Friday, January 12, 2007

"Why Chávez Wins" by Francisco Rodríguez

One can resume Venezuela's misery on this words:

"Whether or not Chávez's policies have actually helped the poor, what's relevant is that the poor attribute the improvement in their living standards to what Chavez has done. That's a fundamentally political fact based on a series of complex cultural phenomena: no amount of economic data is likely to clarify it."

- FT (Quico) from Caracas Chronicles blog.

Yep. A vast amount of Venezuelans are that blinded by the allure of the speech of charlatans like Hugo Chavez. Make no mistake, could have been anyone, Pepito Perez, anyone full of BS-like speech. That's the biggest tragedy of the country. The waste of human resources by ignorance, by the charm of a cult leader.

Read below the whole transcript of the article that Quico posted a few days ago, and check out his whole comments about it.

"Why Chávez Wins" by Francisco Rodríguez

Anti-American autocrat Hugo Chávez was sworn in for a third term as Venezuelan president on Wednesday, after promising to nationalize "strategic" sectors of the economy and bring "21st Century Socialism" to the masses. But his appeal among Venezuela’s poor is based on a lie. A new analysis of his government’s own statistics finds that his policies don’t actually help them.

On December 3, President Hugo Chávez was reelected by Venezuelans to a third term with the support of nearly 63 percent of voters. Most observers quickly attributed Chávez’s victory to support among the country’s poor, stemming from his strategy of broadly redistributing Venezuela’s oil wealth.

The myth that Chávez has redirected Venezuela’s priorities toward the poor is so widespread that it is even commonplace among his critics. But there is a problem with this diagnosis of Chávez’s success: It isn’t true. Most existing statistics do not show significant improvements in either the well-being of or the share of resources being directed to Venezuela’s most disadvantaged citizens. And the few statistics that do appear to support this notion are so filled with inconsistencies that they can’t be trusted.

The most commonly cited statistic in defense of the Chávez-helps-the-poor hypothesis is the decrease in poverty rates, from 42.8 percent when he took office in 1999 to 33.9 percent in 2006. But this decrease is neither unprecedented nor surprising, given that the Venezuelan economy is in the midst of an economic expansion fueled by a five-fold increase in global oil prices since his first term began. Historically, drastic declines in poverty in Venezuela are associated with periods of substantial real exchange appreciation similar to the current one. The last such episode, which lasted from 1996 to 1998, coincided with an even larger decline in the poverty rate, from 64.3 percent to 43.9 percent. The fact that Venezuela is presently running a fiscal deficit despite unprecedented global oil prices signals that the current improvement, just like previous ones, will sooner or later be reversed.

A full reading of Venezuela’s health and education statistics shows no signs of the dramatic turnaround in well-being often claimed by the Chávez government and its supporters. For instance, the percentage of newborns who are underweight actually increased from 8.4 to 8.8 percent between 1999 and 2004. The infant mortality rate has declined, but it has been declining steadily since the 1940s. There isn’t even much evidence that the government is trying to do more for the poor. The average share of social spending, excluding social security, has actually decreased during the Chávez administration (29.3 percent for the period from 1999 to 2004, in contrast to 31.5 percent for period from 1990 to 1998 before Chávez was in office).

The biggest challenge to evaluating Chávez’s success in poverty reduction is disentangling fantasy from reality in official announcements and data. One example is the government’s claim of having eradicated illiteracy by teaching 1.5 million Venezuelans how to read and write. Several colleagues and I analyzed the veracity of this claim by studying official Venezuelan government data. According to our estimates, in the second school semester of 2005, there were still 1,014,441 illiterate Venezuelans over the age of 15, only slightly less than the estimate of 1,107,793 people at the start of the program. Even this small reduction can be traced back primarily to changes in the demographic composition of the population.

Similar inconsistencies can be found almost everywhere in the government claims. The administration says it mobilized more than 3 percent of the labor force to work in social programs called misiones, but official employment statistics show no evidence that these people were ever employed, and official budget figures show no evidence that they were ever paid. Estimates of the percentage of Venezuelans with access to sanitation services derived from government data are also inconsistent with official claims of large improvements.

But if Chávez’s social policies are not working, why did he win such a clear victory in the December elections? The explanation lies largely in Venezuela’s economic growth. The country has experienced three straight years of near-double-digit growth, partly because of the recovery from the 2003 national strike and partly because of the dramatic increase in worldwide oil prices. If there is one universal rule of voting behavior, it is that incumbents do well when the economy is growing.

That high economic growth would obviously be a point in favor of Chávez if it weren’t so clearly unsustainable. Despite a five-fold expansion in oil prices, Venezuela is currently running a fiscal deficit projected at 2.3 percent for 2006. A decline in oil prices, or perhaps even something less dramatic, will make this house of cards come tumbling down. When it does, it will be the Venezuelan poor who will pay the heaviest price.

And when that time comes, Venezuelans of all stripes may have no choice but to accept Chávez’s continued rule. He has used his time in office, and his country’s ample resources, to consolidate a formidable political machinery whose power is based not only on its ability to hand out rewards to supporters, but also to punish its opponents by systematically denying them access to employment and public services. Every arm of the state, from the tax collection agency to the judicial system, is being used to ensure that Chávez’s opponents pay a high cost for their political opinions.

The centerpiece of this system is the elaborate Maisanta database, an electronic registry of the political allegiances of 12.4 million Venezuelans. In what Venezuelan economist Ana Julia Jatar has termed a “21st century apartheid,” the list is routinely used by government offices to screen job applicants and those seeking social assistance. The Inter-American Commission on Human Rights is currently processing 780 cases of political discrimination against signers of the petition to hold the 2004 recall referendum. Only time will tell whether Chávez’s elaborate system for the suppression of dissent will be sufficient to counteract the effect of an economic downturn. In the meantime, another oil boom will have been squandered and another chance for Venezuela’s development will have been thrown into the dustbin.

Francisco Rodríguez is assistant professor of economics and Latin American studies at Wesleyan University and former chief economist of the Venezuelan National Assembly.

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