The New York Times
March 23, 2007
President Hugo Chávez of Venezuela had an especially good time baiting President Bush during their recent competing tours of Latin America. But demagoguery and showmanship will do nothing to solve Venezuela’s 20 percent inflation rate — now the highest in Latin America — and growing food shortages that are punishing the poor whose interests Mr. Chávez so loudly declaims.
Venezuela’s biggest problem is that there is no one to question Mr. Chávez’s increasingly erratic decisions. The National Assembly has given him the power to rule by decree for 18 months. So instead of seriously addressing Venezuela’s serious problems, the showman has settled for more showmanship.
As Simon Romero reported in The Times, Venezuela’s currency, the bolívar, has lost about a fifth of its value since January. The government has now announced it will introduce a new “bolívar fuerte,” or strong bolívar — worth 1,000 old bolívar, or roughly 25 American cents. It is also reintroducing a coin known as the locha — to be worth one-eighth of a bolívar fuerte — which last circulated in the 1970s.
Mr. Chávez appears to be counting on a psychological boost from a currency with three fewer zeros and a coin that evokes financially happier days. But by drawing attention to the bolívar’s recent weakness and — even worse — to the government’s capricious response, the maneuvers could further undermine confidence, rather than raise it.
Government spending — fueled by the nation’s oil wealth — rose an extraordinary 48 percent last year, and is one of the main forces driving inflation. Private-sector investment, meanwhile, has weakened since Mr. Chávez decided to nationalize utility companies earlier this year.
Price controls intended to help the poor buy food and hold down rising prices have led to a scarcity of staples like beef, chicken and milk. Threats to nationalize grocery stores and jail their owners — whom Mr. Chávez accuses of hoarding — have only made the situation worse.
Venezuela still has billions of dollars in foreign currency reserves. And Mr. Chávez has used some of the oil wealth to push social programs — including for literacy and health clinics — to improve the lives of Venezuela’s poor. But we fear that any good is quickly being undone by the old strongman formula of cronyism, corruption and incompetence.