What Happens If Hugo Chavez Dies?
Charles Sizemore | Jan 17, 2013 12:36AM ET
It may sound like a harsh question. But the man is seriously ill with cancer, and he has had no public appearances in over a month. Rumors abound that he is near death…or may already be dead. As he is reported to be in Havana, some have even speculated that the Cuban government is essentially holding him hostage to secure its own future.
Love him or hate him, the authoritarian Venezuelan president has quite a few mouths to feed across Latin America, and his death could send shockwaves across the region. Let’s take a look at who is most likely to be affected…and what it might mean for the financial markets.
At the top of the list is the Castro regime in Cuba. Cuba gets about two-thirds of its oil from Venezuela, and most is either given to the island free or via loans that everyone involved knows will never be repaid. By Venezuelan crude oil production has been in steady decline since Chavez took power and for obvious reasons. Professional managers were replaced with political hatchet men, and no foreign investor in their right mind would invest in the country even if Chavez allowed them.
The death of Chavez and the fall of his regime would likely mean massive foreign investment in the Venezuelan oil industry and could lead to a surge of new production…which would be incredibly bearish for the price of oil.
Alas, all of this is premature. Chavez is still alive—as far as we know—and his death will not automatically bring free trade, peace, and prosperity to his country. A far more likely outcome will be years of political infighting and…in the worst case…civil war.
In the meantime, all eyes are on Havana.
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