Venezuelan President Hugo Chavez succumbed to an infection secondary to cancer on February 5. Vice President Nicolas Maduro paid a tearful tribute to Chavez, as a "true patriot" and leader of the Bolivarian Revolution. The passing of the leader of Latin American countries taking an increasingly independent course from the U.S. inspired other tearful tributes. Venezuelan Foreign Minister Elias Jaua has declared seven days of national mourning.
Speaking in La Paz, Bolivian President Evo Morales wept as he described Chavez as an inspiration for Latins struggling for liberation. Morales, who came to the presidency as the first chief executive of Amerindian ancestry, said "Chavez is more alive than ever." Cuba, closely allied with Chavez, declared two days of mourning with flags flown at half-staff. A government statement declared that the Cuban people considered him one of their "most outstanding sons." Indeed, Venezuela has long sold subsidized petroleum to the communist island.
Argentine President Cristina Fernandez declared three days of mourning in Argentina. She will be joined at Chavez’s funeral with Uruguayan President Jose Mujica. Nicaraguan President Daniel Ortega said he would carry on the legacy of Chavez and his Bolivarian Revolution. For his part, Iranian President Mahmoud Ahmadinejad offered condolences and may also attend the March 8 exequies. China called Chavez "a great leader and great friend of the Chinese people."
U.N. Secretary General Ban Ki-Moon offered condolences to the people of Venezuela. The secretary general of the Organization of American States, Jose Miguel Insulza, sent his condolences to the Venezuelan people, calling this a time of great sorrow. The OAS will hold a special meeting in memory of President Chavez.
The 58-year-old Chavez had been treated in Cuba for cancer before returning to Venezuela last month. Following his treatment there, Chavez contracted a severe infection after chemotherapy in a Caracas military hospital. He had last been seen in public in December, missing his inauguration in January for another term as president. Official photographs released by the government had shown Chavez in a hospital bed flanked by his two daughters, apparently reading a copy of Cuba’s Granma newspaper.
Vice President Maduro accused Venezuela's enemies of being the source of the pelvic cancer that killed Chavez. He did not explain how this could be possible. Also on March 5, Venezuela expelled two American diplomats for allegedly plotting to overthrow the government. One of two Americans was the Air Force attaché. The Obama administration, often the target of Chavez's criticism, was cautious in its response, releasing a statement expressing support for the Venezuelan people and interest in "developing a constructive relationship with the Venezuelan government." During the George W. Bush administration, Venezuela accused the U.S. of direct involvement in a coup against the government. Relations have been further strained between the U.S. and Venezuela over Chavez’s ever-closer relationship with Iran and Russia. Venezuela continues to be one of the greatest exporters of petroleum to the U.S.; its contribution of petroleum than that exported through the Persian Gulf. The Venezuelan government oil company owns CITGO, a gasoline retailer and refiner which was formerly U.S. owned.
In the largely Venezuelan community of Doral in the Florida city of Miami, nonetheless, many people who left Venezuela while Chavez was in power took to the streets to celebrate his passing. Some expressed hope that the problems they left behind - crime, corruption, and a poor economy - would finally begin to improve.
“President Chávez's immediate successor will inherit a country facing widespread violent crime (one of the highest per-capita homicides rates in the world), high inflation and frequent electricity and food shortages,” said Carlos Cardenas, Deputy Head of Latin America Country Analysis at IHS – a forecasting firm based in the UK.
“Independent figures show there were 4,981 protests in Venezuela during January-November 2012. None of the groups organising these protests are likely to show the new president the same loyalty and patience they did with President Chávez. Without Chávez's charisma, the new president is likely to encounter frequent bouts of nationwide unrest. This is likely to take the form of road blockades, arson against vehicles, confrontations between protesters and security forces,” Cardenas said.
“We expect the civil unrest hotspots to include areas directly around ministries and government offices after the new president is elected, as well as larger union protests and strikes at state-run firms, including oil firm PDVSA and the various companies under the Corporación Venezolana de Guayana (CVG) metals conglomerate in Bolívar state,” he continued.
Cardenas anticipates currency instability as Chavez’s successor attempts to further regulate the economy. “Vice President Maduro is eager to assert his authority. He is likely to do this by expropriating and fining private firms. Sectors at highest risk include food and retail,” Cardenas said. “Currency risks are likely to intensify in 2013,” according to Cardenas. “On 8 February 2013, the government introduced important economic measures that are likely to increase currency risks over the one-year outlook. The first measure introduced was a 31.7% devaluation of the currency from 4.3 bolivares (VEF) per US dollar to 6.3,” he said.
“The decision to devalue was triggered by the government's need to reduce a fiscal deficit that widened to about 15% of GDP in 2012. The VEF is still overvalued, as indicated by it trading on the black market at over three times higher than the new exchange rate. The government is pondering increasing corporate taxes to strengthen its fiscal position, but we still expect the fiscal deficit to widen as the government is likely to significantly increase spending with the objective of aiding Vice President Maduro's chances of securing power via election,” said Cardenas.
Improvements to Oil Sector Regulatory Framework Likely
“Venezuela currently has one of the toughest fiscal regimes in the world,” Cardenas said of his report. “We assess that the government will inevitably need to ease the fiscal terms in the sector in order to incentivise a rise in production, particularly as higher production is needed to provide some respite to PDVSA's finances. The government already introduced some minor improvements to the windfall tax earlier in 2013. Improvements however are unlikely to be immediate, and the most likely scenario is an intensification of PDVSA's current problems which will eventually force the authorities to introduce incentives in the sector.”