Bloomberg News

Venezuelans’ Quality of Life Improved in UN Index Under Chavez

March 07, 2013

GRAPHIC: Venezuela Now and Then

Venezuelans’ quality of life improved at the third-fastest pace worldwide and income inequality narrowed during the presidency of Hugo Chavez, who tapped the world’s biggest oil reserves to aid the poor.

Venezuela moved up seven spots to 73 out of 187 countries in the United Nation’s index of human development from 2006 to 2011, a period that covers the latter half of Chavez’s rule, which ended with his death March 5. That progress trails only Cuba and Hong Kong in the index, which is based on life expectancy, health and education levels.

The improvements financed by his government’s oil profits will aid Vice President Nicolas Maduro’s bid to succeed him. Yet rising crime and inflation, crumbling infrastructure, oil output that dropped 13 percent since 1999 and food and power shortages may derail economic growth and undermine support for Chavez’s policies in the longer term, said David Smilde, a sociologist at the University of Georgia in Athens who lives in Venezuela.

“He gave a third of the population a sense that they mattered, the material benefits they got are part of his legacy,” said Julia Sweig, a senior fellow at the Council on Foreign Relations, said by phone from outside San Francisco. “But he destroyed the village in order to rebuild it, taking property, spending oil money without reinvesting, mismanaging the resources.”

Falling Poverty

Venezuela cut its poverty rate to 29.5 percent in 2011 from 48.6 percent in 2002, according to the United Nations Economic Commission for Latin America, known as CEPAL. Venezuelans gave a life satisfaction rating of 7.5 on a scale from 1-10, above the global average of 5.5, according to a 2012 index of global prosperity compiled by Legatum Institute, a London-based research organization.

While nationalizing oil fields run by Irving, Texas-based Exxon Mobil Corp. (XON) and Houston-based ConocoPhillips (COP:US), Chavez harnessed an oil windfall to increase spending and establish social programs including subsidized food markets and primary care health clinics in poor neighborhoods. Prices for Venezuelan crude climbed to as high as $126.46 in July 2008 from $8.65 per barrel when Chavez took office in 1999.

Isabel Rojas, a 72-year-old retired seamstress, was one beneficiary of Chavez’s policies. Rojas said she was given free housing in the Valles del Tuy neighborhood southwest of Caracas after the apartment she lived in was deemed in risk of collapse. After retiring in 1986, she said she began receiving a 2000 bolivar ($318) per month pension for the first time in 1999 after Chavez took power.

‘Valued the Poor’

Rojas said in an interview that she was impressed as much by Chavez’s words as his deeds.

“He valued the poor just as much as the rich,” she said. “Everyone had the same value.”

Venezuela has the lowest rate of income inequality – the smallest gap between the rich and the poor – of all countries in Latin America and the Caribbean, according to a March 5 report by UN-HABITAT, the United Nations Human Settlements Program.

The report, called “The State of Cities in Latin America and the Caribbean 2012,” uses the so-called Gini coefficient to measure inequality. It said Venezuela has the region’s lowest figure of 0.41, followed by Uruguay, and that the index has fallen “significantly” since 1990. The coefficient rates countries on a scale of zero to 1.0, with a higher number indicating greater inequality.

At the same time, Chavez’s spending and policies that included the seizure of more than 1,000 companies or their assets, price controls and currency restrictions have undermined the country’s long-term economic foundation, said Smilde. Consumer prices rose 22.2 percent in January from a year earlier, according to government data. They grew about 24 percent in February from a year earlier, the fastest official rate in Latin America, according to a Bloomberg survey of six economists.

Unsustainable Policies

“Chavez did improve people’s lives economically,” said Smilde. “He didn’t necessarily improve people’s economic future because a lot of the things he did aren’t sustainable.”

Chavez’s detractors also blame his government for a rise in crime and a deterioration in governability.

Homicides rose 23 percent in 2012 to 16,030 from 13,080 in 2010, according to a report Maduro presented to the National Assembly Feb. 28. The Venezuelan Violence Observatory, a non- governmental organization, puts the number higher, estimating 21,692 people, or 59 people a day, were murdered in 2012. The murder rate of 73 per 100,000 inhabitants is the highest in South America. In the U.S., the murder rate was five per 100,000 in 2009.

‘We Went Backward’

Carlos Nieto, a 41-year-old builder from Caracas blamed Chavez for a 50 percent increase in prices in shops after the government announced a 32 percent devaluation of the bolivar in February. While he sometimes visits subsidized food markets, he said the diversity of products is poor.

“I think we went backward” under Chavez, Nieto said, blaming inflation, corruption and currency controls for a lower standard of living.

Chavez’s successor will also struggle to rein in poverty levels that began increasing in 2010, according to CEPAL. Even with improvements under Chavez, Venezuela has the fifth-highest percentage of poor people out of 12 countries measured in Latin America, according to CEPAL.

“The Chavez government did very little to improve the capacity for wealth creation,” said Francisco Rodriguez, a senior economist at Bank of America Corp. in New York. “While the pie was being distributed more fairly, the pie was not growing.”

To contact the reporters on this story: Charlie Devereux in Caracas at cdevereux3@bloomberg.net; Raymond Colitt in Brasilia Newsroom at rcolitt@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net


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