The Rentier State Strikes Again

Half-finished cars in outside of a state-run auto factory in Venezuela.

Half-finished cars in outside of a state-run auto factory in Venezuela.

The four main ALBA countries in Latin America (Venezuela, Cuba, Ecuador and Bolivia) are often treated as being fairly homogenous in both their politics as well as their economic policy. In some respects, like respect for traditional forms of democratic governance, they certainly, and unfortunately, do. In economic terms, however, they are much less similar than people often imagine them to be. In discussing the electoral prospects of Ecuadorian president Rafael Correa, Stephanie Leutert highlights the political impact of the upgrades to the country’s transportation infrastructure during his first term and I think indirectly highlights an important difference between Hugo Chávez in Venezuela and Correa and, to a lesser extent, Bolivia’s Evo Morales regarding their commitment to improving productivity.

When comparing Rafael Correa to his ALBA peers, the most important distinction to make, without a doubt, is his training as an economist in the United States. Correa has serious critiques of neoliberal economic models as a panacea of growth, but also seems to believe that market-based economic policy does have merit in many circumstances. Compare this to Chávez, who largely seems to view all economic questions through a purely political and ideological lens. This distinction between a real understanding of the economics and a political understanding of economics illustrates itself in the simple fact that these infrastructure improvements in Ecuador have actually been completed and appear to be of good quality, whereas in Venezuela one sees a myriad of promised improvements that have, either been white elephants, were never completed or were completed either over budget, with serious quality deficiencies or both (Caracas Chronicles does an excellent job chronicling these projects). Both leaders understand the political potential of these types of projects, but Correa clearly appreciates their economic benefits much more. You can see a similar dynamic playing in Bolivia, where Evo Morales continues to fight local Indian groups to build a highway through the TIPNIS, a national park and indigenous territory, and actively courts investment from Brazil and elsewhere.

This highlights the fundamental difference between these countries; in Venezuela, because of its oil, there is less necessity for Chavez to increase the productive capacity effectively than for Correa or Morales (Cuba is something entirely on its own at this point). While both Ecuador and Bolivia produce a large amount of hydrocarbons, and both leaders have been aggressive in extracting more money out of that production, the simple fact is that neither country can depend on them to the degree that Venezuela can. Correa or Morales can use oil and gas revenues to pay for some social programs, but they cannot expect to pay for everything using them as a cash cow the way that Venezuela can. Chávez has been able to paper over the declining productivity of the Venezuelan economy because of high oil prices. Correa and Morales cannot do that to the same degree, and therefore face much stronger incentives to do more than pay lip service to increasing productive capacity or face the political perils of an underperforming economy.

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