January 14, 2007
Chavez spooks investors
As the controversial leader pushes a Soviet-era leftist agenda, foreign capital heads elsewhere
Thinking about investing in the Venezuelan stock market?
Well, you might want to think again.
Hugo Chavez, who has been Venezuela’s president since 1999, announced last week that he will nationalize all of the nation’s power companies, as well as the largest telecommunications firm in Venezuela. After dropping this bombshell, Chavez declared his intention to nationalize even more of his nation’s economy. "Everything that [previously] was privatized will be nationalized" he promised.
Investors reacted swiftly to the news. The Caracas stock market plunged 19 percent after Chavez’s performance. Financial pundits throughout Latin America have also given the nationalization decision a unanimous thumbs down. Venezuela has a lot of competition for foreign capital and investment these days. As China moves closer to full capitalism and Mexico stays on the pro-free market path, Venezuela is likely to lose even more ground in the global economy. And all because their president has delusions of being the next Simon Bolivar or Fidel Castro.
Although Chavez was technically elected through a democratic process, he has been chipping away at Venezuela’s democratic institutions in recent years. He has said that only his supporters can hold jobs in the army and the Venezuelan oil industry. On December 28, 2006, he announced that he will revoke the license of RCTV----Venezuela’s oldest television network. The reason? The network is (or was) critical of the Chavez regime. This arbitrary decision to restrict free speech in Venezuela earned Chavez rebukes from around the world, including a harsh criticism from Jose Miguel Insulza, the chairman of the Organization of American States (OAS)
On the foreign policy front, Chavez has made a point of associating with rogue leaders like North Korea’s Kim Jong Il and Iran’s Mahmoud Ahmadinejad. While a photo-op with Kim Jong or Mahmoud is good for getting under George W. Bush’s skin, these shenanigans provide no benefits for the Venezuelan people. These self-indulgent antics merely associate Venezuela with the world’s troublemakers, further hastening the flight of capital.
Hugo Chavez was recently sworn in for a new presidential term that lasts until 2013. If he completes the full term, Chavez will have spent well over a decade in control of Venezuela. This will no doubt make for some more interesting headlines. But can Venezuela survive another six years of Hugo Chavez?