Carpe Diem

The Chavez legacy: Venezuela became one of the world’s most economically repressed countries under his regime

venezuela1The chart above shows Venezuela’s annual overall economic freedom score from 1995 to 2012 as reported by a joint project between the Heritage Foundation and the Wall Street Journal. Under Chavez’s political leadership, Venezuela’s economic freedom nosedived from 56.1 the year he took office (1999) to 38.1 in 2012. Last year, Venezuela ranked 174th out of 177 countries surveyed by Heritage, and only Zimbabwe, Cuba, and North Korea were more economically repressed than Venezuela. Here’s what the Heritage study said about Venezuela:

1. Venezuela’s economic freedom score decreased 2.0 points from last year, reflecting deteriorations in business freedom, labor freedom, and freedom from corruption and an explosive increase in government spending in the run-up to 2012 elections. Venezuela is ranked 28th out of 29 countries in the South and Central America/Caribbean region for economic freedom, and its overall score has recorded one of the 10 largest declines in the 2013 Index.

2. The foundations of economic freedom in Venezuela continue to deteriorate, severely hampered by structural and institutional problems. With the judicial system increasingly vulnerable to political interference, corruption is prevalent, and the rule of law is weak across the country.

3. The state’s presence in economic activity has increased through nationalization of industry. Heavily dependent on the oil sector, which accounts for 95 percent of exports, the economy suffers from a lack of dynamism. Inefficient and non-transparent regulatory and judicial frameworks obstruct prospects for long-term development. The lack of access to financing precludes entrepreneurial growth, and the investment regime lacks transparency and remains under tight state control.

4. Venezuela has Latin America’s highest inflation rate (currently nearly 30 percent); chronic electricity, food, and housing shortages; and skyrocketing crime rates.

5. The government expropriates land and other private holdings across the economy arbitrarily and without compensation. Corruption, exacerbated by cronyism and nepotism, is rampant at all level of government.

6. Regulatory encroachment on private businesses continues to increase, with heavy government control and intervention discouraging entrepreneurship. There is little transparency in decision-making, and most contracts are awarded without competition.

MP: AEI’s Roger Noriega described Chavez’s legacy as ”deep political polarization, authoritarian manipulation, hateful rhetoric, disastrous economic policies, and the devastation of Venezuela’s petroleum industry.” That destructive legacy is reflected empirically in the dramatic decline in Venezuela’s economic freedom score under the Chavez regime, which has brought his country the distinction of now being one of the most economically repressed countries in the world.

The Cato Institute’s Juan Carlos Hidalgo summed up the grim Chavez legacy this way: “In the final analysis, history will remember Hugo Chavez as an authoritarian caudillo (dicator) whose policies set back Venezuela’s development and institutions by decades. The faster Venezuela and Latin America turn the page, the better.”

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