Hugo Chavez, the avowed anti-American president of Venezuela, is gearing up for what it promises to be a tough reelection battle in 2012 – after more than a decade in power and amid growing popular discontent over the country’s rampant crime and inflation. The leftist leader, who in October of next year will face an opposition emboldened by his ongoing battle with cancer, has secured the issuance of $30 billion worth of Venezuelan debt as well as an additional $32 billion oil-for-credit deal with China. Chavez will use the money to pay for social programs he’ll deliver to the Venezuelan poor in exchange for votes in 2012.
Besides politically motivated, the deals are also bad economic policy for a major global oil producer with a population of just 28 million. While the rest of Latin America has managed to weather the global economic downturn with reduced borrowing, Venezuela –that remains largely dependent on the fluctuations of oil prices– issued the region’s largest amount of debt this year; and instead of using the money to modernize the country’s aging oil-producing infrastructure, Chavez will buy Chinese-made appliances for sale to the public at a discount through cheap state credit (even when these electronics risk sitting unused due to the country’s recurrent power shortages).
Lawmakers of the Venezuelan opposition have also denounced Chavez’s borrowing as lacking in transparency and downright unconstitutional. The strongman has discretionary powers over the funds obtained from the securities as well as absolute control over the money from the Chinese deal –which is administered separately from the national treasury and only requires the approval of the national executive. The oil-for-credit operation, in which China will lend Venezuela $32 billion at low interest rates in exchange for a steady supply of future oil shipments, raises flags as the Venezuelan constitution prohibits oil reserves to be used as loan guarantees.
But constitutional boundaries haven’t stopped Chavez before. The self-proclaimed socialist leader –known for his eagerness to seize private property and intimidate independent media– has also been denounced for redrafting the constitution, banning political opponents and tampering oversight of electoral processes in order to secure consecutive reelection. Chavez has also overstepped geographical boundaries by financing governments and political campaigns across the continent hoping to spread his brand of “21st-Century Socialism” through the region in countries such as Cuba, Argentina and Nicaragua –where Daniel Ortega, the former leader of the Sandinista revolution, recently won a controversial reelection by following Chavez’s playbook and using Venezuela’s checkbook.
This is hardly the first time that Chavez has manipulated Venezuela's economy to finance his demagogic brand of populism. Whether it will be the last, however, is yet to be determined. His opposition is still crippled by internal divisions and, most importantly, the fluctuations of oil prices could either fuel the Bolivarians for decades to come or sweep them away from power if we ever manage to cure our oil addiction.
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