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Hugo Chavez's implosion continues in Venezuela

Hugo Chavez has been keeping a relatively low profile of late -- there have been no grand world tours, no fiery speeches at the United Nations. The Obama administration, which once promised to “engage” the Venezuelan caudillo, is instead quietly shunning him.

There’s a simple reason for this: the implosion of Chavez’s self-styled “Bolivarian socialism” is accelerating.

Figures reported Tuesday by the Chavez-controlled central bank portrayed an economy that is completely out of sync with the rest of the region -- and perhaps unique in the world in the degree of its current distress. Gross national product fell by 5.8 percent in the first quarter, while inflation remained at 30 percent. Private investment plummeted by 27.9 percent as capital continued to flee the country.

Private economists suspect the economic contraction is even worse than what the official figures concede. But let’s assume they are correct. Venezuela’s crash compares with quarterly growth rates of 8 percent in Brazil, Argentina and Mexico. It comfortably exceeds the collapse of Greece, which contracted by 3 percent in the first quarter.

Inflation in Caracas is triple the next highest rate in Latin America (Argentina) and is more than double that of the next worst economy (Pakistan) among the 56 tracked by the Economist’s website. Even Zimbabwe, which used to be considered the world’s economic basket case, looks good compared to Venezuela: it is expecting 6 percent growth this year, while inflation is under 5 percent.

In short, economic recovery is taking hold across the world -- except in Chavez’s Venezuela.

When I pointed out back in January that Chavez’s revolution was collapsing, a chorus of left-wing bloggers rose up in protest.

The extremists among them claim that Venezuela is actually doing better than the rest of the world, because (loony version) Chavez is destroying evil capitalism or because (slightly less loony version) Venezuela’s implosion is irrelevant to the rest of the region.

But, of course, Venezuela really is cratering -- and Chavez’s desperate measures to stop the freefall are only making it worse. A couple of weeks ago, for example, he abruptly moved to abolish the private currency market, which supplies the dollars for 30 to 40 percent of Venezuela’s imports. The dollar exchange rate was soaring, so the government arrested a bunch of currency traders and announced that sales of dollars henceforth would be controlled exclusively by the central bank. The result will almost certainly be another drastic decrease in imports, the worsening of already widespread shortages in food and basic consumer goods, and the creation of a new black market in dollars.

And, of course, the implosion of Chavez’s potted socialism does matter to the rest of Latin America. It’s not just that the Obama administration no longer needs to bother with the strongman, since he is doing an excellent job of self-destruction. It’s that Venezuela’s clients and imitators -- especially in Bolivia and Nicaragua -- stand to lose both subsidies and ideological sustainment from Caracas. Chavez’s decade-long attempt to create a bloc of like-minded countries around the region is in tatters.

The caudillo’s popularity rating around Latin American is now below 40 percent, and his backing in Venezuela has dropped below 50 percent. With an election for the National Assembly coming up this fall, he has resorted to the Iranian tactic of disqualifying prominent opponents from the ballot. He will try to steal the election; if that doesn’t work he will try to strip the legislature of power.

No matter: Chavez appears powerless to stop the unraveling of Venezuela’s economy -- and with it, his “revolution.” He will be left with a choice: surrender to his country’s mounting discontent, or rule entirely by force.

By Jackson Diehl  | May 26, 2010; 2:26 PM ET
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I guess he needs another hug from his friend in the White House.

Tragic how the suffering of the Venezuelan people elicits no condemnation from the White House. Where are those oppressive Jews when Obama needs them ?

Perhaps Chavez will have to ask his military to pretend to arrest him and put him on the border with Brazil ?

Than like Honduran Chavez-wannabe.. the White House and the American Left will rise up in rage and support him ?

Posted by: pvilso24 | May 26, 2010 2:40 PM | Report abuse

Couldn't happen to a better despot.

Posted by: johnson0572 | May 26, 2010 3:03 PM | Report abuse

Knowing despot Chavez, he's going to go for ruling entirely by force. History repeats itself.

Posted by: Me-2 | May 26, 2010 5:03 PM | Report abuse

Chavez's policy are totalitarian and bankrupt? Really!! Well, don't tell Capeheart, Robinson, Obama or some of the left-wing red-loving loons commenting on WaPo articles. You'll be accused of racism and be called a retarded Palin-loving Republican.

Posted by: wjc1va | May 26, 2010 5:06 PM | Report abuse

Tell us Mr. Diehl how much confidence investors have when dictators steal companies like Putin and Chavez? Then tell us how much when they don't in China? Nuff said.

Posted by: jameschirico | May 26, 2010 6:01 PM | Report abuse

Where does Diehl get his numbers from? Why doesn't he portraits the whole picture?
I think that he's been reading and watching too many opposition Venezuelan news media.
I recommend you to pay us a visit, please.
Stop being part of the conspiracy and get your stuff together.
Get real man!

