President Hugo Chavez, architect of Latin America’s so-called “Socialism of the 21st Century,” roiled Venezuela’s economic waters with his decision to devalue the Bolivar, the national currency, on January 8.

Under a new exchange regime, the first devaluation in five years, Venezuela will operate a three-tiered exchanges rate system. For the average consumer of imported goods, prices will automatically double. Imported foods and medicines get an exemption. Reuters reports that Venezuelans are responding to Chavez’s edict with panic buying and hoarding.

The Venezuelan economy, despite its massive reserves of petroleum, continues to struggle to invest in its future and sustain populist policies of subsidies, wealth redistribution, government-run enterprises, and foreign giveaways that have become the hallmarks of Chavez’s 11th years as president. The devaluation comes on the heals of ever-more-frequent power outages due to drought and the Chavez regime’s mismanagement of Venezuela’s hydroelectric generation system.

Venezuela’s populist caudillo [strong man] vowed to protect the poor’s purchasing power and promised new money for his struggling national oil company, PdVSA, and stimulus for ailing local industries. Under Chavez, Venezuela’s relies on oil exports for 90% of its export and foreign exchange earnings. The forces of socialism, economic mismanagement, and political cronyism will continue to make Venezuela one of Latin America’s chronic economic underachievers. Its economy contracted 2.9% in 2009. Inflation is already the highest in Latin America and will likely grow.

Last year’s Wall Street Journal/Heritage Foundation Index of Economic Freedom placed 174th out of 179 ranked countries. This year’s ranking, due out next week, is not likely to show any improvement.

As in the past, Chavez threatened to confiscate any businesses that violates his arbitrary edicts and called out the National Guard, an ill-organized, unprofessional military arm of his regime, to enforce the new price edicts and punish speculators. The devaluation means more local currency [Bolivars] for every barrel of crude sold in Chavez’s pocket and will give him a larger war chest to propping up his socialist spending programs before legislative elections in September.