Hugo Chavez’s economic legacy – the two graph version

Today (March 5th) – on the 60 year anniversary of Stalin’s death – Venezuelan president Hugo Chavez passed away.

I think Chavez’s economic legacy can be pretty well-illustrated by two graphs comparing Venezuela’s economic performance from 1999 when Chavez became president with three ‘neo-liberal’ Latin American countries – Chile, Peru and Colombia.

We start out with the real GDP level (Index 1999 = 100)


And next the price level (GDP deflator, Index 1999 = 100)

LATAM inflation

I leave it to my readers to judge whether Hugo Chavez’s death is a positive or a negative shock to Venezuela’s economy.

PS I am not claiming that Venezuelan economic statistics has not been manipulated. My source is IMF.

Related posts:
Food shortage is always and everywhere a monetary phenomenon
A modest proposal for post-Chavez monetary reform in Venezuela

Leave a comment


  1. Lars, in the short run it could be bad! There´s likely going to be confusion…

  2. I think this is misleading.

    I’m not sure why you’d choose an index for GDP as it doesn’t really tell us, well, what GDP is!

    If you look here then it’s clear Venezuela has gone very well under Chavez:!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:VEN:COL:CHL:PER:ECU&ifdim=region&tstart=762912000000&tend=1299369600000&hl=en_US&dl=en&ind=false

    now, you can attribute it to oil wealth (which I do). But the idea the economy tanked under him is just false. If you add his reductions in poverty (from 25% to 8%) and unemployment (halved) then it’s easy to see why he was consistently reelected. Obviously the inflation doesn’t bother people that much.

    • I find it very odd that we should say that GDP is not a relevant measure. Venezuela has clearly under performed economically – and socially – while Hugo Chavez has been in power.

      And inflation? Clear people worry about inflation, but more important the Chavez regime has tried to fight inflation with price controls. That has created massive food and energy shortages in Venezuela. Again the poor are the main victim’s of Chavez’s quasi-communist policies.

      • Did you follow my graph? I was saying that the index as a measure was misguided. Measured in inflation adjusted per capita GDP, your claims do not stand up to scrutiny. There are certainly food shortages and I don’t think price controls are a great policy, but it’s only the poor suffering from the shortages – ‘only’ in the sense that they have always had poor access to food and basic needs one way or another. At least health and education have improved markedly under Chavez.

        You also mention crime below. Crime is a persistent problem throughout Latin America, and though it has gone up under Chavez, there is a case to be made that this is because neighbouring countries (Brazil, Colombia) have cracked down on crime and shifted it into Venezuela. While the Chavez government should not be excused by any means, their sin is more one of omission than commission: they thought the reduction in poverty would reduce crime, but it didn’t. Since realising this they have taken measures such as gun controls and buybacks and reforming the perpetually corrupt police system.

        Btw, crime is highest in the territories where the opposition is elected. If Chavez were anything but a socialist crime would not receive attention, it would just be ‘oh, Latin America.’ This can be seen from the world’s highest crime rate in Honduras, where the government is neoliberal.

    • Carlos

       /  March 7, 2013

      Keep in mind that all the numbers you are discussing are completely unreal-fake. Venezuela has been under a strict currency exchange control since +10 years, and all the figures the government sends out to the IMF and World Bank are under the fake official fx rate, e.g. real market fx is at +20 per USD, while the figures you are seeing are under the official 4.3 per USD. No wonder all our unit econ. look excellent!

      Reality is much much different here.

      We DO NOT have the best GDP per capita, we DO NOT have the best minimun salary in Latam. Anyone who at believes that is in wonderland. Unemployment has not gone down; government just decided to count in street vendors (thousands) as officially employed.

      Regarding crime, I respect your opinion, but also respectfully tell you that what your saying is not true. Crime has gone up and up, everyone is doing it and everyone is becoming a victim of it, poor or rich (more the poor than the rich). Police is as corrupt as ever. Narco politics are as big as ever. If you do not believe me I invite you to come here and I’ll show you how easy it is.

