Hugonomics: Venezuela’s fight against poverty, and against the private sector

Research Study

Hugo Chavez was elected President of Venezuela in 1998 and has proceeded to lead and symbolize a new variant of the Latin American political left. His Bolivarian Revolution and his push toward socialism have been characterized by strong rhetorical commitment to the poor, a larger state role in the economy, and authoritarian practices in political affairs.

Chavez is a former military officer whose first bid for power came in a failed coup attempt in 1992. He did not come from an elite social background and had no affiliation with either of the political parties that dominated Venezuelan politics since the late 1950’s. Given Chavez’ background, his stated economic goals, and Venezuela’s oil wealth, it seemed that his government would find a way to lift many Venezuelans out of poverty, and perhaps to create a new model for poverty reduction policies in a continent whose record on that score has been spotty. If ever there was a government that had the opportunity to fund social programs while preserving the benefits of private sector economic development, it was Venezuela’s.

A decade later, the degree to which Chavez has lifted Venezuelans out of poverty is subject to debate. What is clear is that the Bolivarian Revolution has developed new means of delivering services to low-income Venezuelans, and is developing an economic model that not only relies less and less on the private sector, but is in fact reducing the ability of private businesses to operate.

In the economic sphere, the drama of the next decade of the Bolivarian Revolution will be the extent to which private economic activity can continue and prosper, and whether Venezuelan social programs – in a context of lower oil revenues – can address not only the social problems that Chavez inherited, but also those created by own his policies’ squeeze on the private sector.

This paper is based in part on visits and interviews conducted in Caracas in July 2008.

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