Market Analysis

Big League Capitalism

Turns out Hugo Chavez and many Venezuelans are huge baseball fans. If only the country could leverage that love in the name of freer markets and private property protection.

Well, it's November, which means one thing-and for a change, my topic today isn't the election. No, November marks the official end of major league baseball for the year-which means those of us who enjoy America's pastime face five long, cold months anticipating a new season and possibly planning getaways to either Florida or Arizona for spring training to temporarily fill the void.

For San Francisco Giants fans like me, fortunately, that time may pass a little quicker than usual, given we have a championship season to relive and savor for a while. Last Wednesday, I had the opportunity to attend the parade thrown in the Giants' honor in San Francisco, and as I surveyed the team sitting on the stage in front of San Francisco's City Hall and nearly a million doting fans, it highlighted starkly an interesting factoid pointed out by numerous commentators: This year's World Series featured a record nine players from Venezuela, seven of whom started Game 3 (another record). Two of them were recognized for their postseason accomplishments: Marco Scutaro was named MVP of the National League Championship Series, and Pablo Sandoval was named MVP of the World Series.

Which, probably not surprisingly, prompted a touch of bragging from Venezuela's president, Hugo Chavez-an avid baseball fan who said during a recent televised cabinet meeting, "What would the major leagues do if Venezuela didn't exist? They'd get bored," and, "I think the next World Series, Obama, you're going to have to play it here in Venezuela, because it's Venezuelans all over the place." Now, to be sure, it's hard to blame Chavez for feeling some national pride-after all, San Franciscans would hardly discount the contributions the team's Venezuelan players made this year (though they had a healthy dose of help from the rest of the lineup, including one of baseball's best bullpens and rising star catcher Buster Posey, but that's beside the point).

Unfortunately, though, it seems the foothold Venezuela has gained in terms of contributing top talent to professional baseball may be lost, tied in part to the political and economic environment in a country still run by a dictator and, on average, rather averse to capitalism. What does capitalism have to do with it? Plenty, actually. To see how, first, a little recent history.

The Houston Astros are typically credited with the MLB's recent interest in Venezuela, having opened a training camp in the 1990s to work with and develop young, local talent. As the Astros' camp bore fruit, other teams followed until some 21 clubs had local academies in 2002. However, just four now remain-those operated by the Los Angeles Dodgers, the Tampa Bay Rays, the Colorado Rockies and the Detroit Tigers. Even the Astros pulled out in 2008. Most clubs have left in favor of the Dominican Republic, where each of the 30 teams has an academy.

But Venezuelans are as passionate as ever about their baseball, which surpasses soccer in popularity-a rarity for a South American country-and so local academies still exist, funded primarily by parents eager to give their children an opportunity to learn and develop their skills. But to what end? Well, presumably not to play locally, though Venezuela does have its own professional baseball league. No, the dream among parents and children alike is undoubtedly to be the next Luis Aparicio, Andres Galarraga, Miguel Cabrera or Pablo Sandoval.

In other words, the profit motive has taken over. These academies by and large are not government-sponsored-they're privately funded and paid for by parents. There's little money in it for the instructors and coaches-but of course, there are hopes for all of a big return.

Trouble is the environment in Venezuela is driving MLB clubs away. Just last year, Washington Nationals catcher Wilson Ramos was abducted outside of his Venezuelan home and held for 24 hours until being rescued. Not surprisingly, the aim was extracting a large ransom from whoever would pay-ostensibly the Nationals and/or MLB in some form. It was the first abduction of a player, but players' families have been kidnapped and ransomed in Venezuela before-and in two cases, murdered. Many players who return home to Venezuela are accompanied by bodyguards, and some have stopped going altogether-their clubs, for obvious reasons, preferring they remain in the United States.

All of which is a tragedy for Venezuela-a country clearly in love with the game and which could probably see even more growth tied to the sport if it had a political and economic climate that better supported it. But remember: Capital flows freely in a relatively unrestricted global market-and it flows to where the return will be highest ... and the attendant private property rights protected and preserved. Which means major league clubs are undoubtedly going to invest elsewhere-even if it means relocating talented players from Venezuela to the Dominican Republic to train in a much safer, friendlier environment.

As for all of Chavez's bluster about the US, it's hard to argue the States aren't friendly to those who yearn to achieve success-even to scale the heights to a baseball Triple Crown, an MVP title or a World Series ring. And through the rule of law, America vigorously protects property rights-thereby making it possible for even those born at the very bottom of the income scale in a developing country to take a shot at their dreams. Something impossible in their homeland, at least for now.

Here's hoping the situation someday reverses-that Venezuela begins taking steps toward capitalism, private property protections and the rule of law. That all MLB clubs someday have training camps and academies there and allow the children of Venezuela to dream dreams of a World Series parade attended by a million fans. Or better yet, that Venezuela has its own thriving and growing baseball league that rivals the big leagues here. What an amazing boon that would be to Venezuela's morale and future, at least from a symbolic standpoint. Maybe someday we can and will play a World Series in Venezuela. Until that day, we can continue to celebrate Venezuela's greats here in the US-starting in San Francisco and Detroit.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.