Hugo Chavez May Have Returned, But is Venezuela Still Spiraling Into Chaos?

The recent spate of news over the last two months regarding Hugo Frias Chavez, the president of Venezuela, has been vaguely perplexing or even somewhat amusing, to those outside of the country. "He is sick," "He is cured," "Where is he?," "He is dying," "He is fully in command," "He can’t talk," "He’s back!" ... In a completely unannounced development, Chavez reportedly returned to Venezuela in the middle of the night a few days ago. I say "reportedly," because there were no reporters and no video, only a message from Chavez on Tweeter, which is hardly definitive. What is certain to most people is that after 14 years in office, Chavez is no longer exercising power in Venezuela and he never will again. For Venezuelans, this has been a roller coaster ride, which has left the entire country in a state of extreme anxiety. 

After years of autocratic and capricious rule, Chavez has eliminated (often jailing) anyone in his party and government who had the temerity to disagree with him. The remainder of his government is loyal, but they are mediocrities, lacking in leadership and management ability. Yet these are the people who are currently running the country and making decisions. There is no real central authority, and the communications coming from the government show a shocking lack of message discipline.

The current condition of Venezuela is amazingly bad for a country sitting on the largest proven oil reserves in the world. The independent institutions of democracy have been destroyed. They exist, but they are only there to provide a fig leaf of democratic legitimacy, and are filled with people who obey the commands of Chavez. The society has been polarized into two diametrically opposed groups, the Chavistas, loyal to Chavez, and the opposition. Political dialogue has been reduced to crude insults. Crime has spiraled out of control, and the police are more often the criminals than not. The homicide rate is the second worst in the Western Hemisphere behind Honduras. The private sector has been devastated by incompetent economic management and purely punitive policies designed to reduce the power of the opposition.

Venezuela is currently importing about three quarters of its consumed foodstuffs because the private sector cannot compete with massively subsidized imports. Shortages of staple items are normal. The infrastructure of the country is crumbling from mismanagement and lack of investment. Power outages occur in all parts of the country on a daily basis, for hours at a time. Bridges are collapsing on a regular basis, and the country’s mainstay, its petroleum industry, has been beset by major industrial accidents amid declining production. I could go on and on, but suffice it to say that the last 14 years of incompetence in government, mismanagement, and corruption, has been a disaster for Venezuela. It has had one successs: spawning a brand-new cadre of nouveau riche who rode the Bolivarian movement to great wealth through official corruption, or by taking advantage of the opportunities for arbitrage created by the huge discrepancies between the currency’s actual value and its currency controlled value (currently 22 to 6.3).

The frustration here for any analyst is that no one can really predict what will happen next. If the Venezuelan government were making rational decisions, it would be different. Rational people (and governments) evaluate their options and decide based on their best interests. It is not a perfect science, because sometimes risk factors are not evaluated correctly. But, in general, it is possible to evaluate a short list of options and assign probabilities for a government selecting one of those options. But, at the moment, neither the Venezuelan government, nor the players in it, are behaving rationally or in their best interests. So anything is possible.

My educated guess is that we will see a rapidly accelerating descent into chaos and civil disorder. It seems that like a drug addict, Venezuela is going to have to hit rock bottom before it can begin to get better. Eventually, martial law will have to be enacted just to restore order; but considering the current state of the Venezuelan military, even they may be outnumbered by the Chavista thugs. The U.S. will not act, but if the situation threatens Colombia and Brazil with a massive refugee crisis, they may intervene.

It is all going to happen fast, though, so stay tuned.