In a nutshell: why I don't worry about Chavez

ARTICLE: "Venezuelan consumers gobble up U.S. goods: Despite political tension, U.S. companies do well," by David J. Lynch, USA Today, 28 March 2007, p. 1A.

No, not the fact that Venezuela's oil boom allows average citizens there to indulge their inner American.

Here's why:

Few manufacturers are doing better than General Motors ...

GM, which has sold cars here since World war II, literally can't make vehicles fast enough to satisfy Venezuelan buyers. Its local plant, housed on "General Motors Avenue" in an industrial district near this city's airport, added a third shift in 2006 and is running flat-out producing more than 20 models.

But rather than expand capacity to meet ravenous demand GM--like other U.S. companies--is importing additional products. With Chavez, a self-described revolutionary, promising a grandiose "socialism for the 21st century," new multi-billion-dollar investments are just too risky.

"Commercially, the country's in a good moment. But I don't think this is sustainable in the long term ... The truth is, there's no more investment coming in," says Michael Penfold, former executive director of Venezuela's investment promotion agency.

I wonder which Chavez cousin got his job. I'm sure he's amazingly unqualified--besides his birth.

Comments

[stuart abrams]

I'm certainly not afraid of Chavez, but I am saddened because of the fact that Venezuela seems like such a squandered opportunity. It is a good illustration of my view that possession of a valuable natural resource such as oil is more of a curse than a blessing to countries in the Gap. Historically, such countries have made deals with western (mostly American) oil companies that are profitable for those companies but generally do little to support development within the countries and merely serve to enrich a corrupt local elite. Chavez is sort of the flip-side of the same paradigm, namely, a so-called "populist" who wants to use the oil revenues to create some "socialist" system of wealth redistribution (also highly corrupt), but does not really support viable long-term economic development. Ideally, Venezuela should look to the examples of some of its neighbors, notably Brazil, and adopt a third path. Venezuela can maintain control of oil revenues, but use the wealth derived therefrom to underwrite tax reform and other incentives to promote foreign investment in order to build real economic development. The same model should be followed in all of the oil-rich (but otherwise poor) countries in the Gap, such as Nigeria and the petrocracies in the Middle East.

[Jimmy J]

stuart abrams,Absolutely spot on. However, these thuggocracies and the kleptocrats that run them will never do anything that cuts into their wealth and particularly their power. They just do not understand that it isn't a zero sum game. By encouraging development they could all get much wealthier and so could the rest of the country. But then they wouldn't have control and they just cannot abide that.

[stuart abrams]

Never is a long time, especially when you consider that most of it hasn't even happened yet (royalties to Jim Steinman). The thinking of the globalizers is spreading every day.