Through The Fly's Eyes: Venezuela

from Theflyonthewall.com















The Market Putting Chavez in a Tough Spot

Yesterday, there were numerous press reports stating that Hugo Chavez would nationalize the country's electrical and telecommunication companies, continuing to transform Venezuela into a socialist state.

However, entering his third term, Chavez's plans may already be running into trouble. According to yesterday's Wall Street Journal, Venezuelan inflation is approaching 17% due to Chavez introducing his own version of socialism and unilateral redistribution of wealth policies.

In addition, Chavez has promised much of the windfall money from high oil prices to leaders of other countries in the region that are tempted to re-explore socialism as a way to govern.

The Journal article suggested that if oil drops below $50 per barrel, Chavez could run into trouble keeping up with all the promises he has made. In addition, oil below $50 per barrel might mean he cannot meet Venezuelan's external financial obligations.

Rather than politicians getting in a frenzy about Mr. Chavez, the market may take care of him itself.