The Housing puzzle under Hugo Chavez

January 26, 2009

Housing has been a true puzzle under Chavez. Despite the billions of dollars in revenues, the Hugo Chavez Government has been unable to build more than 50,000 housing units on any given year, despite the fact that in the hateful days of the IVth. Republic, 50,000 was considered to be a “bad” number. Caldera II, as an example, considered to be a terrible Government by all, managed to build more than 40,000 units in 1994, a cataclysmic year for the Venezuelan economy. And in 1997 and 1998, despite what is now extremely low oil price levels, Caldera II managed to build more than 90,000 and 60,000 units.

Venezuela is estimated to have a shortage of about 2 million housing units, so that the problem of building housing has always been considered to be a priority by all Governments, including Chavez’. This Government has gone through many Ministers of Housing, but somehow none of them have been able to do a decent job. Not that Chavez has not given it the priority it requires, as year after year, the Venezuelan President announces ambitious goals for housing.

But it just does not happen and last week the Government announced that it had built only 23 thousand plus units in 2008 and once again it projects that it will build over one hundred thousand houses in 2009.

But what is the problem? I have talked to many people about the subject and everyone seems to blame something different. When Hugo Chavez came to power in 1999, the people he named to the Ministry of Housing had the outlines for a very ambitious project to build between 1.5 and 1.7 million housing units and if my memory serves me right the price tag was US$ 60 billion.

Remarkably, at the time such an amount was considered to be a little bit too large, so the plan was to obtain multilateral financing for it over the next five years and devote fairly large amounts from Government resources to it. The idea was that the plan would have a two fold effect: It would not only build the housing, but would become a driver for the economy. Of course, given the high oil prices of the last few years, it would have been rather easy to implement the plan without even borrowing the money.

So, what went wrong? Mostly that the experts Chavez first appointed to the Ministry of Housing were not loyalists and they were quickly displaced by more hard core Chavistas, many with no expertise, including the current Minister Farruco Sesto, who was Minister of Culture for a few years before being moved to Housing. Sesto is an architect by profession but has expressed all his life that he is not interested in urban matters. But Chavze even announced his Mision Vivienda in 2005, but we have never heard anything else about it.

My understanding is that the Government has never assigned huge amounts of funds to housing, believing instead that forcing banks and the like to lend to housing would help in increasing the number of units built each year. On top of that, the Minister of Housing has apparently been terrible at assigning funds for projects and deciding who gets how much and every time a new Minsiter has been appointed, he has suspended projects until he could understand the situation. Then, there is of course corruption, with funds spent erratically and not always assigned to those that have the best capabilities.

But in the end, none of the people I talked to understands the ineffectiveness. Each one blames a different aspect, but in the end suggests that the number of housing units built should have been much higher. some of them always expeceted the next year to have a boom because the number was so low and then nothing.

Thus, the low numbers remain a puzzle and are probably due to a combination of leack of epertize, management, corruption and the like. One person I talked to today even suggested that the Minsiter of Housing did not execute even half its budget in 2008 and the funds are now part of Chavez’ Miranda V fund, a sort of huge petty cash fund Chavez has that we know little about. Maybe he should use it for housing…

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