Tuesday, March 5, 2013

Hugo Chavez Dies: Good for Commodities?

The flamboyant and egotistical leader of Venezuela - Huge Chavez - died Tuesday after a two-year battle against cancer. The question now is will there be a more business-favorable replacement of Chavez, or will Venezuela remain a backward, socialist country barely able to make it.

Chavez bought the love of the poor in the country by nationalizing industries and then feeding some of the poor while offering them free health clinics in the poorest parts of the country.

Those that he bought using the goods and capital of others will miss him, but the cost of nationalizing energy especially, as always, results in a loss of production.

Opponents of the mini-dictator will be glad he is out of the way as he has largely wasted the natural resources that would have, and should have, been put to better use. Unfortunately, socialists can't see the devastating effects of wealth distribution, and over time always end up being a destructive force.

Assuming Vice President Nicolas Maduro steps into his shoes (or whoever does), it'll be interesting to see if policies in the country towards commodities continues on. Since there are always large numbers of poor under wealth redistribution schemes, it's going to be hard for whoever follows Chavez - even if they were more favorable to capitalism - to change things without social unrest that comes from government dependence.

Maduro does appear to have a strong lead over his competitors to replace Chavez, but it's not clear if he has the charisma and strength to follow in the footsteps of goal of Chavez. He has said he wants to continue on in that vein, but rhetoric is different from reality, and pressure will rise from a variety of places to get what they want.

It was the somewhat benign but bombastic personality of Chavez that allowed him to get away with what he said, which was really more theater than a true threat. Madura doesn't have that same personality, so it could be much harder for him to command the attention and faithful and adoring followers Chavez did.

As for commodities in the country, it's unlikely some major change will happen in the near term, but there is always a point in socialism, as history has proven over and over again, when it can no longer sustain itself.

Many in Venezuela see that, and they are the ones hopefully that will influence the country going forward; no matter who ends up leading it.

Interestingly, the more desirable and probable opponent of Maduro, Capriles, would probably have beaten Maduro under any other circumstance, but he is likely to ride the emotion people have attached to Chavez and now passed on to him when Chavez picked him as his preferred successor in December 2012.

Maduro has positioned himself as a Chavez clone, but it's almost assuredly so he would be in the position he is in at this moment. More than likely we'll find out if he is really a Chavez or a pretender seeking power. Hopefully it's the latter.

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