      At the end It’s all a matter of numbers and semantics + political rubbish 😉

    • Aquiles Lacruz

       /  March 7, 2013

      Well many statistics have been touched by the Government… I’m a Venezuelan and if you look at the minimum salary it was one of the highest in Latin America, but that was if you used the price of the dollar set by the government, the actual prize of the dollar in the street is 3 times or even 4 times more. Also on account of the unemployment, this government inserted into the employed statistics the people that sell trinkets in the streets, or as we call it here informal economy. If you come here and check, that kind of people comprises more or less the percentage of unemployment that this government got rid of. As on the basis of his getting reelected over and over again… well he had at least 12 hours of national TV presence every week for 14 years, and during this acts he would give a house to someone or a plowing machine or whatever and promise everyone else that he would be next. Also, he made the poor of the country realize that they mattered as much as the wealthy at the moment of elections and that gave the poor a power they never even dreamed of before and that fuels them. He’s made some good things here but the economy of the country as well as the insecurity we live in our cities are some legacies that will not soon be fixed or even forgotten (more than 150.000 deaths due to street violence in 14 years)

    • al - ih

       /  March 8, 2013

      Obviously the Inflation doesn´t bother us that much?? WTH?? Imagine that all that you have, your savings, car, house, paycheck, etc, was worth 40% less when you wake up a morning. That is what happened to us last february, with the “economic measure”, the inflation that we have experiencied so far duplicates the price of a normal purchase in a grocery store. I´m Venezuelan and Im telling you: Is bothering me. The health is not improved, or the president itself wouldnt decide to take his treatment in Cuba. Is a complex situation with a lot of psychological dependence and real answer to the problems of the poor, with the total ignorance on really important economic problems, and a lot, A LOT of media campaign. If you put pictures, giant pictures of houses being built, the people eventually will start to belive that there are houses everywere, feeling hope because there are really needy. Please excuse my poor english.

  3. PoachedWonk

     /  March 6, 2013

    What about income inequality and unemployment statistics?

    Its clear the oil price shocks of 2008 had a massive impact on Venezuela but are you really blaming global oil price declines on Chavez?

    • Well, I would then ask what about crime? The murder rate has exploded in Venezuela while Chavez has been president and it is pretty clear that it is the poor that are victims of this crime wave.

  4. Bernd

     /  March 6, 2013

    I’m not a Chavez fan by any means, but I think your arguments are flawed. First of all, both graphs show the same thing, namely that inflation has been very high in Venezuela. On the other hand, if you look at better indictators such as GDP (PPP) per capita, then the case against Chavez is less clear:

    • concerned

       /  March 11, 2013

      That graph has an obvious fault: how could PPP possibly ~double from 2006 to 2007? =accounting tricks

  5. G

     /  March 6, 2013

    To all those dreamers thinking that Chavez was some sort of Robin Hood, you got it all wrong, I have traveled extensively and the country gets worse and worse by the second in all aspects, the economy is ruined, security is awful, corruption is rampant….GDP has stagnated, Inflation is very high, there are permanent shortages of food, and electricity, the economy in general is very distorted…GASOLINE IS CHEAPER THAN WATER that will tell you a lot, yet the poor can not enjoy this subsidies as cars are VERY expensive,…it is all upside down…all those that think that this was a great government are completely wrong…go there, experience it you will reach the same conclusion

  6. G

     /  March 6, 2013

    Bernd…it is easy to argue your point, change your graph to GDP per Country and you will see that in the same time period the economy of Peru almost tripled, while Venezuela’s “doubled” (in quotes because government data in Venezuela is heavily manipulated), both countries are heavily dependent on the export of commodities (oil in Venezuela and minerals in Peru), which had a great run during the past 10 years, additionally Venezuela always had a higher income than Colombia, Peru therefore what you see in this chart is a country that grew but that grew at a much less significant rate than its potential, the reason is because the country was very poorly managed, should Chavez not been there real GDP PPP per capita in Venezuela should be in the 18-20K/year and not 12K like it is today…makes sense???

  7. dimaj

     /  March 6, 2013

    I´m from Venezuela. I read a lot of comments about Chavez´s gobernment and the economy inside my country. I gotta tell you, is a disaster, you go into a supermarket and can´t find: milk, soap, powder, etc. Hugo Chavez regimen always manipulated the people, they try very hard with propaganda and they have succeeded by changing people´s mind over this 14 years. In a couple of days the prices of every product rise a lot.

    If I start talking about violence, crime, corruption… could write a book

  8. bidrec

     /  March 6, 2013

    I worked for a couple of years in lower Manhattan for a “mid-size” brokerage. The office I worked in was usually ranked first in the firm in the monthly rankings in terms of commissions out of about one hundred offices countrywide. When it dropped to second it was because it was beat out by the office in Caracas.

    Something ought to be said about the pernicious affect of capital flight on poor countries.

  9. Unlearningecon misses the point. The relative comparison is the following:
    In 1950 per capita income in Vene was 60% of US income. By the end of the 50s it had climbed to 66% of the US level. A nice example of convergence. In 2012 per capita income in Vene was only 24% of the US level. That´s why in econ growth textbooks Vene falls in the category of “disasters”! In absolute terms, income p.c. in 2012 was the same as in 1960!

