Venezuelan President Hugo Chavez loomed so large over his country and Latin America for the last two decades that his death on Tuesday following a long battle with cancer confronts the region with potentially destabilizing political swings and economic setbacks.
Here are five issues facing Venezuelans and their neighbors in the absence of the powerful leftist who was beloved by the region’s poor and resented by the elites whose power and affluence eroded under his tenure:
Although Chavez built a loyal following and boosted his United Socialist Party of Venezuela to unrivaled influence, he leaves behind a political structure fractured by intra-party rivalries, bitter disputes with the opposition and sharp ideological conflicts between rich and poor, urban and rural. Chavez anointed Vice President Nicolas Maduro as his preferred successor before he left for cancer surgery in Cuba on Dec. 9. But the constitution provides for National Assembly President Diosdado Cabello to succeed a head of state who dies in office and organize a new election within 30 days. Cabello is known to harbor his own presidential ambitions and may compete with Maduro for the party's mantle. Opposition leader Henrique Capriles, who won 45% of the vote against Chavez in October, could pull off a victory if the Socialists are divided.
On Chavez’s watch, the oil industry was nationalized and put at the service of his populist missions. Oil earnings, which account for half of Venezuela's revenue, were funneled to programs aimed at providing low-cost groceries, higher education, free healthcare and new housing. The largess was shared with leftist allies such as Cuba and Bolivia through his PetroCaribe program, which traded subsidized oil for services, like 20,000 Cuban doctors who staff the free clinics. But the national oil conglomerate, Petroleos de Venezuela, or PDVSA, now faces billions in unpaid compensation claims by foreign oil giants whose assets were seized. Caracas-based consulting firm Ecoanalitica estimates that the government seized more than $33 billion in foreign operations, most of which have yet to be compensated. Court awards, like a $900-million judgment ordered for Exxon Mobil last year, could cut deeply into the money available to fund social services.
Chavez wielded power over the impoverished masses by casting himself as their protector against an aggressive and rapacious “empire,” his reference to the United States, also Venezuela's biggest oil customer. Relations between Washington and Caracas went from bad to worse under Chavez as he shifted allegiances to leftist regimes in the region. With his demise and looming economic reckonings ahead, the next leadership -- especially if the opposition gains power -- may rethink the ideologically driven oil giveaways. Any retreat from the PetroCaribe program could reconfigure diplomatic relations throughout the region and open prospects for closer ties with capitalist states, the U.S. first among them.
Government spending rose 40% in 2012, an election year for Chavez and his fellow socialists. The inflation rate is nearly 20%, overtaking national wage increases meant to soften the blow of rising food and consumer goods costs. Though one of the world’s biggest oil producers, the country’s internal and external debts have been mounting while productivity and income from the vital oil trade have declined. Manufacturing and food production also have declined, forcing a fivefold increase in food imports over the last decade that last year cost the government $52 billion. The next leader is likely to have to devalue the national currency, the bolivar, cutting even deeper into the spending power of most households.
Chavez-inaugurated welfare projects grew from within the political structure and have remained outside the administration of government agencies, making them subject to the political patronage of the ruling party. That allowed Chavez to devote the country’s resources to the needy, who were often ignored under previous governments aligned with business community elites and intellectuals. Because the missions are wildly popular with the poor, no savvy politician is likely to call openly for their demise. But the opaque funding operations are vulnerable to corruption and waste, as the opposition has been claiming for years. In the hands of a new government confronted with intensifying pressure to trim spending, the subsidized food, preferred university entry, slum-based free clinics and other handouts could face cutbacks or elimination.