were so generous that corporate tax rates were effectively negative.

Not surprisingly, domestic oil consumption almost doubled. As a result, despite surging international demand, under Chavez Venezuela's oil exports collapsed by more than a third.

The effect on Venezuela's economy was devastating. Loose monetary policies combined with profligate government spending meant that consumer inflation stayed in double figures throughout Chavez's presidency. In January, the inflation rate hit 21.6 per cent.

In response, Chavez's government was forced to devalue Venezuela's currency repeatedly, with the most recent 30 per cent devaluation coming last month. Altogether over the course of Chavez's presidency, the bolivar lost more than 90 per cent of its value against the US dollar. And that was during a period when the dollar itself declined 18 per cent in value against a basket of currencies.

No doubt enthusiasts for Chavez's brand of Bolivarian socialism will attempt to defend his economic record by claiming his policies benefited Venezuela's poor and narrowed the country's income divide.

Yes, it is true that between 1998 and 2006 (the last year for which figures are available) Venezuela's Gini co-efficient of income inequality dropped by 3 percentage points.

But that narrowing did nothing for the country's poor. According to World Bank figures, when Chavez took over, the poorest 10 per cent of Venezuelans took home just 1 per cent of the country's household income. By 2006, that share had not changed, with the poorest 10 per cent still earning only a 1 per cent share of total income.

In the meantime, the total size of Venezuela's income pie barely expanded. Between 1998 and 2011, the country's per capita income grew by just 10 per cent in real terms.

To put that into perspective, compare Venezuela with Chile, another South American country blessed with natural resources where the Gini co-efficient has also declined.

Between 1998 and 2011, Chile's income per head shot up by 40 per cent, with the share taken home by the poorest 10 per cent rising by a quarter.

In short, for all his colourful costumes, Chavez was an economic disaster. If he was a clown, then ordinary Venezuelans paid a ruinous price for our entertainment.

With the Hong Kong authorities blithely arresting and fining enterprising individuals who cross the border into Shenzhen carrying more than two tins of baby milk, why doesn't it bother our officials that their actions clearly contravene Article 115 of the Basic Law, which obliges Hong Kong's government to "pursue the policy of free trade and safeguard the free movement of goods"?