Further Venezuelan Privatization

If you did not read The Wall Street Journal article LAND GRAB Farms Are Latest Target In Venezuelan Upheaval (subscription required) this past week, I urge you to do so.

If the rhetoric smacks of the 1960s, it's because Mr. Chávez dreams of transforming Venezuela just as Fidel Castro did Cuba. Mr. Chávez has already sharply cut private companies' role in Venezuela's lucrative oil industry, and uses the state oil company to funnel billions of dollars to his social projects. He has nationalized the leading telephone company and the main electric utility. He speaks of wanting to drive a stake through the heart of capitalism, limiting the role of money and installing a barter system.

Now Mr. Chávez is taking his revolution to the Venezuelan countryside. "We must end latifundios," he said in a televised speech in March, referring to large agrarian estates. "The people order it, and we will do it, whatever the cost." Then he announced the seizure of a land area larger than the state of Rhode Island.

Since coming to power, the Chávez government has handed over 8.8 million acres, an area bigger than Maryland, for use by the poor. While much of this was state-owned land that was either idle or leased to ranchers, some 4.5 million acres were "recovered" from private owners, Mr. Chávez said recently. In some cases, the government compensated them. In most others, like Mr. Lecuna's, it has simply turned a blind eye to land invasions.

I have written before about Venezuela's president Hugo Chavez. While he is pursuing his own independent path, he is setting Venezuela up for a huge downfall. Eventually, the oily golden goose will no longer be able to provide the largesse required for all his wonky programs. And then the pain will set in.

Because Venezuela remains a large exporter of crude oil to the U.S., investors should pay close attention to its developments. As long as Hugo Chavez remains in power, I do not think it bodes well for neither the U.S. nor Venezuela, most particularly Venezuela.