As we have previously noted, many pundits and much of the international media predicted a close presidential election in Venezuela in October, if not an actual victory by opposition candidate Henrique Capriles Radonski. But in the end, the vote was not close, as we had predicted it would not be in a paper we released on October 4. Chávez won by 11 percentage points – just a little over the 10.7 point victory that poll averages had suggested. As we have also noted, the conventional wisdom on Venezuela in the U.S. media and the economics profession (including the IMF) has repeatedly predicted sharply more negative outcomes for the Venezuelan economy than have materialized.
Now, as speculation runs rampant over the state of Hugo Chávez’s health, many of the same voices that predicted a close election in October are again predicting doom and gloom for Venezuela.
For example, in an op-ed just before the October election, the Inter-American Dialogue’s Michael Shifter wrote that “the election appears to be very tight.” In the New York Times’ Room for Debate today, Shifter details a list of problems that he says Chávez’s successor will need to tackle, “gradually” and tactfully in order to avoid some kind of catastrophe:
By now, it is easy to recite the litany of problems facing Venezuela.
At the top of the list are a huge fiscal deficit (around 20 percent) and high inflation (just under 18 percent), decaying infrastructure, mismanaged petroleum sector, shortages of basic goods, periodic blackouts and widespread crime and insecurity. All of these derive in some measure from severe institutional weaknesses, a product of Hugo Chávez’s one-man, 14-year rule. Whether his successor comes from his camp or from the opposition, reform and improved governance will be essential.
In a quickly-dated October 5 op-ed titled “How Hugo Chávez Became Irrelevant,” blogger Francisco Toro wrote, “Mr. Chávez is facing a tight re-election race against Henrique Capriles Radonski, a 40-year-old progressive state governor who extols the virtues of the Brazilian model,” and a little over a week before that wrote “Two weeks out, though, two of Venezuela's three best-regarded pollsters show him in a statistical dead-heat with the president. By crafting a message to appeal to a truly nationwide audience, he's given himself a real fighting chance to pull off a stunning upset on Oct. 7th.”
In today’s Room for Debate, Toro suggests:
The next few years are going to be turbulent in Venezuela. … this kind of spending-led "socialism" can't last. For years, Venezuela has been borrowing at credit-card level interest rates. As the country runs out of money and out of people willing to lend it more, the real question is who's going to be left holding the checkbook when the spending must screech to a halt?
For his part, the Heritage Foundation’s Ray Walser may have been less rosy on Capriles’ chances of winning – owing to Walser’s conspiratorial notions that Venezuela’s elections are somehow rigged. Nevertheless, on September 19 he wrote, “Despite powerful and unfair disadvantages, Capriles and the opposition still believe they have a genuine shot at winning. While polling data are inconsistent, the race appears to be tighter than initially predicted, and the closer the race, the greater the temptation for Chávez to cheat.” In today’s Room for Debate, Walser writes that “Clearly, Maduro cannot match Chávez’s populist appeal.” He also portends – as with Shifter, Toro and the majority of writers the Times grouped together – looming disaster:
Venezuela suffers from high public debt, accelerating inflation, potential devaluation and slowing growth. The national oil company PDVSA, the country’s economic life support system, is in trouble. It’s even importing refined gasoline from the U.S. From failing infrastructure to one of the world’s highest per capita homicide rates, the next president faces a tough phalanx of domestic challenges.
But these writers need not worry about being wrong, yet again, since the views and faulty predictions they have made before, and are making again, are part of the conventional wisdom. They represent the establishment view, ubiquitous in commentary and reporting on Venezuela in the U.S. media, and when they turn out to be incorrect once more, they will have lots of company.
For a different perspective, CEPR Co-Director Mark Weisbrot writes in Room for Debate:
Is this progress sustainable? The press focuses on Venezuela’s inflation, which, at just under 18 percent is about the highest in the region. However it has come down from 28.2 percent in 2010, even as the economy has recovered and growth has accelerated. This shows that the government can bring inflation down with the right policies. Chávez’s party won in 20 of 23 states during a regional election on Dec. 16, even with Chávez himself absent from the campaign trail. This indicates that his successor will likely win if he should step down.
Who will turn out to be correct this time? Stay tuned.