Latin America without Chávez

In all of the capitals of the Americas the atmosphere is one of waiting to see what unfolds. After all, the devil you know is better than the one you don’t

Is Latin America being turned upside down?
Fernando Menendez
On 14 March 2013 14:15

While most obituaries and assessments of Hugo Chávez have paid attention to his personality, his revolutionary politics, or focused on a potential chavismo without Chávez, the prospects of a Latin America without Chávez have only just begun to be explored.

For fourteen years, Hugo Chávez Frías promoted a revolutionary transformation of Venezuelan society known alternatively as “socialism of the 21st century,” or the “Bolivarian Revolution.” But it could also be argued that his enormous supply of petro-dollars served to reshape Latin American relations.

Chávez’s rhetoric sought to recapture Simón Bolívar’s vision of a united Latin American republic while tapping into longstanding antagonism and resentment towards the United States, as a colossus of the north athwart to the Liberator’s dream. Through projects such as the Bolivarian Alliance of the Americas (ALBA), Chávez pursued a united anti-American front, whose symbolism has had regional effects.

The Role Chávez Played

The anti-Yankee rhetoric, always a staple of Latin American populism, had two powerful impacts. First, it helped to blunt American influence in the region. The once predominant economic relationship between the U.S. and the American republics has been diminishing as inter-American trade alliances reduce barriers and the EU and China, in cases like Brazil, play a larger trade role than the U.S.

Second, Chávez’s firebrand status coupled with his petroleum-based piggy bank, allowed the caudillo to act like a lightning rod for the rest of the region. Whether abetting Iranian penetration in the Americas, propping up the Castro regime in Cuba, or giving aid and comfort to Colombia’s FARC (Revolutionary Armed Forces), Chávez’s role as premier revolutionary helped draw fire from his allies and others in the region. It is a role for which he was much admired, even among some ideological enemies, and for which he will be missed.

The effects of Chávez’s domestic policies also played a role in the region. Capital consumption, rising prices, a devalued currency and ever increasing shortages badly damaged Venezuela’s economic viability. While the rising price of petroleum has continued to fuel much of Mr. Chávez’s domestic and foreign agenda, actual output and maintenance of Venezuela’s oil industry have declined significantly due largely to mismanagement. And while it exports large quantities of oil and populist rhetoric, Venezuela is producing little else.

Statistics alone present a disconcerting picture. When Chávez was first elected in 1998 Venezuela’s external debt stood at $28 billion; that has now climbed to $90 billion today. According to the World Bank, gross fixed capital formation declined to 18 percent of GDP in 2011 as compared to 24 perccent in 1995. Net inflows of foreign direct investment shrank from 2.9 perccent of GDP in 1999 to a tiny 1.7 percent in 2011.

Some of the decline in production is attributable to decreased capitalization of companies listed on the Caracas stock exchange from 7.9 percent of GDP in 1999 to an abysmal 1.6 percent of GDP in 2013. Meanwhile Venezuela’s oil, which once amounted to 80 percent of its exports, now accounts for 95 percent of all exports.

A New Latin American Landscape

Economic growth in Latin America has been largely tied to the boom in commodity prices, especially where China is concerned. China’s expanding economy requires a constant inflow of commodities such as Argentine soybeans, Brazilian iron ore, Venezuelan petroleum and other raw materials. Chinese manufactured goods are also finding new markets in the Americas. In addition, China is becoming a source of capital investment and loans for the development of infrastructure projects, especially if these result in a faster outflow of valuable commodities.

Beginning in 2007, Chávez negotiated a deal providing China with a steady supply of oil at below market prices in exchange for $32 billion. According to a 2012 article in China Daily, China’s imports of Venezuelan oil are expected to reach 1 million barrels per day (b/d) in 2015 from an initial 59,000 b/d in 2005. In effect, the deal makes China Venezuela’s largest source of foreign funding while exposing it to unwanted geo-political entanglements in the Americas vis-à-vis the US.

Brazil, where both presidents Lula and Dilma Rousseff showed solidarity for Chávez, albeit with a minimum of rhetorical flourish, has actually benefited from Venezuela’s anemic economic performance. After the United States and the EU, Brazil is Venezuela’s largest trading partner. Brazilian business, for instance, has been supplying an increasing amount of the goods and services Venezuelans have stopped producing. Brazil and Venezuela have reached several strategic alliances such as the one signed by Lula and Chávez in 2005, intended to create a “common economic area” between the north of Brazil and the south of Venezuela.

Moreover, the relationship extends far beyond economic matters to strategic political considerations. Journalist Raúl Zibechi, writing on October 2nd, 2012, in the Guardian, cites Brazilian diplomat Samuel Pinheiro Guimaraes, explaining:

that Brazil's strategy sought to prevent the "removal" of Chávez through a coup, to block the reincorporation of Venezuela into the North American economy, to extend Mercosur with the inclusion of Bolivia and Ecuador and to hinder the US project to consolidate the Pacific Alliance, which includes Chile, Colombia, Mexico and Peru.

Far from exposing differences between two South American “left models,” this demonstrates a far more sophisticated division of labour. No doubt, the presence of such a diverse cast of characters as Raúl Castro, Sebastian Pineira, and Dilma Rousseff at Chávez’s state funeral indicates the important part played by the tank commander in the red beret.

For Chávez’s clients, namely Cuba, Bolivia, Ecuador, Nicaragua, and arguably Argentina, his death begins a time of uncertainty at least until Maduro and his followers have consolidated the post-Chávez agenda. But in all of the capitals of the Americas the atmosphere is one of waiting to see what unfolds since the devil you know is always better than the one you don’t.

Fernando Menéndez is an economist and principal of the Cordoba Group International LLC, a strategic consulting firm

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