Not many world leaders can give their markets a shot in the arm by revealing a serious medical problem. But then Venezuelan President Hugo Chavez isn’t like most elected politicians. Mr. Chavez says he is heading back to Havana for another operation after a test showed a possibly cancerous lesion in the same spot where a tumour was removed from his pelvis last June. The news triggered a surge in battered government bonds, driving yields to the lowest levels against comparable U.S. Treasuries in nearly two years.
Mr. Chavez, who has been running Venezuela into the ground for the past 13 years, still insists he will contest the next presidential election in October, which will feature a credible opposition candidate running on a platform borrowed from Brazil’s successful, market-boosting socialists.
The bond market’s early bet is that Mr. Chavez’s political prognosis is poor. Even if he prevails in the election, chances of serving out another term are considered remote. And it would be hard to find anyone outside his inner circle who thinks Venezuela wouldn’t be far healthier and considerably more market friendly without him at the helm. But give the former army officer and Castro acolyte his due. It’s quite a political feat to transform an oil-rich nation into an abject basket case, with high unemployment, rampant corruption, an overvalued currency, stunning inflation of about 30 per cent and a continuing flight of capital, despite exchange controls. Average economic growth during his time in his office: 2 per cent. The average for all OPEC producers during the latest period of stronger oil prices: nearly 7 per cent.
Mr. Chavez has opined that the market “has become a perverse mechanism where big monopolies dominate and ransack the people.” That sounds like an apt description for his own regime.