After Chavez, what future for ‘petro-socialism’?

The recent passing of Venezuela's firebrand president Hugo Chavez raises questions over the future of the oil-fuelled socialist programmes that underscored his "Bolivarian revolution".

Does Venezuela face a hard landing after 14 years of oil-fuelled “Bolivarian socialism”?

Despite a growth rate of 5.2% in 2012, critics say the country's addiction to oil and years of mismanagement could spell trouble for its economy.

Analysts have pointed to Venezuela’s failure to diversify its economy during the 14-year rule of Hugo Chavez as the country’s Achilles’ heel. Petrochemicals account for more than half of the central government’s income, making its budget vulnerable to fluctuations in the global market.

“Oil and gas still account for more than 90% of Venezuela’s export earnings,” noted Christine Rifflart, a senior economist at the French Economic Observatory (OFCE).

Crude oil prices increased five-fold since Hugo Chavez took office in 1998, allowing the leftist leader to bolster his popularity by funding and expanding social programmes across the country.

But a sharp drop in the price of crude oil would put many of those programmes at risk.

Shrinking private sector

While it helped reduce income inequality and slash poverty by more than 50%, Chavez's oil-based economic policy had an adverse effect on the private sector.

Out of the 14,000 Venezuelan private sector firms existing in 1998, only 9,000 were left by 2011. Chavez’s taste for nationalisation and his far-left policies have kept many foreign investors at bay: Venezuela received only $5 billion in foreign investment in 2012 while neighbouring Colombia attracted $13 billion.

The late Venezuelan president has also been accused of weakening the very industries upon which he built his political capital.

“Hugo Chavez had absolutely no industrial vision for his country (…) he failed to push the structural reforms implemented by most other countries in the region,” Christine Rifflart told FRANCE 24.

Critics point to Chavez’s failure to invest more in oil refining capacities as the ultimate symbol of his mismanagement of Venezuela's resources.

Despite being the fifth largest oil exporting country in the world, Venezuela is forced to import large amounts of fuel from other countries: for every ten barrels Caracas sells to the US, it must now import two barrels of refined product at a higher price.