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Chavez Still Destroying Venezuela’s Economy From Beyond the Grave

Posted By Daniel Greenfield On July 6, 2013 @ 9:23 am In The Point | 9 Comments

I forget which phase of Hugo Chavez’s Bolivarian revolution Venezuela is supposed to be in. The silver or the gold one. Or maybe tin. At any rate, the golden part of it has worked out about as well as the rest of it.

The bet on gold that former Venezuelan President Hugo Chavez made in the final years of his life is collapsing at the wrong time for his country.

Chavez, who argued that Venezuela should move away from the “dictatorship of the dollar,” stockpiled more than 70 percent of Venezuela’s foreign reserves in gold by 2012, the highest percentage among all emerging-market countries and more than 50 times that held by neighbors Colombia and Brazil, according to the World Gold Council.

After rewarding Venezuela with a rally of almost 400 percent in the past decade, gold has tumbled 25 percent this year, pushing the central bank’s reserves to an eight-month low and compromising the government’s ability to repay foreign bondholders. The yield on Venezuela’s dollar-denominated debt has risen 62 basis points, or 0.62 percentage point, to 11.84 percent in the past month, compared with an average increase of 57 basis points for other countries in Latin America.

“Venezuela’s reserves have taken a big hit,” Francisco Rodriguez, an economist at Bank of America Corp., said by phone from New York. If current gold price levels continue, “then you will see an increase in perception that Venezuela’s capacity to pay is weakening.”

You have to give Chavez some credit. He picked the perfect time to exit the stage. Right before his Socialist house of cards came crashing down.


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