Roosevelt Institute | Cornell University

Venezuela's outlook without Chavez

By Michael CrovettoPublished May 1, 2013

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With countries seemingly going bankrupt daily in Europe, and the threat of congressional incompetence killing the American economic recovery, it should come as no surprise that countries in South America are experiencing struggles as well.
By Michael Crovetto, Published 5/1/13

With countries seemingly going bankrupt daily in Europe, and the threat of congressional incompetence killing the American economic recovery, it should come as no surprise that countries in South America are experiencing struggles as well. Venezuela, after the recent death of its leader Hugo Chavez, has been left in an interesting position. After Pres. Chavez escalated government spending in order to secure his reelection bid, it seems as though the Venezuela will soon feel the resulting high spending consequences.  

Chavez’ successor, projected to be Nicolas Maduro, must soon deal with the rising inflation levels as a result of the costly surge in government spending. Venezuela’s annual inflation rate could top 30% this year. Such a high inflation rate means the government will need to spend more in real dollars to make up for the devaluation. This further increase will than add on to the already engorged rate, creating a vicious cycle. With an economy whose growth has been dependent on Chavez’ enormous government spending policies, cutting back now could have devastating effects. 

The Venezuelan people have grown accustomed to the exuberant spending. With generous public housing and subsidies on gas and food, a cut to spending could lead to political turmoil. Venezuela is in a difficult position. In cutting spending, the Venezuelan people lose the government benefits they have received for years and are thrown back into an inflation filled disaster where they must spend what little they have before it becomes even less. This does not bode well for Chavez’ successor, who at this point looks like will be put in a situation where these hardships will be unavoidable. The newly elected President will have to act quickly. But with such difficulties in the near future in this prideful state, could there be an opportunity here for the United States? After Hugo Chavez’ policy of bitterness toward all things American throughout his entire political career, it is pretty hard picturing an American-Venezuelan relationship getting any worse. With the Venezuelan economy potentially hitting a wall, the people may soon look toward American capitalism as the answer. Not only this, but it becomes very difficult for a government in the middle of an economic struggle to avoid trading with the world’s biggest importer.

In conclusion, the Venezuelan economy is at a critical point. The winner of the April 14th presidential election will be put in a position where his first actions will be very telling. As the world looks onto Venezuela on election night, the winner must be ready for his every action to be scrutinized until there is some sort of conclusion to this potential disaster.