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Why Chavez Has Support in Venezuela

Pres. Hugo Chavez of Venezuela
AP
Pres. Hugo Chavez of Venezuela

We've been mentioning the price of oil and Venezuela's President Hugo Chavez in the same sentence in some previous posts. This is in light of his moves to nationalize some of his country's utilities. It might be worth a look to see why he's popular-- for the most part--in Venezuela. CNBC's Michelle Caruso-Cabrera is on assignment in Venezuela--and filed a report on "Morning Call."

Some background: before Chavez was elected president in 1998--Venezuela had more than half of its citizens in poverty. Oil revenues--always a big part of the country's economy--did not go for public improvements. That changed with Chavez--as he started a series of programs "aimed at helping" the poor.

Caruso-Cabrera highlighted two such cases--a woman who after living in a dirt and tin shack got her nursing degree--and a family that was finally able to get a home with a roof and an indoor bathroom. He also provides low cost or free loans for people to buy items like cars. It's people like these that give Chavez his support in elections.

However--the middle and upper classes have not exactly been fans of Chavez--saying he's more like his friend Fidel Castro than a free-market advocate--and that he's in danger of turning Venezuela into a replica of a "socialist Cuba." His recent statements and efforts to take over telecom and energy companies haven't exactly dispelled these ideas. But--his people say there's more small businesses than ever in Venezuela and independent reports to say that consumer spending is at an all time historic high.

As Caruso-Cabrera points out--oil is 1/4 of Venezuela's GDP--and got some $25 billion in oil revenues last year. But--with oil prices falling--Chavez has more than once asked OPEC to consider cutting oil production. Remember--Venezuela is the 4th largest oil producer of the U.S. and the U.S. is Venezuela's largest oil production customer.

FYI: Chavez is apparently looking for more power by asking the country's congress--which he controls--to discuss a proposal to let him "rule by decree."

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