CHAVISMO MEETS THE MARKET / THE WALL STREET JOURNAL OP EDITORIAL ( RECOMMENDED READING )

OPINION: THE AMERICAS

JUNE 7, 2010.

Chavismo Meets the Market

By MARY ANASTASIA O'GRADY

San Antonio-Ureña,
Venezuela

This is the busiest crossing along the 1,375 mile Venezuelan-Colombian border. It is also the best place to observe what happens when the commanding heights of Hugo Chávez's Bolivarian revolution collide with real life—aka, the market economy.

Crime—kidnapping, robbery and extortion—is a big risk for travelers here and so is dealing with Mr. Chávez's National Guard, which is notoriously corrupt. It has hundreds of highway check points throughout the country and every Venezuelan I talk to is uneasy about its arbitrary power. But I've come to see how Venezuelans are able to get by under price and capital controls, the slow suffocation of the private sector, a skyrocketing crime rate and a variety of shortages. I also want to better understand how people in the provinces feel about their government.

Ironically, a bizarre form of market economics may be playing a key role in Mr. Chávez's survival. Venezuela imports nearly everything it consumes, and Colombia has long been one of its major suppliers. But in a fit of pique last year, when Colombia agreed to allow the U.S. to use its air bases for drug surveillance, Mr. Chávez announced that he would restrict trade with his neighbor.

Food imports are now denied health-department permits, and expiring import permits for some other goods are not being renewed. Mr. Chávez says that the country can get what it needs from allies like Brazil, Argentina and Nicaragua.

Yet there is a long line of trucks waiting to enter Venezuela. A partial explanation is that some of these trucks are carrying goods produced outside of Colombia. Venezuelan ports have deteriorated so much under Mr. Chávez's rule that importers are increasingly offloading in Colombian ports and using overland transportation to the final Venezuelan destinations. This theory is supported by a recent report in the Colombian daily El Tiempo that said 50,000 tons of food had spoiled in Venezuela's northern Puerto Cabello because of government mismanagement.

Yet even if legal commerce between Colombia and Venezuela is down, the animal spirits seeking mutually beneficial exchange have not been extinguished. Take the gasoline market. Before crossing into Venezuela, I spent a day in the Colombian border city of Cúcuta where I witnessed scores of entrepreneurs—dressed in T-shirts, shorts and flip-flops, standing in the hot sun or under makeshift canopies—selling contraband Venezuelan petrol from five gallon plastic containers along the road.

Five gallons of petrol in Venezuela costs roughly U.S. 25 cents. In Colombia a driver pays upwards of U.S. $20 for five gallons. It's not hard to spot the profit opportunity that Venezuela's subsidized gasoline offers, with, of course, some help from Venezuelans. In March 2008 the Mexican newspaper La Crónica de Hoy cited a study by the Venezuelan energy and petroleum ministry claiming that it was losing 30,000 barrels of gasoline a day ($1.5 million) because of contraband to Colombia.

It is common gossip among Venezuelans here that this lucrative business belongs to the National Guard, which controls the border. I can offer no proof of this claim, but it is not unusual for authoritarian governments to buy troop loyalty by granting the military valuable business franchises. Iran and China do that. What a delicious irony it would be if Mr. Chávez's war on private enterprise makes one exception: the soldiers who keep him in power.

This is a drug-trafficker's paradise and the profits have to be laundered. In Cúcuta there are many houses and apartments that are extravagantly incongruous with the formal economy. I am reminded of that tongue-in-cheek remark about how the war on drugs is the U.S.'s most successful development project.

Foreign-exchange supply is also a hot business, now that Mr. Chávez has decreed that only the government can supply dollars and any parallel trading by the private sector is illegal. As an importer I met in the El Vigia airport explained to me, the dollars needed for businesses in this country are smuggled across the Colombian border.

The poor have an especially hard time staying afloat. A local home I visit here, like so many, is a work in progress, with unfinished rooms and curtains for doors. But even my humble host—who says he voted for Mr. Chávez once, in 1998—has a generator. Without it the family's food would spoil during regular power outages.

On the road north into the Andes, the vistas are breathtaking. But so is the poverty. The only orderly human endeavors I can spot from the highway are the rose farms that dot the hillsides with color. The towns are dirty and lacking in creature comforts. Service stations have lines for gasoline. Locals of every economic class complain about the fruits of chavismo: the shortages, the devaluations, the political patronage, the corruption and most of all, the joblessness.

Plenty of Venezuelans want to get rid of Mr. Chávez. But few have faith in fair elections. For them, the border is near but the liberty Colombians enjoy is a faraway dream.

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