Venezuela After Chavez
Video Transcript:
Video Transcript:
One day after officially announcing the death of Venezuelan President Hugo Chavez, the chavista inner circle appears united behind Vice President Nicolas Maduro. Despite some initial uncertainty, it appears that Maduro will serve as interim president and presidential candidate for elections that will be called within 30 days. Chavez's popularity and decision to designate Maduro as his successor will give Maduro a significant advantage over his most likely opponent from the opposition, Henrique Capriles.
Chavez was the first of a series of populist leaders to come into power in Latin America at the beginning of the 21st century. Chavez and his brand of populism was the answer to decades of economic instability that affected the entire region. His redistribution policies made him highly popular at home. His charismatic style and inflammatory rhetoric made him a polarizing figure abroad. Chavez's idiosyncratic leadership style is comparable to many populist leaders of the past, but the longevity of his popularity is notable.
Chavez's death puts into motion a succession plan that has been in the making for more than a year. More important than the name of his successor, however, are the challenges facing the South American country. Chief among them are the economic challenges associated with high spending and an oil-dominated economy. High inflation and food shortages affect Venezuelans on a day-to-day basis, as does rampant street crime.
Without Chavez's charisma, Maduro will have to maneuver very carefully to address these issues and maintain popularity. A smooth transition will aid his efforts, but key questions will face his government. Serious cash flow challenges are already forcing the government to consider a range of options including raising the price of gasoline, cutting back social spending, borrowing more or devaluing the bolivar again.
Venezuela's relationship with the Chinese will remain important as a source of funding. Recent signs of friction between the two partners may clear up with the resolution of the leadership transition, but Venezuela may also have to look elsewhere for sustainable sources of capital.
The billion dollar question for U.S. investors is whether or not Venezuela will improve its regulatory regime enough to allow major oil companies to invest in the energy sector. Increased oil production and exports would be helpful in addressing the country's economic challenges, so there is some reason for optimism. However, on the same day that Maduro announced Chavez's death, he also accused the U.S. of poisoning Chavez and announced the expulsion of two U.S. Embassy personnel -- not an auspicious first move for bilateral relations between the U.S. and the Maduro government. So while change may be coming to Venezuela, it may not be imminent.