  10. Just a few hours before announcing Chavez’s death, Vice President Maduro virulently accused foreign and domestic enemies, clearly including the United States, of trying to undermine Venezuelan democracy. Yes, he did use the term democracy. The government said two U.S. military attaches had been expelled for trying to destabilize the nation, and Maduro insisted that Chavez was purposefully attacked with cancer. He said a scientific commission would be set up to investigate. It’s good to know that rational forces prevail in Venezuela.

    Chavez leaves behind a political movement in control of a nation that human rights activists regularly describe as a badly deteriorated state where institutions such as the police and courts have been converted into tools of political persecution and where most media are firmly controlled by the government.

  11. Andres Perez

     /  March 7, 2013

    Thanks for the great graph, this is something that people completely miss. Not only that Chavez oversee oil going from $9 to $100+/barrel, which given the percentage that oil accounts for the Venezuelan economy it is amazing that the country did so poorly during the “vaca gorda” (fat cow) years. Here is a debate bringing the pros and cons of chavez during his presidency:

  12. Brian Briscoe

     /  March 7, 2013

    One more thing to add — Venezuela’s economy is entirely dependent on oil revenues (already mentioned), but these oil revenues have been falling annually for the past decade. Venezuela has not reinvested its windfall profits back into increasing production and now faces a situation where it will require several billion dollars just to maintain production at its current rate (source:

    I also have to correct unlearningecon’s inaccurate statement about crime being a persistent problem in Latin America. It is a problem in a few countries severely affected by drug violence and poor institutions (El Salvador, Guatemala, Honduras, Colombia, Venezuela), but compared with major US cities, many Latin American nations do very well with violent crime statistics. Chile, Argentina, Cuba, and Peru are all very competitive with the US national average on murders per capita. In fact, most Latin American countries are safer than Chicago or Philadelphia, and all except Honduras and El Salvador are safer than New Orleans (sources and FBI database).

    As far as the specific question on Venezuela, the crime rate is high and it is largely due to the lack of rule of law. The government is not capable of keeping the peace or it turns a blind eye in the largely Chavista areas where the crime rates are the highest (source: presentation from a Venezuela expert and PhD).

    Now, a final testament to the economy is the prevalence of the black market. Price and currency controls have pushed a large portion of purchasing activity to the informal market, and many economists say that the Bolivar is overvalued. The Big Mac index (seriously, it’s legit) says that the currency is overvalued by about 80%(Source: the economist).

    If you were to look past the first layers of economic health (GDP or GDPPC), you’d find the real story. Failure to devalue the currency may lead to a currency crisis, and devaluing will make goods more scarce. Chavez chose to pass this buck to his successor. The failure to invest in oil infrastructure is going to require major investments by the government (it’s a state run project) which will divert billions of dollars from the social projects that have reduced inequality and provided some relief to the poor.

    Bottom line, Chavez used the prototypical populist short-term fixes to maintain his popularity. Venezuela’s growth is simply not sustainable.

  13. ruanaruana

     /  March 7, 2013

    Interesting graph, but Chile, Colombia and Peru may not be the ideal comparisons. They are among the best performing Latin American economies over the past decade. They have mineral wealth, rather than oil – so the terms of trade have been different. Probably better to compare Venezuela to the LatAm average or even the OPEC average.

  14. truth to be said

     /  March 7, 2013

    So no graph of capital flight !
    Okay so Chavez policies weren’t exactly optimal, but you’re missing the elephant in the room !

  15. pedro ruiz

     /  March 7, 2013

    I think you are measuring in a wrong way government performance. For instance, try to change the indicator, but a socilist one. Probabilly You will get a problem with such a indicator’s source.

  16. scf

     /  March 10, 2013

    GDP per capita looks favourable because the currency has been controlled. If you have a fixed currency regime then you can get any number you want for gdp per capita simply by setting the us dollar conversion rate to whatever level you choose, which is precisely what the government there has been doing.
    In order to do a proper comparison, purchasing power parity can eliminate many of the distortions. So here you go:
    This is essentially the same graph as the image above. It accounts for a inflation and for the fixed currency regime.
    Now, when you consider the fact that Venezuela is an oil producing country, if you were to compare to other countries of similar gdp and similar oil producing capability:
    Not favourable to Chavez.

    • Not really unfavourable, either. There was a dip at the turn of the millennium which surely can be attributed to the attempted coup and subsequent oil strike sat the time. After that Venezuela followed a reasonable trajectory until the global crisis in 2008.

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