Chacon-ery: Crony Capitalism Venezuela Style

The art of Latin American populism has now reached its zenith with Hugo Chavez in terms of sheer brazeness; it's as if the people couldn't care less and just passively accept the will of the Hugo. Here are the latest steps to follow in the art of Venezuelan corruption for would-be tyrants the world over. From the outside, I must certainly say that being an old-school populist looks kind of fun in a sadistic way:

1. Tirelessly spout populist propaganda;
2. Install your cronies in important industries;
3. When these cronies inevitably run these industries into the ground, purge them;
4. Take credit for "cleaning up" the system (of the filth you perpetrated);
5. Return to (1).

Here are excerpts from the Reuters article:

Venezuelan President Hugo Chavez was heading to a summit in Uruguay on Monday in the hope he had quashed public panic and gained political ground with a purge of the South American nation's financial sector. Chavez sacrificed one of his closest political allies -- Science Minister Jesse Chacon -- over the weekend after his brother was implicated in mismanagement at one of seven banks the government has closed in the last eight days.

The resignation of Chacon, a fellow retired military officer who took part in a 1992 coup attempt alongside Chavez, was the biggest political casualty in a cleanup of banks that initially spooked investors and panicked depositors. But while the opposition say socialist Chavez is to blame for allowing a new class of mega-rich businessmen with close ties to government to buy and abuse banks, the president is trying to present the cleanup as a political plus. He faces a national assembly vote next September and a presidential election in 2012.

"The bank scandal has turned Chavez into an anti-corruption hero," pro-opposition newspaper El Universal noted wryly, arguing Chavez was successfully but deceitfully exploiting the mini-crisis in the bank system for personal political gain. "In a nation where not even a leaf can move without the president's approval, and given there is proof the culprits were known to intelligence services from the start of the year, any attempt to wash his hands, alleging he knows nothing, is a false argument with no credibility."

In a lengthy discourse at the weekend, Chavez promised to brook no illicit enrichment among his allies, and urged people to inform him if ministers or others were seen gallivanting on yachts or otherwise flaunting wealth. The Venezuelan leader, who was leaving for Montevideo for a summit of the Mercosur trade bloc, which Venezuela wants to join, again said he would not hesitate to take over any banks guilty of illegal practices. But he stressed his aim was to regulate better not nationalize the whole sector.

Chavez has expropriated large swathes of Venezuela's economy during his decade in office, including parts of the OPEC member nation's lucrative oil industry. But analysts say full-scale bank nationalization may be out of reach for him as it would cause panic and a probable run on funds.

While the full political impact of the cleanup is not yet clear, investors and depositors appear to be agreeing with Chavez that Venezuela is not on the verge of a big crisis. Venezuela's benchmark global bond rose 2.5 points on Monday in a sign of easing investor anxiety. Local markets were closed for a Roman Catholic holy day.

The seven banks closed last week represent 8 percent of Venezuela's total deposits, and the government has promised to return almost all savers' money before Christmas. It plans to rehabilitate and join some of the banks in a state firm. Analysts say some smaller banks, mainly in the hands of government-linked businessmen, may face similar intervention but that Venezuela's big banks are in good shape, with healthy capitalization and profits.

"There are a number of zombie banks still around at the lower end of the sector, but systemic financial risk is unlikely," said Russell Dallen, head trader of BBO Financial Services in Caracas. He said internal feuds within government circles, rather than a major privatization push, was the driving force behind the bank cleanup. "The socialist mafia are pushing out the capitalist mafia among the Chavistas," he said...

Venezuela has now jailed eight bankers, including Arne Chacon, brother of the minister who quit. Several dozen arrest warrants have been issued, and some bankers have fled abroad.

The Bolivarian Revolution marches on...