The Implosion of Chavez Continues

The Washington Post: Venezuela ... the implosion of Chavez continues

The Washington Post (Jackson Diehl): 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 Venezuela's 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 distress. Gross national product fell 5.8% in the first quarter, while inflation remained at 30%. Private investment plummeted 27.9% 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. Now, contrast Venezuela's crash with quarterly growth rates of 8% in Brazil, Argentina and Mexico. It even comfortably exceeds the collapse of Greece's economy, which contracted 3% 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 Web site. Even Zimbabwe, which used to be considered the world's economic basket case, looks good compared with Venezuela: It is expecting 6% growth this year, while inflation is under 5%.

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

When I pointed out in January that Chavez' 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' desperate measures to stop the free-fall are only making it worse.

Recently, for example, Chavez abruptly moved to abolish the private currency market, which supplies the dollars for 30-40% 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' 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' decade-long attempt to create a bloc of like-minded countries in the region is in tatters.

The caudillo's popularity rating around Latin America is now below 40%, and his backing in Venezuela has dropped below 50%.

With an election for the National Assembly coming 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.