It appears that the world is about to witness another Hugo Chavez temper tantrum…seemingly sparked by whenever he feels like he isn’t getting enough attention from the U.S.  So, According to Al Jazeera, Hugo Chavez has announced details of an arms build-up which he says will make the South American nation “invulnerable” to any attack.   

The new program is described as a defensive system that could shoot down enemy aircraft and rockets.  According to Chavez: “We’re going to have a tremendous air-defense system, and with with missiles capable of reaching 200 kilometers,” Chavez said during a televised speech on Friday at a military academy in Caracas.

At the same time Chavez announced that Venezuela would also spend more than $561 million for factories to build AK-103 assault rifles as well as other munitions and detonators.  This is on top of the 2.7 billion that Chavez spent last year to purchase 24 Sukhoi fighters and 53 helicopters as well as 100,000 Kalashnikov rifles from Russia.  Chavez has also his expressed desire to collaborate with and purchase arms from Iran.

Mr. Chavez does this at a time when his nation has been experiencing South America’s highest inflation rate (17%) and he has been dealing with this looming disaster not by reducing his spending…which is evidenced by his new plan to dump large sums of money into the Venezuelan “defenses”…or by raising interest rates… his answer is inducing price controls.  These artificial prices are having a devastating effect on the Venezuelan economy and most importantly heavily affecting the poorest amongst them.

Since 2003, Chavez has used price controls as an attempt to tame the rising inflation.  He has frozen prices on food stuffs like rice and meat and has recently capped the prices of telephone and electricity rates as well as put controls on some 45 different construction materials.  His efforts have had devastating effects on the economy as shortages of all types are being found around the country…staples like rice and milk are rarely found on grocerystore shelves and a number of construction projects have screeched to a halt because of a shortage of materials. 

Another unwanted effect of the price controls is that they are creating and expanding the ”informal” sector in Venezuela where staples can be found for many times their worth at unregulated street markets.  Many farmers are avoiding selling their products to legitimate stores and are selling meats and crops on the streets becuase with the controls on the prices they end up losing money on what they produce…so, in effect, Mr. Chavez has created a black market in his nation where only the rich are nourished.

Also, Manufacturers, concerned that Chavez will deepen state involvement in the economy, have reduced spending on new plant and equipment to the point that central bank figures show that nongovernment investment equals no more than 4 percent of gross domestic product, the lowest among the 10 biggest economies in Latin America.

Many businesses are reluctant to expand production because of a lack of guarantees from the government on the protection of private property. Chavez has seized rural estates and factories that the government deems to be unproductive, including some assets of Lorenzo Mendoza, one of the wealthiest men in Venezuela, and of the food maker H.J. Heinz. (I wonder how Ted Kennedy will explain working with Chavez to his Comrades Teresa Heinz and her wife John Kerry?)

Foreign investors sold $778 million more in Venezuelan assets than they bought in the first nine months of 2006, according to the central bank. A decade ago, in the same period, they added $5.9 billion more than they disposed of.

Hugo Chavez, much like his hero and comrade Fidel Castro did for over half a decade in Cuba, is perpetually beating the war drum in preparation for an enemy that doesn’t exist while his fellow countrymen go hungry.  Chavez has been masterful at focusing Venezuela’s attention on national pride and world importance while he is actively stripping his country of its democratic legacy and its citizens of the most basic rights and liberties.  The only thing that kept the aspirations of Fidel Castro… to transform his self from a national to an international despot…was his hands were tied economically…the same is not true for Mr. Chavez…he is sitting on top of the world’s fifth largest reserve of oil.

Stay tuned…

Written by Matthew Willette