It is unclear if Venezuelan president Hugo Chavez will make a full recovery from his most recent surgery in Cuba. Whatever happens, he always stirs a lot of passions. Certainly that is the case when thinking of what his lasting legacy in Venezuela will be.
On the left he is seen as a socialist hero who broke the Venezuelan "oligarchy" and defended the country against the "American Empire." On the right he is the socialist anti-Christ who "brought Afghanistan to South America." But perhaps one of the simplest ways to judge his reign, is to remove the politics and look closely at his economic record.
Take gross domestic product, or GDP. In that case the record is certainly mixed. There was strong economic growth from 2004 to 2008 but GDP fell in 1999, 2002, 2003, 2009 and 2010. From the time Chávez took office in 1999 to 2011 Venezuela's economy grew by an average of 2.8% per year. During this same period Latin America as a whole grew by 3.3% per year and Brazil grew by 3.4% per year.
Others will argue that we must judge Chavez on his record of reducing poverty and inequality. According to the UN's Economic Commission for Latin America, the percentage of the population living under the poverty line in Venezuela fell from 49.4% in 1999 to 27.8% in 2010. That is a pretty good record but there were similar trends across Latin America. In the region as a whole poverty dropped from 43.8% in 1999 to 31.8% in 2010. A few countries, like Peru, Brazil and Panama, faired even better than Venezuela. Poverty rates in Peru dropped sharply from 54.7% in 2000 to 31.3% in 2010—all three have solidly capitalistic economies.
Inequality has declined in Venezuela but it has across other parts of Latin America as well particularly in Brazil, Chile and Colombia.
When you take a closer look at the entire economy, and where Venezuela is headed, the record is not a good one. Here are five major ways that Chavez has really undone the Venezuelan economy:
1. Venezuela has gone from being dependent on oil to being extremely dependent on oil.
Former minister Gerver Torres points out that in 1998 oil represented 77 percent of Venezuela's exports but by 2011 oil represented 96 percent of exports. That means today only around 4 percent of the goods that Venezuela exports are non-oil products! The Venezuelan economy relies almost exclusively on the price of oil and the ability of the government to spend oil revenues. This will take years to reverse because of item two below.
2. The Chavez government has crippled private businesses and national industry through expropriations and nationalizations.
The Chavez government has expropriated or nationalized numerous companies (no one seems to be able to count them all) involved in various sectors including aluminum, cement, gold, iron, steel, farming, transportation, electricity, food production, banking, paper and the media. The number of private companies in industry has dropped from 14,000 in 1998 to only 9,000 in 2011, according to Torres.
Companies need investment to grow and hire new workers. One of the biggest failures of the Chavez government has been to drive away both domestic and foreign investors. In 2011 Latin America enjoyed a record of more than $150 billion in foreign investment with Brazil receiving $67 billion. Venezuela's neighbor Colombia received $13 billion while Venezuela received only $5 billion. To avoid expropriation and find investment a number of Venezuelan companies have moved to Colombia, Panama and the United States.