The Inflation of Hugo Chávez

MEXICO CITY – Supporters of Hugo Chávez, the recently deceased Venezuelan president, and even many of his critics, have repeatedly emphasized two supposed achievements that will burnish his legacy. First, the share of people living in poverty plummeted to approximately 28% in 2012, from a peak of 62% in 2003 (though it was 46% three years earlier, at the beginning of Chávez’s first term). Second, he gave to a majority of Venezuelans a sense of identity, pride, and dignity long denied them by a corrupt, elitist, light-skinned oligarchy.

Both claims, however, are only partly true, and only partly account for Chávez’s recurrent electoral victories – 13 of 14 popular votes, including referenda. As for the first claim, both The Economist and the Nobel laureate Mario Vargas Llosa were right to put Chávez’s achievement in perspective. Almost every country in Latin America has reduced poverty significantly since the beginning of this century, with the extent of progress depending on baselines and cut-off dates, good years and bad years, the reliability of official data, and other factors.

The reasons for this progress are well known: with the exception of 2001 and 2009, these were boom years for commodity-exporting countries like Brazil, Argentina, Peru, Chile, and, of course, Venezuela, as well as for manufacturing-based economies, like Mexico. Furthermore, during these nearly 15 years, most governments have managed their accounts responsibly: small or no fiscal deficits, low inflation, well-targeted anti-poverty programs, and so on.

This has helped to lower not only poverty, but also inequality, Latin America’s traditional scourge. According to the economist Nora Lustig, between 2000 and 2010, “income inequality…declined in all 17 Latin American countries for which comparable data exist.” The decline was especially pronounced in the three largest countries – Brazil, Mexico, and Argentina – which comprise nearly 75% of the region’s population.