The Rich (And Poor) Get Richer In Venezuela, But Can It Last?

CARACAS, Venezuela — Ricardo Diaz has rarely seen a year like 2006, when high-priced luxury cars almost flew out his family's small showroom in an upscale district of this bustling capital.

Record oil prices and free-spending government programs over the past few years have sparked a consumer frenzy in petroleum-rich Venezuela. The wealthy have been snapping up expensive cars and designer-label clothes and jewelry, while even poor neighborhoods are flush with cash from social programs created by leftist President Hugo Chavez.

There is even a boom in shopping mall construction: seven went up last year in Venezuela, with a dozen more slated to open this year.

But many here worry the boom times could be coming to an end.

Inflation has jumped to 20 percent, imports are more expensive because the local currency's value is dropping and Chavez has moved to nationalize key sectors of the economy, vowing to make Venezuela a socialist country.

"It's very contradictory," said Diaz. "The petro-dollars and government contracts have made a lot of people rich. Last year everybody was selling like mad. But this year it has slowed down because of the uncertainties. Prices are rising and nobody knows if Chavez will strangle private companies."

Some car dealers still report brisk sales, with months-long waiting lists. Last year, Venezuelan's bought 343,000 cars and trucks, a jump of 50 percent over 2005.

With its economy staked on oil, Venezuela has seen booms before, most recently during the energy crisis of the 1970s, when it earned the nickname "Saudi Venezuela."

The inevitable bust came in the 1980s, when the economy stumbled with high unemployment, inflation, inefficiency and corruption.

If the recent frenzy is different from those past, a key factor is Chavez. The charismatic firebrand is a fierce critic of President Bush, despite the fact that Venezuela ships more than 1 million barrels of oil a day to America, accounting for more than 10 percent of U.S. imports.

Fresh from a landslide re-election victory in December, Chavez has nationalized telecommunications and electricity production and is taking over oil fields from international firms. He has lavished aid and discounted oil on other countries, while channeling billions into social programs at home, creating employment and hope for the 80 percent of Venezuela's 26 million residents who live in poverty.

"The poor have the highest propensity to spend any extra money and the social programs have been putting money in their pockets," said Luis Vicente Leon of Datanalisis, a Caracas polling firms that tracks social and economic trends. "They are still poor, but they have been buying basic products to make their lives better."

But while the poor are making small purchases, upscale malls have seen a run on iPods, fancy cell phones, Armani clothes and Luis Vuitton purses.

"It's absolutely amazing," said Leon. "Last year consumer spending was up 20 percent. Construction was up 40 percent. Retail sales were up 28 percent. Even plastic surgery; we saw breast surgery go up by 80 percent. The question is: how stable is it? It's based on oil and it wasn't stable in the past and it's not stable now."

Ripples of uncertainty are spreading, threatening Venezuela's economic growth, which swelled by 10 percent last year. Along with the nationalizations, Chavez has vowed to impose a "luxury" tax on expensive items, even as he's ordered price controls on basic goods like beef, chicken and sugar.

"Consumerism carries inside it a cell that we could call carcinogenic: corruption," Chavez said recently. "What is the root of the corruption? The desire to possess material goods."

But Chavez has poured money into social programs, fueling inflation and a drop in the value of the Venezuelan Bolivar.

Hardest hit is the middle class, which accounts for about 16 percent of Venezuela's population.

"They're afraid of Chavez, that he'll take their cars and houses," said Leon, citing polls that show 35 percent of the middle class would leave the country if possible.

Even with the consumer boom, lines have appeared at foreign embassies with people hoping to emigrate.

Maria Gonzalez, 57, and her son Manuel Suarez, 32, waited in a line of about 30 people outside the Spanish embassy recently to inquire about moving to Spain. Suarez was just robbed at gunpoint and vows to leave Venezuela, while his mother, who was born in Spain but has lived in Caracas for 50 years, is uncertain.

Neither blames Chavez directly, but they were angry about his government's economic policies and inability to control crime.

"This used to be a great country for everybody," Gonzalez said. "But it has deteriorated. The government needs to stop all this fighting and giving away money to other countries and concentrate on our problems here."