An Opportunity and a Warning for Latin America

Former Lt. Col. Hugo Chavez failed to overthrow the Venezuelan government in a bloody coup six years ago, but returned on Sunday as a radical populist and was elected president by a landslide of 56% to 40%.

The victory of this old-fashioned caudillo in a rich but poverty-stricken land sends a message to all Latin Americans: Basic market reforms are essential but they cannot be entrusted to dishonest, self-serving politicians so characteristic of Venezuela and some other countries. Venezuelans are not the first to send this message, but they have done so most dramatically.

Unfortunately, sending crooks and incompetents packing is only the beginning for many reasons. The reforms are still essential if Latin American countries are not to remain forever in the 20th--or even the 19th--century. And they are not easy to make.

Of course, Latin American countries are far more varied than most Americans realize. Venezuela is one of the richest because of its oil, but it is also one of the most corrupt and worst governed. Chavez, the former paratrooper sold himself as an honest, patriotic defender of the poor majority that has been relegated to the slums by the often corrupt elite.

This election strategy has worked before and is certain to resonate in other countries in the future. Peruvian President Alberto Fujimori appeared from nowhere in 1990 and was overwhelmingly elected by confronting head-on the self-serving ruling elite and old political parties.

The challenge for Chavez and any other president thus overwhelmingly elected is to convert his mandate into policies that work. Populism may win votes, but it doesn’t make economies produce for the long-term benefit of those voters. Presenting one’s self as a messiah, as Chavez did, implies that the bread and fishes are right there to be passed around.

But they aren’t and conditions are worse now than a year ago because oil prices have plummeted. Indeed, populist rhetoric isn’t good policy at home, and it makes essential foreign investors very nervous. Chavez already has tried to reassure foreigners who, along with Venezuelans, will closely watch who joins the presidential team. Chavez has obviously noticed that Fujimori disbanded a congress that represented only the elites, and he hopes to do the same in Venezuela, but by means of a constitutional convention rather than a coup.

But Fujimori didn’t just play caudillo politics, he also carried out serious free-market reforms that have, on balance, significantly improved the lives of many Peruvians. Playing his cards right, Chavez could, like Fujimori, draw in outstanding talent that was unwilling to work with earlier, corrupt governments.

Several Asian countries have shown that market reforms can bring more nearly universal health care and education by shared growth, these being accomplished by expanding equality and opportunities and not by redistribution, the typical and fatal Latin American response to social needs.

Chavez loves to quote from Simon Bolivar, but he always skips the South American liberator’s conclusion that the region is “ungovernable” and that making a revolution there is like “plowing the sea.” If Chavez goes the populist route, he will confirm Bolivar’s fears and another grand opportunity in Latin America will have been squandered. But, if he uses his mandate to undertake productive market--not populist--policies backed by a vastly broadened respect for law and private property, he could lead a true revolution for the Venezuelan people and be a worthy disciple of the hopes of his early-19th century idol.