17 January 2013 — CEPR
Earlier this month my colleague Dan Beeton noted that the major media, after incorrectly predicting a close race in Venezuela’s presidential elections, had quickly reverted to the familiar “gloom and doom” predictions for Venezuela’s economic future. Additionally, many recent opinion and news pieces have echoed the Venezuelan opposition’s view that the decision to postpone Chávez’s inauguration was legally questionable. On January 8th, a Chicago Tribune editorialneatly summarized the prevailing wisdom: “Venezuela after Chavez will likely be plagued by political turmoil and economic struggle.”
Just as it appeared that the current conventional wisdom on Venezuela had spread and hardened irreversibly throughout the major media, on Monday the UK daily The Guardian published an editorial entitled “Venezuela, defying predictions – again.” The piece deftly takes on a few commonly held views found in much of the media coverage of Venezuela.
The postponement of Chávez’s inauguration “is not a coup,” the Guardian states. In fact, “the constitution allows for a president-elect to be sworn in by the supreme court, and the postponement has now been endorsed by the court itself.” It’s worth noting that head of the Organization of American States José Miguel Insulza, thegovernment of Brazil and a number of other regional governments have also publicly agreed with this assessment, which we explored in detail last week. Few U.S. media reported on the international acceptance of the decision to postpone Chávez’s swearing-in, instead preferring to focus on the views of members of the Venezuelan opposition, some of which lack consistency. For instance, opposition leader Henrique Capriles called on the Supreme Court to rule on the constitutionality of the postponement, only to later reject the Court’s determinationthat the move was constitutional.
The Guardian editorial also points out that the frequent predictions that rivals within the pro-government coalition “would begin falling out have not materialized” and that:
dire warnings about a mismanaged economy, with soaring inflation, crumbling infrastructure and currency control problems, also need examining with care. After all, the Venezuelan economy has grown for nine successive quarters, has a relatively low debt burden, and the fall in inflation indicates a government with the ability to control inflation while maintaining growth. Oh, and Venezuela is sitting on the world’s largest oil reserve.
The editorial provides a link to CEPR’s September report on the Venezuelan economy showing that the economic data doesn’t support the negative scenarios found in media coverage of Venezuela. In fact, as the report explains, even in the unlikely event of a temporary crash in oil prices, it’s very doubtful that Venezuela will face serious balance of payment constraints. To date, the report’s analysis and conclusions remain uncontested, yet Venezuela pundits continue to claim that the Venezuelan economy is on the verge of collapse and that a major fiscal readjustment is inevitable. Though Venezuela’s leadership would do well to address kinks in the country’s currency control regime, there is no compelling reason for making drastic cutbacks in government spending, despite the contentions of so many pundits and journalists who write about Venezuela.
It is worth noting that this is probably the first time in at least a decade that the editorial board of a major Western newspaper has challenged the “conventional wisdom” on Venezuela. Hopefully it will not be the last.