Hugo Chavez's almost 8 years in power in Venezuela – which he will seek to extend in presidential elections next month -- seems to defy economic analysis. Indeed, any and all economic examination of Chavez’s Venezuela confirms Edgar R. Fiedler’s quip that if you "ask five economists something, you will get five answers...or six if one of them is a Harvard graduate."
Some people see in Chavez an innovative statesman who has seized an almost magical moment – the windfall Venezuela has received from today’s sky high oil prices -- to change the rules of the game in his country. A few key indicators appear to support this. Foreign investment has grown recently from $1.5 billion (2004) to $2.5 billion (2005).
In that two year period, Chavez stepped on the gas for his social reforms – education, health care, etc. – and also in regard to breaking down the country’s excessive concentrations of wealth. Although over 70% of national income remains in the hands of just 20% of the population, Chavez has forced big foreign oil companies to pay much higher royalties and has started expropriating unproductive land and industrial facilities.
With oil prices now six times higher than they were when he came to power, Chavez presided over economic growth of 9% in 2005 and as much again in the first quarter of 2006. Above all, however, he has achieved a 6.3% effective reduction of poverty, after taking over a country whose vast majority - 80% - was perched between poverty and squalor.