Posted by: wlirab | May 26, 2010 6:01 PM | Report abuse

Where does Diehl get his numbers from? Why doesn't he portrait the whole picture?
I think that he's been reading and watching too many opposition Venezuelan news media.
I recommend Diehl to pay us a visit, please.
Stop being part of the conspiracy and get your stuff together.
Get real man!

Posted by: wlirab | May 26, 2010 6:02 PM | Report abuse

The last comment tell it all: a conspiracy! Give me a break. It doesn't look too good for a semi dictator! Do you folks who post these comments really believe in the power of the people? Give me a break!

Posted by: Fergie303 | May 26, 2010 9:11 PM | Report abuse

It's time for Pelosi and Reid to convene a Congressional hearing and subpeona Sean Penn, Joe Kennedy and Danny Glover to testify that everything is indeed paradise in Venezuela.

Posted by: ExPatYankee | May 26, 2010 9:38 PM | Report abuse

Good job Mr. Diehl! Ain't that great when we are proven right? Even in my case as I might be about to lose my business courtesy of Chavez blunders: I was right all along but I will be starving along chavistas anyway. Little consolation at the end.

It is funny but when I read some of your critics I wonder if they actually bother reading what you write down, they seem to be more like shooting from the hip.

Posted by: danielinyaracuy | May 26, 2010 11:17 PM | Report abuse


The numbers come from nowhere else than the Venezuelan Central Bank, CONTROLLED by Chavez appointees. That is, the numbers are terrible which might actually mean they are much worse since the Central Bank sugar coats as much as possible bad indicators....

There is no need to invent numbers to tear down Chavez results: he gives them to us.

Posted by: danielinyaracuy | May 26, 2010 11:20 PM | Report abuse

The comparison to Zimbabwe isn't entirely fair, since it had nowhere to go but up, whereas Venezuela has historically been relatively robust. And as such, even a cratering Venezuela will remain an extremely important partner to a nation like Nicaragua--where Venezuela's problems represent an additional worry, but still only one among many.

I'm sympathetic to a certain amount of caudillismo in Latin America, but its success all depends on the leader. Progress can be made if the caudillo's committed to it, and has broad enough support.

But the criticisms here are totally valid. Venezuela deserves much better.

Posted by: Godfather_of_Goals | May 27, 2010 12:09 AM | Report abuse

Good article Jackson. As Daniel says, the situation is but the confirmation of stuff we´ve been denouncing for years.

Regarding your ´left wing critics´: pay no heed to Chavez employees, for the boss himself is allowing publication of figures that undermine himself!

Posted by: alekboyd | May 27, 2010 4:09 AM | Report abuse

I am no fan of socialism or whatever you want to call the system in Venezuela. But it seems to me that the larger economic issues the country is dealing with are more a product of Chavez's inept dictatorial rule and insanely bad judgment than any type of economic philosophy he might favor.

But of course that doesn't fit with your political agenda so those realites must be diminshed. As someone that has a healthy distrust of both sides of the aisle I am bothered people who create an altered reality to score points.

Posted by: Albie1 | May 27, 2010 9:16 AM | Report abuse

@wlirab: And what is the "whole picture" according to you? Because the only thing that I can see from your post is that you are trying to disqualify Mr. Diehl's argument without providing an iota of substance to back your statement.

Yeah... and I agree Mr. Diehl should come and pay a visit. Perhaps he can verify that I cannot find cooking oil, margarine, toilette paper or corn flour. Perhaps he can verify that I need to go to three or four supermarkets every week in order to find what I need for my home. Perhaps he can verify that crime is killing us by the thousands while Mr. Chavez funds police departments else where. Perhaps he can verify that we are invaded by Cubans who are stealing our country piece by piece with the approval of Mr. Chavez.

Posted by: Mambru | May 27, 2010 10:59 AM | Report abuse

While I'm not suggesting that socialism is right or wrong, I do find such a commentary disturbing.

First, any commentary that is TOTALLY negative becomes less than credible. It suggests that all the "facts" are polished to fit a cental opinion (that one way of thinking is right and another in wrong).

Second, it fails to cite any specifics on the country's economy. What about the fall of oil prices? How about the isolation by other counties because they control their own resources, not allowing Exxon to make another trillion?

Third, a full reversal to capitalism may increase the "growth", but for whom? The people or Exxon and BP? Would more american manufacturing or service jobs be lost to workers in Venezuala who would work for half the price of Americans, increasing profits of the above?

Commentaries in the post should be at a higher level than simply "they are BAD, so they fail (ha ha)."

