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ECONOMIST: Hugo Chavez's rotten legacy

Back in the 1990s<WC>,<WC1> Latin America seemed to have turned the page on military rule and embraced democracy and free-market economics, with the sole, beleaguered exception of communist Cuba. Then along came former Lt. Col. Hugo Chavez, a bumptious Venezuelan who, having staged a failed military coup against a democratic government, got himself elected president in 1998.

Chavez proceeded to dominate his country for more than 14 years<WC> <WC1>until his death this week from cancer. His secret was to invent a hybrid regime.

He preserved the outward forms of democracy, but behind them he concentrated power in his own hands and manipulated the law to further his own ends. He bullied opponents and encouraged the middle class to emigrate. He hollowed out the economy by mixing state socialism and populist redistribution with a residue of capitalism, and he glued it all together with the crude but potent rhetoric of Latin American nationalism.

Chavez claimed to be leading a <WC>"<WC1>Bolivarian revolution" against the <WC>"<WC1>empire" <WC>—<WC1> that is, the United States. It did not seem to matter that Simon Bolivar, the Venezuelan hero who liberated much of South America from Spanish colonial rule, was an Anglophile conservative.

Chavismo turned out to be a remarkably successful formula: Chavez won four elections by margins ranging from sweeping to comfortable and lost only one of his six referenda. In October<WC>,<WC1> he won a new six-year term, even though his campaigning was restricted by his illness, which was graver than he admitted. He spawned imitators elsewhere in Latin America, financing an anti-American alliance of like-minded leaders and client states. He was the savior of communism in Cuba, his aid keeping the Castros in power while slowing the transition to capitalism in a bankrupt island.

Two things lay at the heart of Chavez's success. The first was his own political talent. Born in provincial obscurity, he proved to be a natural performer and communicator, with an unmatched ability to empathize with ordinary Venezuelans, combined with plenty of cunning. If Nicolas Maduro, his appointed vice president and anointed successor, possesses any of these skills, he has yet to reveal them.

The second and bigger factor was that Chavez had the immense good fortune to come to power as an unprecedented commodity boom was about to get under way. Oil prices soared and the dollars rolled in, without the Bolivarian revolution having to work for them. Chavez used this windfall to buy himself popular support, with social programs and handouts. The oil-fueled bounty seemed to vindicate his claim that, before his advent, Venezuelans had been impoverished by <WC>"<WC1>neo-liberalism."

The writing on the wall for Venezuela is no longer simply Bolivarian slogans, however. Although commodity prices may not be about to fall, they are no longer rising as they did in the 2000s. After ramping up spending ahead of October's election, the government posted a fiscal deficit of 8.5 percent of GDP last year, financed in part by mortgaging some of its future oil output to China. Last month it devalued the currency by 32 percent.

As acting president since December, Maduro has continued in his boss's vein, issuing threats against the opposition and private business and expelling a couple of American diplomats. No doubt Chavez's death will prompt a sympathy vote that will help Maduro win the election that the constitution now demands. Latin Americans have a necrophiliac streak, and the opposition, though stronger than in the past, is reeling from defeat in presidential and regional elections last year.

Maduro lacks Chavez's authority, however. Assuming that he wins, he will have to stabilize the economy while imposing his will on his faction-ridden party. The place may unravel.


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