Oil Wars

The opposition used to be very found of talking about how bad the Venezuelan economy was doing, how Chavez was driving it into the ground, eliminating private property, scaring away investment, and having people standard of living plummet. Of course, what they generally left out when they were saying these things a couple of years ago was that most of the economic problems confronting Venezuela at the time were artificial problems created by the oppositions coup attempt and strikes. It was often said by Chavez suppoters at the time that the problem was that they (the opposition) didn't let Chavez govern.

For the past two years Chavez has had relative peace and his been able to concentrate his energies not on which generals might be plotting against him but rather what economic policies are best. The results should be abvious to any regular reader of this blog as a great many statistics have been presented documenting Venezuela's boom. In fact, so obvious is the boom that even this reuters reporter couldn't miss it:

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez spends much of his time extolling socialism and deriding free-market values, but don't expect 29-year-old Steve Telleria to pay much heed.

In the huge Sambil shopping mall in eastern Caracas, Telleria joined the heaving crowds on a recent weekend browsing through expensive boutiques and shops looking for a bargain gift for a friend.

"This is fundamentally not a socialist society," a business administrator said, standing next to a rack of mens' jackets in a packed store. "People here would prefer to stop eating than to stop spending."

Even as Chavez promises a 21st century socialist revolution to end "savage capitalism," rejects the very rich and promotes collective values, Venezuela is enjoying a consumer spending boom as its oil exports bring in record revenues.

While the tough-talking former soldier has spent billions of dollars on social development programs that have made him popular among the poor, consumers in 2005 spent roughly $8.3 billion at the nation's shopping malls.

Whiskey distributor Diageo (DGE.L: Quote, Profile, Research) said Scotch whisky sales grew by 55 percent in 2005 with the largest growth in sales of 18-year scotch, which costs around $60 per bottle -- equivalent to a third of the monthly minimum wage.

Meanwhile, vehicle sales jumped a whopping 70 percent in 2005 over 2004, and the country's BMW (BMWG.DE: Quote, Profile, Research) distributor said its sales tripled last year.

"Honestly I can't understand -- I wish I could understand -- the parameters of this 21st century socialism," said Arnold Moreno, president of the nation's shopping mall chamber.

The group reported shopping mall sales shot up by almost 40 percent in 2005 over 2004.

Riding a wave of high oil prices, Venezuela's economy grew by 9.3 percent in 2005, and government spending left Venezuelans of all walks of life with more money in their pockets.

The state itself has helped fuel some of the boom. The government provides an exoneration of the country's 14 percent sales tax on certain family vehicles and maintained subsidies on gasoline allowing drivers to pay 25 cents a gallon.

Government mandated currency controls, credited with preventing massive capital flight, provide preferential dollar sales to some importers that may have contributed to last year's 45 percent increase in imports, economists say.

OIL REVENUE BOOM

Many Venezuelans became accustomed to luxury consumption during the oil boom of the 1970s that gave the country unprecedented windfall profits.

Shoppers went on weekend trips to Miami, where Venezuelans became known for the catch phrase "Dame dos" in Spanish or "It's cheap, give me two."

Venezuelans also developed during this period their taste for whiskey, which nationalist Chavez has dismissed as an example of slavish adoration of foreign cultures. Venezuela currently consumes the most whiskey per capita in Latin America, according to industry figures.

Leoncio Barrios, a social psychologist and professor at the Venezuelan Central University in Caracas, said today consumption is similar to what Venezuela witnessed thirty years ago.

Chavez, a close ally of Cuba's Fidel Castro, has promised a socialist revolution to end poverty after years in which U.S.-backed free market reforms failed to help the region's impoverished.

Fearing he would copy Cuban communism, his adversaries in 2002 attempted to force him from office through a botched coup and later with a massive oil industry strike.

Chavez has often said "it's bad to be rich," and often quotes from the Bible passage about how rich men will have a difficult time getting into heaven.

Still, the Venezuelan leader, who faces an election in December, enjoys widespread popular support even though he repeatedly condemns the wasteful consumer culture of developed nations and in his own country.

Such concerns rarely come up at the Sambil mall, once considered a playground for rich Venezuelans, that is now packed with shoppers from all of the city's social classes.

"Venezuelans are much more likely to spend than to save," said Telleria. "You give me money today, I'll spend it today."

This is all well and good for the middle and upper classes you may think, but what about the poor and behalf of whom Chavez is supposed to be governing? Actually, they are doing quite well too. Stay tuned and you'll see. In the meantime we can just reflect on how well Chavez governs when he is allowed to.
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