CARACAS (Reuters) - A string of nationalizations in Venezuela in recent days shows President Hugo Chavez is pushing ahead with takeovers that critics say are undermining an economy that is already the worst performing in South America.
Almost all the businesses expropriated during the 12-year rule of the firebrand leftist have struggled to maintain production levels — a prime example being the OPEC member’s troubled steelmaker Sidor.
“Firms operate under the permanent threat of confiscation ... The state of despair and uncertainty is generalized,” said Mauricio Cardenas, director of the Latin America Initiative at the Washington-based Brookings Institution think tank.
“The economic model that has taken hold in Venezuela does not work. Without legal protection, there is no investment, and without investment, there is no growth,” he said.
Rejecting allegations that economic production has been hurt by its policies, the government says people are better off under Chavez.
“The future is for the workers, for you who build socialism ... to safeguard for our people, our communities, the benefits of worker control over such important companies,” Oil Minister Rafael Ramirez said at a nationalized factory this week.
In recent days, the president has ordered the takeover of a major fertilizer plant, a motor lubricants maker, more farmland and agricultural supplies company Agroislena.
Those nationalizations followed gains by the newly united opposition at legislative elections on September 26, where they struck a symbolic blow to Chavez by winning 40 percent of seats in the National Assembly and nearly half the popular vote.
The 56-year-old former soldier responded that the new opposition presence in parliament posed no obstacle to his legislative agenda, and he vowed to accelerate his socialist “revolution.”
Last month’s polls set the stage for the next presidential election in 2012, when the opposition will try to unseat him, and analysts expect Chavez to take more steps to re-energize his base by showing that he is pushing ahead with his plans.
“The government is trying to increase its control over the economy, including food production and the agriculture sector, in an effort to manage food shortages and high inflation,” said Daniel Kerner of the Eurasia Group think tank.
“Further measures to increase state presence in the food production sector are thus likely,” he said.
The focus on agriculture and the government’s goal of providing abundant, cheap food for all citizens comes after a scandal earlier this year that threatened to eat into support for Chavez’s ruling Socialist Party ahead of the ballot.
Amid sporadic shortages of some staple goods and annual inflation running at around 30 percent, tens of thousands of metric tons of meat and milk were found rotting in the Caribbean sun in containers owned by a state-run importer.
Chavez fought back, accusing opposition politicians of twisting facts and taking advantage of honest mistakes to portray his government as incompetent. But the saga was an embarrassment for the president, who had often blamed capitalist “speculators” of hoarding food to drive up prices.
Since then, he has zeroed in on state-run agriculture as a way to undermine wealthy elites and eliminate poverty.
“We must connect the city with the countryside! Land is the most important of the productive forces. The Agrarian Revolution!” he exclaimed on his Twitter account this week.
After renaming Agroislena as Agropatria, meaning “Agro-fatherland,” Chavez announced cuts of more than 40 percent in the prices of a dozen of its fertilizers, more than 250 agrochemicals, and its black bean, corn and rice seeds.
His supporters say he is working hard to reverse years of inequality in the South American country, which suffers a huge gap between rich and poor — despite sitting on the some of the biggest deposits of crude oil in the world.
“Here in Venezuela, the poor were marginalized and dismissed so entirely and so ruthlessly and for so damn long that an irrational backlash was almost certain to happen eventually,” a reader commented on a pro-opposition blog posting about the nationalizations. “Social dynamics had been preparing the soil for a Hugo Chavez for more than a century.”
But as Venezuela suffers a second year of recession — making it the only economy in the region not growing again after the global financial crisis — some say the effect of its fiscal problems could increasingly be felt abroad if Chavez keeps to the more radical posture he has shown in recent days.
As well as further curbing imports from neighboring Colombia, which have already been hammered by a diplomatic row last year, a faltering economy would hurt members of Venezuela’s Petrocaribe alliance, which have been able buy its oil on easier terms.
“It will definitely have a negative impact on the balance of payments and the overall economic situation of a whole host of countries, ranging from Central America to the Caribbean,” Cardenas, of the Brookings Institution, told Reuters.
Editing by Frank Jack Daniel and Eric Beech