Oliver Campbell: Beyond the elections
I am no political pundit and have made no analysis of the 7 October elections. However, I do have a view on why President Chávez won the elections, that may interest you, and which is based on just two premises:
a) The superior number of the poor. They are around 60% of the population and are the ones who have benefitted from handouts and other aids like the Cuban doctors. It is said many of the latter are badly trained and are not competent physicians. I have no idea if this is true as none of my relatives lives in a shanty town. But is a fact the poor in the "barrios" do have access to medical attention, however basic it may be, which they did not have before.
b) Sense of security with status quo. The poor are sure Chávez will continue with the handouts and other aids, whereas with Capriles they only had it on trust despite the fact he promised to continue with them. The saying, "You don't bite the hand that feeds you" neatly sums it up.
Several political pundits cried foul because Chávez used all means at his disposal to get votes--scaring public employees by saying they would lose their jobs if the opposition won, use of public funds, gifts of electric appliances, propaganda on posters, radio and television, etc. This "ventajismo," or unfair use of resources not available to the other party, is generally admitted, but I do not agree with those who say it was the reason Capriles lost. Without doubt, it secured Chávez many votes, but he would have won anyway--just look at the figures: Chávez 8.1 million (55%) and the opposition 6.5 million (44%). A majority of 1.6 million cannot just be explained by unfair tactics.
What about the future? As a marketer, I know the importance of perception and the main problem is how to convince voters the opposition is not a continuation of AD and Copei which were in power before Chávez. These parties did little to improve the lot of the poor. The opposition must overcome any perception it is elitist and convince the poor it will be inclusive and govern for the benefit of all Venezuelans not just the middle and upper classes. The opposition must erase the legacy from AD and Copei by stressing its all-inclusive nature and assuring greater help for the poorer people.
How should President Chávez change? I believe he should encourage the private sector instead of threatening to nationalise it. The country cannot rely on oil income alone, and a buoyant private sector will be a hedge against any fall in oil prices. So will the creation of increased production capacity in the Orinoco Belt. However, to accomplish this, PDVSA must invest more and that will reduce funds available for the government's social spending. This is a problem and another reason for stimulating the private sector since it can replace some of the shortfall and provide jobs at the same time.
There are three points I should like to raise since my views differ from many commentators in Venezuela and abroad.
1) Devaluation of the bolivar. I don't think it is a good idea. It would create more bolivars from the sale of oil and so allow the government to increase its budget, but it would also increase the costs of imports, including food. Inflation is running at some 20% and people, particularly the poor, are already feeling the pinch without further increasing the cost of imported food and other products.
2) Lifting of exchange controls. I don't support that either in the short term Too many Venezuelans are anxious to have their savings abroad in dollar accounts, and I believe it would create a flight from the bolivar. Free convertibility should occur only when the government has reduced its large dollar debt.
3) Increasing local fuel prices. I don't favour that either in the short term. Everybody knows Venezuela's domestic prices for gasoline and diesel are the lowest in the world. The present government is perfectly aware what the opportunity cost is, but every time governments in the last fifty years have proposed increasing prices there have been riots in the street. It is a hot potato and even Capriles promised not to increase them for some time. But it should be realised almost all goods in the country are transported by road, so an increase in the price of gasoline and diesel would be passed on to the cost of these goods, including food, and add to the already-high inflation. The low price of gasoline also allows the poorer classes to run an old car, take the children to the beach, and to visit relatives in other parts of the country. It thus has a social benefit and it is unfortunate the low cost is regressive--the middle and upper classes could pay a lot more--but differential pricing is not a practical option. The government has tried to wean motorists off gasoline by encouraging them to convert their vehicles to use compressed natural gas (CNG) but with little success because of the lack of gas filling points. The time to increase fuel prices is when there is a rise in real incomes and, with an increased purchasing power, the less well off can afford to pay more. This may be possible in a couple of years' time but, meanwhile, let's look on the subsidy as another social cost.
Some colleagues have already told me they do not support my views so don't worry if you add to their number. I just hope my article will lead to some useful debate.
Oliver L Campbell
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Oliver L Campbell MBA, DipM, FCCA, ACMA, CGMA, MCIM was born in 1931 in El Callao, Venezuela where his father worked in the gold mining industry. He spent the WWII years in England, then in 1953 returned to Venezuela and worked with Compañía Shell de Venezuela (CSV). He spent 15 years in the oilfields and ended up as Company Financial Controller. Upon nationalisation of the oil industry, he went to Petróleos de Venezuela (PDVSA) as its Head of Finance. In 1982 he returned to England and was the Finance Manager of the British National Oil Corporation prior to its privatisation. He then worked as an oil consultant and retired in 2002 after fifty years in the oil industry. Petroleumworld does not necessarily share these views.
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Petroleumworld News 10/18/2012
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