More Fun with Price Controls

It was with astonishment that The Economist surveyed Hugo Chávez's first five years in office: "In the five years to 2003, Mr Chávez's performance was disastrous. The proportion of households below the poverty line increased by more than 11 percentage points…It was the first time since data were collected that poverty rose even as the oil price did too."

But in the past few years, the Venezuelan economy has undergone significant growth, with an influx of oil money resulting in 18 percent growth in 2004 and 10 percent in 2005 (though the economic expansion has tapered off in recent months). Back in 2006, Latin American studies Professor Michael Shifter, who is somewhat sympathetic to the Chavism, said that while the economy has improved, and "record oil profits…are funding social spending, [Chavez's] initiatives have yielded only very modest gains." In a previous piece on the caudillo of Caracas, I quoted former chief economist of the Venezuelan National Assembly Francisco Rodriguez on the much-heralded decrease in poverty: "It's normal for poverty to decline during economic expansions and that the decline under Chávez is not unprecedented—indeed, it is smaller than the decline observed during similar periods in the past."

And despite oil hovering at around $100 a barrel, the economic situation seems to be getting worse. This is what one must endure if one wants to buy "subsidized food" in the city of San Antonio de Tachir:

The New York Times' excellent Latin America correspondent Simon Romero has a must-read (well, for those interested in such things) on Chavez's eroding popularity. A sample:

While Mr. Chávez remains Venezuela's most powerful political figure, his once unquestionable authority is showing signs of erosion. Unthinkable a few months ago, graffiti began appearing here in the capital in January reading, "Diosdado Presidente," a show of support for a possible presidential bid by Diosdado Cabello, a Chávez supporter and governor of the populous Miranda State.

Outbreaks of dengue fever and Chagas disease have alarmed families living in the heart of this city. Fears of a devaluation of the new currency, called the "strong bolívar," are fueling capital flight. While the economy may grow 6 percent this year, lifted by high oil prices, production in oil fields controlled by the national oil company, Petróleos de Venezuela, has declined. Inflation soared by 3 percent in January, its highest monthly level in a decade.

Add to this Exxon's court-approved freezing of $12 billion in PdVSA (Venezuela's state oil company) assets and widespread food shortages (those pesky price controls again!) and it looks like Chavez's Bolivarian revolution is, at long last, in decline.