Venezuela
"The
rise of the "Boligarchs"
Under
Hugo Chávez, the right political connections are a
passport to wealth, whisky and a Hummer
Illustration: Claudio
Munoz
By
The
Economist
"PETROLEUM socialism" is how Hugo Chávez,
Venezuela's president, recently dubbed the blend of military
populism and neo-Marxist statism to which he is subjecting
his country. Its prime objective, he insists, is to improve
the lot of the country's poor majority. Mr Chávez proclaims
that "being rich is bad". He frequently lashes out
at what he calls "the oligarchy". Strange, then,
that the streets of Caracas are clogged with big new 4x4s (Hummers
are especially favoured), it is hard to get a table at the
best restaurants, and art dealers and whisky importers have
never had it so good. A new oligarchy seems to be rising in
Venezuela on the back of the "Bolivarian Revolution",
named for the country's independence hero.
"Some of Chávez's speeches are for the gallery," says
Alberto Muller Rojas, a retired army general who was until
recently the president's chief of staff. "And I'll give
you an example: the attack on the bourgeoisie." As evidence,
General Muller singles out the banks: "the most extreme
expression of the bourgeoisie" but "the most favoured
sector" of the economy since Mr Chávez came to
power in 1999.
Their prosperity
owes much to an oil windfall: the price of Venezuela's main
export has increased almost eightfold since
1999 and the economy has been growing at 10% a year. But government
policies, too, have favoured the bankers and other intermediaries:
inflation is close to 20% and the official value of the currency
is twice its black-market exchange rate. So the savvy investor
looks for access to cheap dollars, import opportunities and
government contracts, all of which are largely conditional
on political obedience. By contrast, manufacturers and farmers
face price controls and risk sporadic official harassment.
The result has been the rise of what is known, in obeisance
to Bolívar, as the "Boli-bourgeoisie".
Thanks
to economic growth and social programmes, the government
claims that only 30% of Venezuelan families now live in poverty,
down from 55% at the peak in 2003. But according to a new report
by the central bank, income inequality has widened slightly
under Mr Chávez: the Gini coefficient—a statistical
measure of inequality—has gone from 0.44 in 2000 to 0.48
in 2005.
Typical
of the new "Boligarchy" is Wilmer Ruperti,
a shipping broker who was once a merchant seaman. His ascent
was helped by a two-month strike against Mr Chávez by
workers at Petróleos de Venezuela (PDVSA), the state
oil company. Mr Ruperti chartered ships to help the government
break the strike. Another is Arné Chacón, whose
brother Jesse is the communications minister. Arné now
owns half of Baninvest, a bank. He acquired it with loans for
which his main apparent collateral was his official connections.
Mr Chávez claims to be pursuing economic nationalism
and "endogenous development". But farmers and manufacturers
struggle against cheap imports. Though local dairy products
are often missing from the supermarket shelves, Gouda and Emmenthal
cheeses nestle beside Irish butter. The frozen chickens at
Mercal, a government chain of subsidised grocery shops, are
Brazilian. The importers who supply Mercal have grown rich.
But Venezuela's ranchers are becoming extinct, threatened by
expropriations, land invasions and price controls, as well
as by extortion and kidnappings by criminal gangs.
Officials
stress that two-thirds of the poor have benefited directly
from government social policies. As well as Mercal,
these include the "missions", which offer education
and health care. Up to 2m people get a small cash stipend.
But despite hefty increases in the minimum wage and price controls
on basic goods, inflation is eating away at the gains.
For those
with connections, however, the rewards are great. The World
Bank recently ranked Venezuela as the second-worst
country in the Americas for the control of corruption, above
only Haiti. Others confirm this perception. "We usually
ask for 10%," a foreign diplomat reports one government
official admitting. "But some get greedy and want 15-20%."
Since his
re-election in December, Mr Chávez has frequently
suggested capping the salaries of the highest-paid public officials.
He also called on those with "excess" wealth to donate
part of it to worthy causes. The response has been meagre.
If he really tries to make socialism more than a slogan, some
of the fiercest resistance may come from the new bourgeoisie
his own policies have created.
The
Economist is
one of the most read business magazine. Petroleumworld
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Editor's
Note: This
article originally published by the Economist print edition, on 11 August
2007. Petroleumworld reprint this
article in the interest of our readers.
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