By
Gustavo Coronel
Between 1999 and 2009 El Salvador and Venezuela have operated under very different political systems. El Salvador has had a government of the “right”, conservative, advocating free-market practices, an open economy, total freedom of financial exchange (the country has adopted the dollar) and a friendly attitude toward the United States. Venezuela has been operating under a regime of the “extreme left”, militaristic, self-defined as socialist, exercising rigid state control over the economy and currency exchange and exhibiting a very hostile attitude toward the United States, while aligning itself with dictatorial regimes and extremist organizations all over the world. Although the two countries are quite different in size, population and economic profiles, they can serve as laboratory examples of what to expect from a country operating under an open-economy, democratic system and what to expect from a country operating under an authoritarian, highly centralized regime. Some of the comparisons that can be made are listed below. Many more could be made and certainly should be made, but the ones below will serve as general indicators of what has taken place in the two countries.
The first index is an Economic Freedom Rank (1), published every year by the Heritage Foundation and the Wall Street Journal that incorporates eight types of freedom and two other components. The eight freedoms are: business, trade, fiscal, monetary, investment, financial, freedom from corruption and labor. The two other components are government size and property rights. In a ranking of 179 countries El Salvador occupies place number 33 while Venezuela is at place 174.
Venezuela shows low business, trade, fiscal, monetary, investment, financial and labor freedoms. Property rights are practically non-existent. Corruption is rampant, as evaluated by Transparency International, an organization that places Venezuela as number 162 in a group of 179 countries, as far as corruption is concerned. Government has grown out of control and its expenditures equal an unhealthy 32% of the GDP.
Is this an accident? Of course not. Any country with the centralized, rigid and authoritarian public policies utilized by Venezuela during these ten years will show essentially similar results. El Salvador , opening up to private activity and to free trade has become, almost, a Central American “tiger”, as a paper by Juan Carlos Hidalgo (2), has convincingly demonstrated.
The other indices shown are mostly taken from Hidalgo 's paper (2), in the case of El Salvador and represent my own estimates or incorporate other, rather fragile, statistical data on Venezuela . One problem about Venezuela is the almost total lack of representative data. International organizations generally present rather obsolete data while Venezuelan government data have become highly politicized. For example, the man in charge of the Venezuelan petroleum company, Rafael Ramirez, recently claimed that they had 226 drilling rigs in operation. The number of drilling rigs in Venezuela , according international statistics and drilling companies is 66. As you will appreciate, Venezuelan government spokespersons are far from being reliable.
You will be able to notice that, in every aspect of social and economic life mentioned above, Venezuela shows numbers and policies that are totally inferior, both in quantity and quality, to the numbers and policies in El Salvador.
The question then becomes: do we need revolutions in Latin America ? Do we need messianic and bombastic leaders or, on the contrary, good and solid administrators? Do we need the exercise of autocratic abuse of power or, rather, a political and legal environment in which all citizens can feel equal? Do we need to antagonize the middle class in order to upgrade the well being of the poor? In short, do we need “revolutions”, demagogic shouting and aggressiveness, or can we get where we want to go through democratic, orderly policies?
It would seem, from the comparative experiences of El Salvador and Venezuela during these last ten years, that progress can be obtained through peaceful and democratic means and that there is no need for political leaders to make false promises and practice harassment on political dissenters. In fact, everything we have shown suggests that populism and demagoguery are not the way to go in Latin America . It is time that we should wake up to these facts and resist all attempts of Hugo Chavez and his gang to install a “socialist”, authoritarian regime in Latin America .
A comparison between two countries, 1999-2009.
| |
El Salvador |
Venezuela |
|
Economic Freedom Rank
Heritage/WSJ.
|
33
|
174
|
| Extreme poverty |
11%
|
Est. 20%
|
| Pension Funds |
Privately managed
|
State managed
|
| Exchange restrictions |
None
|
Total
|
|
Percentage of employees
in private pension funds
|
87%
|
10%, estimate
|
| Average trade tariff |
4%
|
About 14%
|
|
International Trade as % Of GDP
|
62%
|
Estimate, 35%
|
| Monetary Stability |
High, dollarized
|
Low, black market
|
| Inflation, 2008 |
5%
|
35%
|
Foreign Direct Investment, 2007,
El Salv; 2008, Ven. |
$1526 M.
|
Minus $500 M.
|
| Public Sector Deficit, %GDP |
0.3
|
4.0 -5.0
|
| Telecommunications
|
14 private companies
|
State monopoly
|
| Govt. spending, %GDP |
16.0
|
32.0
|
| Unemployment |
6%
|
Est.,
10%
|
Latin America should break away from theatrical political postures, grandiose “revolutions” and incendiary rhetoric if our societies are to progress. I hope the new government of El Salvador, made up of ideological friends of the Venezuelan regime, will not make the same grave errors of Hugo Chavez and destroy all that previous Salvadorian governments were able to accomplish.
References.
• 2009 Index of Economic Freedom. Heritage Foundation and the Wall Street Journal.
• Juan Carlos Hidalgo: “ El Salvador , A Central American Tiger?”, CATO Institute Development Policy Analysis #8, March 9, 2009 .
Gustavo Coronel es un veterano geólogo de la industria petrolera, miembro director de la primera junta directiva de PDVSA (1975-1979). Todos sus articulos pueden verse en www.lasarmasdecoronel . Sus puntos de vista no necesariamente son los de Petroleumworld.
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