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December 14, 2009 [LINK / comment]

Banking scandal in Venezuela

Venezuela seems to be going through the same sort of financial scandal that the United States has experienced over the past several years. Science and Technology Minister Jesse Chacon resigned last week because his brother Arne Chacon was involved in lending irregularities at Banco Real (of which he was president), and there are rumors that other top political figures may be implicated as well. It all began on November 20, when the government seized control of four banks that had loaned money to companies owned in part by the banks' directors themselves. The opposition is using the scandal as an opportunity to accuse the Chavez government of widespread cronyism, deriding the new elite as the "Boli-burgesia," or Bolivarian bourgoisie. (Hugo Chavez calls his socialist regime a "Bolivarian" republic, evoking the memory of the Liberator, Simon Bolivar.) See BBC.

Whether the President himself is tainted remains to be seen. It always seems, however, that political leaders who boast that they are the champions of the common people are among the most likely to be raking in the "loot" for themselves.

The big question now is whether this scandal is an indication of increasing fragility in the Venezuelan economy, which has suffered over the past year as crude petroleum prices have declined. Argentina in the early 1950s and Mexico in the early 1980s were classic examples of the tendency in Latin America to go through extreme cycles of economic boom followed by bust, and the irresponsible policies instituted by populist leaders such as Juan Peron and Hugo Chavez are always to blame for the disasters.

Posted (or last updated or commented upon): 14 Dec 2009, 12: 59 PM

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