support babalú

Your donations help fund
our continued operation

do you babalú?

what they’re saying






recommended reading

babalú features

recent comments

  • Humberto Fontova: Hate to say it, but Lopez was dumb to meekly surrender in a show of “good faith.” There is no such thing...

  • asombra: Yes, Carlos, the world is full of shit, and Cubans would be entitled to hold most of it in contempt–if only so many Cubans...

  • asombra: Kerry’s face is dysmorphic, like he’s got a medical syndrome. But facial weirdness aside, I have no problem with him...

  • Honey: Castro Si, Israel No! It’s chickenshit for Israel and praise for Castro. So what else is new with this administration? And...

  • Rayarena: As I always say, we Cuban Americans have really dropped the ball. We can’t expect our adversaries, our enemies to have...

search babalu

babalú archives

frequent topics

elsewhere on the net


The House That Chávez Built

Javier Corrales in Foreign Policy:

The House That Chávez Built

Hugo Chávez subordinated the needs of Venezuela’s economy to the imperative of keeping himself in power. Now the job of cleaning up falls to his successor.

Love him or hate him, Hugo Chávez was a savvy politician -- a point that one might see as ironically confirmed by the timing of his death. For the Venezuelan president leaves the scene at the peak of his political career, but just in time to miss what is likely to be a severe economic downturn. This downturn might have permanently blackened his legacy had he remained alive. It is, in any case, entirely of his making.

Politically, Chávez died at a moment of sky-high popularity among his supporters, in part because of his own ability to portray himself, over the last two years, as a true martyr, a man willing to sacrifice his health and his life for his country, his movement, and his people. At the same time he bolstered his reputation abroad through his lavish dispensation of foreign aid and trade. The Chávez administration's spending on South-to-South aid in proportion to gross national income, for example, is second only to that of Saudi Arabia. Within Latin America, he learned late in his career that he could develop good relations even with countries on the opposite side of the political spectrum (Colombia, Chile, and Mexico) simply by becoming a leading importer of their goods. Learning to contain his criticisms of other Latin American leaders, as he did also late in his career, also helped.

So should his designated successor, Vice President Nicolás Maduro, actually manage to assume the presidency, he will find himself commanding a remarkable store of political capital. Yet Maduro (or whoever else ends up following in Chávez's wake) will also inherit one of the most dysfunctional economies in the Americas -- and just as the bill for the deceased leader's policies comes due.

By now it's widely understood that excessive dependence on commodity exports can distort an economy in fundamental ways. One manifestation of this principle is what has come to be known as "Dutch Disease" (named after the problems faced by the Netherlands as it reaped a windfall from North Sea oil in the 1970s). Dutch Disease occurs when a country that is excessively dependent on commodity exports experiences a price boom. The sudden inflow of foreign currency raises the demand for local currency, yielding an uncompetitive exchange rate. This overvalued exchange rate, if unaddressed, can kill the country's other exports as well as stimulating an avalanche of imports, which can hurt domestic producers.

Continue reading HERE.

Comments are closed.