Posted by: jgrace5 | May 27, 2010 12:30 PM | Report abuse

This is the link to the actual Government Page. If you don't believe it ask someone who speaks Spanish. Also, find an online translator and read the damn thing:

Posted by: carv123456 | May 27, 2010 8:09 PM | Report abuse

LOL! Leftists are such idiots. Socialism simply doesn't work. Never has, never will.

Posted by: danram | May 27, 2010 8:57 PM | Report abuse

Thank you Mr. Diehl for writing another excellent article reporting the terrible situation Venezuelans are suffering under Hugo Chavez. I hope that world leaders do read this article, and come to their senses and help Venezuelans restore democracy.

As readers have noticed Chavez's salaried staff seem to be writing comments defending him. So, is Chavez going to punish them if they have their own opinion outside of the official message?

Posted by: MaruAngarita | May 27, 2010 9:06 PM | Report abuse

to all,

i was once stationed in VZ with the US Army & planned to retire to Caracas.
(it was a lovely place, great climate, friendly/smiling people, etc.)

i also KNEW LTC Chavez & hoped that he would fix the mess that was the VZ government.

instead, he has ruined Caracas & destroyed the economy of the whole nation.= PITY!

yours, TN46

Posted by: texasnative46 | May 27, 2010 10:01 PM | Report abuse

“How about the isolation by other counties because they control their own resources, not allowing Exxon to make another trillion?”
As PDVSA , and thus the Venezuelan government owns CITGO in the US, and Venezuela’s biggest oil customer is the US, this question is comical. Isolation? What planet do you reside on? If Venezuela is “isolated,” then how has Chavez been able to borrow tens of billions of dollars of future oil earnings to pay for his profligate spending today? Do you have any idea when PDVSA was founded, when you talk about "control their own resources?"

“Would more american manufacturing or service jobs be lost to workers in Venezuela who would work for half the price of Americans, increasing profits of the above?”
Given that a very high proportion of what Venezuela consumes is imported, a percentage that has increased under 11 years of Chavez’s “socialism,” this question is comical. Venezuela is much less self-sufficient today than it was 11 years ago, a consequence of Chavez’s “socialism.”

“Third, a full reversal to capitalism may increase the ‘growth’, but for whom? The people or Exxon and BP?”
Back in 2008, Chavez predicted that the worldwide financial crash would not affect Venezuela, because Venezuela was not “capitalist.” How did that work out?

If you are really interested in learning about Venezuela, instead of being an ignorant troll, I suggest you consult three English language Venezuelan blogs: Caracas Chronicles, Devil’s Excrement, and Venezuela News and Views.
If you speak Spanish, I highly recommend Radar de los Barrios.

Posted by: languid | May 27, 2010 10:03 PM | Report abuse

Thank you for raising awareness to the issues in Venezuela. As much as it pains us, with investments and background in the country, an inept despot has to be denounced.
Countering arguments of welfare policies by Chavez (rather handouts), it should be taken into account that he has spent over one hundred billion dollars over the past 11 years and the infraestructure of the country is falling apart. Also, over 98% of homicides are left unpunished. Is this 21st Century Socialism? Enough said!

Posted by: fgbper | May 28, 2010 12:19 PM | Report abuse

Sorry to contradict you Fgbper, but that's ONE MILLION billion dollars or better yet, ONE TRILLION DOLLARS in 11 years. No government before this had at its disposal such fabulous amount of resources to tackle ALL the problems and I mean all (given Venezuela's relatively low population, 27 or 28 million).
I would also like to concur with Albie up there in saying that socialism has nothing to do with the economic debacle. Its pure ignorance on running a country and its economy. Im no socialist (I was born in Venezuela from Cuban parents who fled the island in the 60´s) and prefer caitalism instead, but if Chavez is so bent on establishing socialism in my country why does he not choose a type of "learned" socialism such that which exists in some of the baltic countries? Becuase they are there for the money!! The country's economy is today in shambles precisely because, in addition to strict price controls in effect since early 2003, Chavez has nationalized or out right stolen many of the countries key economic areas. Once he started with the landowners, the result was inefficiency and scarcity of meat and other agricultural staples. And that is just to point out one example. What in fact has happened is that the old economic elite was displaced with a new and revolutionary one whose only major accomplishment has been to drive many industries to the ground while at the same time line their pockets with plenty of public funds. In closing, and to address another situation that Mr. Diehl mentions in his article, the closing of the foreign exchange market in Venezuela is the result of 7 years of a controlled dollar, runaway imports (propitiated by the government and then only through friends of the government), the government's inept handling of its windfall earnings (lots of it squandered or given away), and other economic measures whose only aim was to suffocate economic groups (not their own). In short, this economic collapse is (I think) a carefully executed plan to do away with old. Nothing new in that sense but also nothing gained.

Posted by: sattvaenterprises | May 28, 2010 2:51 PM | Report abuse

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