This week’s election in Venezuela was important for reasons outside of Venezuela itself. The victory of Hugo Chavez with over 80% of the electorate voting and a sizable minority voting against the current President showed that Hugo Chavez does have a great deal of support as well as a strong opposition to his economic model. Outside of Venezuela it also represents the continuation of a model that while having long term weaknesses, still allows for a great deal of popular support in Latin America as a whole. Chavism, or the left-leaning economic model currently being developed in Venezuela has reduced poverty and inequality in Venezuela, but may only be feasible with high oil prices in a country with large oil reserves. The fear many in Venezuela and outside of the country have is that if the money runs out, there will also be an end to the poverty reduction strategy without any other economic engines to cushion the impact. Chavism may run out of fuel in the long run as revenue is directly tied to oil prices, and most, if not all natural resource based economies have suffered from steep market fluctuations when they are dependent on commodity prices alone.
Venezuela will soon have to deal with the limitation of over a decade of President Chavez and his economic model as he contends with his own personal health and regional elections coming up this December. Any severe change may cause a great deal of problems in Venezuela, but with changes to Venezuela’s economy and perhaps to the President himself, social inclusion in Venezuela’s economic future may still be at the core of any shift in Venezuela’s economic model. In Brazil, Lulaism, or what Michael Shifter of the Inter-American Dialogue has defined further as The Brasilia Consensus, may become the core economic model for productive left leaning countries in Latin America. In the event that economic growth becomes elusive in Venezuela in the near future, the roots of Chavism based in social inclusion may still be a priority in line with a stable growth model. Standing apart from The Washington Consensus, the Brasilia Consensus promotes stable growth with social programs as a priority as currently operating in Brazil, one of the BRICS nations and a model for stable economic growth worldwide. While many in Venezuela’s opposition supported Lulaism over Chavism, the popular support for Hugo Chavez may only bring about The Brasilia Consensus in Venezuela and to Latin America as a whole if Venezuela undergoes strong economic issues in the near future, and this may occur in several ways unfortunately according to many experts on Venezuela.
Part of the problem with oil prices is that the consumers of oil, the EU, U.S., China and other large economies are slowing down currently, with a focus on a Chinese slowdown now affecting commodity prices globally. When China curbs its needs for commodities, Latin America and its natural resources take a direct hit. Today, the slowdown in China due to Western nations not being able to effectively deal with their own economic knots had made the IMF reduce its forecast for global growth in 2013, and China’s once double digit economic boom has turned into a fizzle. Venezuela’s dependence on oil prices being high is directly related to demands for Chinese manufactured goods. Economic models based on commodity wealth often have troubles maintaining their economic plans, and Venezuela and Chavism if unstable many have many issues in the near future. Even Brazil has reduced their once healthy growth forecast for more modest numbers, and while Brazil may grow less than once thought, it still will likely be able to maintain its socially oriented economic model with a reduction in growth.
For a well balanced and healthy analysis of Brazil’s reduced economic prospects, as well as China slowing, the EU not growing, and oil prices dropping in the medium to long term, I suggest viewing today’s Canadian broadcast in Ontario of TV Ontario’s: The Agenda. It is one of the best policy shows in English speaking North America and often they will publish the broadcast soon after airing the program usually within 24 hours. You can find the link to the show here.