Cahvez

CASO No. 2: CHAVEZ´S VENEZUELA
LIBRO: GLOBAL BUSINESS TODAY. CHARLES W. HILL, SEXTA EDICIÓN. McGraw-Hill. PAG. 84-85 2009
Hugo Chavez, a former military officer who was once jailed for engineering a failed coup attempt, was elected president of Venezuela in 1998. Chavez, a self-styled democratic socialist, won the presidential election by campaigning against corruption, economicmismanagement, and the "harsh realities" of global capitalism. When he took office in February 1999, Chavez claimed that he had inherited the worst economic situation in the country's recent history. He wasn't far off the mark. A collapse in the price of oil, which accounted for 70 percent of the country's exports, left Venezuela with a large budget deficit and forced the economy into a deep recession.Soon after taking office, Chavez consolidated his hold over the apparatus of government. A constituent assembly, dominated by Chavez followers, drafted a new constitution that strengthened the powers of the presidency and allowed Chavez (if reelected) to stay in office until 2012. Subsequently, the national congress, which was controlled by Chavez supporters, approved a measure allowing thegovernment to remove and appoint Supreme Court justices, effectively increasing Chavez's power over the judiciary. Chavez also extended government control over the media. By 2007, Freedom House, which annually assesses political and civil liberties worldwide, concluded Venezuela was only "partly free" and that freedoms were being progressively curtailed.

On the economic front, things remained rough.The economy shrank by 9 percent in 2002 and another 8 percent in 2003. Unemployment remained persistently high at 15 to 17 percent and the poverty rate rose to more than 50 percent of the population. A 2003 study by the World Bank concluded that Venezuela was one of the most regulated economies in the world and that state controls over business activities gave public officials ample opportunities toenrich themselves by demanding bribes in return for permission to expand operations or enter new lines of business. Despite Chavez's anticorruption rhetoric, Transparency International, which ranks the world's nations according to the extent of public corruption, reported that corruption has increased under Chavez. In 2007, Transparency International ranked Venezuela 162 out of 179 nations, downfrom 114 in 2004. Consistent with his socialist rhetoric, Chavez has taken various enterprises into state ownership and has required that other enterprises be restructured as "workers' cooperatives" in return for government loans. In addition, the government has begun to seize large rural farros and ranches that Chavez claims are not sufficiently productive, turning them into state-ownedcooperatives.

In 2004, the world oil market bailed Chavez out of mounting economic difficulties. Oil prices started to surge, and Venezuela, the world's fifth largest producer, started to reap a bonanza. On the back of surging oil exports, the economy grew by 18 percent in 2004, 9 percent in 2005, 10.5 percent in in Cuba. As a result, the government's share of GDP increased from 20 percent at the end ofthe 1990s to 38 percent in 2007. Chavez also extended government control over foreign oil producers doing business in Venezuela, which he accused of making outsized profits at the expense of a poor nation. In 2005, he increased the government's royalties on oil sales to 30 percent, from 1 percent, and he raised the sales tax rate to 50 percent, from 34 percent. In 2006, he announced plans toreduce the stakes held by foreign companies in oil projects in the Orinoco region and to give the state-run oil company, Petroleos de Venezuela SA, a majority position. However, despite strong global demand, oil production in Venezuela appears to be slipping, having fallen for six successive quarters between mid-2006 and late 2007.

Riding a wave of popularity at home, in December 2006 Chavez won...