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Eric Toussaint: Venezuela's Bolivarian revolution at the crossroads?

By Eric Toussaint

[See parts 2 , 3 and 4 below.]

Part 1: Nationalisation, workers’ control: achievements and limitations

April 14, 2010 -- Committee for the Abolition of Third World Debt -- The economic, social and political situation in Venezuela has changed a lot since the failure of the constitutional reform in December 2007, which acted as a warning to President Hugo Chávez's government. |1| This failure had the effect however of reviving the debate on the need to have a socialist perspective. The debate revolves around several key questions: further nationalisation, workers’ control, the place of the United Socialist Party of Venezuela (PSUV), people’s participation, etc.

On February 15, 2009, 54.36% of the country’s citizens voted "yes" to the amendment to the constitution that allows political representatives to stand for successive mandates without any time limit. |2| Up to then the constitution had only allowed two successive mandates: there had to be a break before the candidate could apply again. |3| In 2013, at the end of his second mandate, Hugo Chávez will have the possibility to run again for president. If he is re-elected, his mandate will end in January 2019. This is why some Chavist activists are now concerned about what changes may occur by then that could consolidate the progress achieved since Chávez’s accession to power.


In April 2008, after 15,000 workers at the SIDOR steel plant, part of the Argentine group Techint, had been on strike for nearly two months, Hugo Chávez announced that the company was being nationalised. The workers’ main demand was for 9000 temporary contracts to be converted into unlimited duration contracts. Given the employer’s refusal, nationalisation was the best way for the government to guarantee that the workers’ demand was met — a decision workers perceived as a great victory.

SIDOR was founded as a state-owned company during the 1960s, was then privatised and sold to foreign capital in 1997 under Rafael Caldera’s presidency. The April 2008 re-nationalisation takes on particular significance since this modern and efficient company is a production tool that Argentinian capital, and Techint in particular, wished to hold on to.

It should be noted that the Chavist government of the state in which SIDOR is located had ordered the police to repress the strike as soon as it started. In addition, the minister of labour had done nothing to support workers’ demands. As a consequence Hugo Chávez’s decision to nationalise the company and to remove the minister was perceived as a shift in the workers’ favour. All the more so as, at about the same time, he announced an increase in interprofessional minimum wages and public sector salaries as well as the nationalisation of the cement industry, which so far had been in the hands of three TNCs (Lafarge – France, Holcim – Switzerland, and Cemex – Mexico).

In the following months and during 2009 the government made further nationalisations in the food industry |4| (which affected both national capital – Lacteos Los Andes – and the grain TNC Cargill). The government justified these nationalisations as being essential for improving the population’s food supply. Finally, the Bank of Venezuela, one of the largest private banks in the Santander group (one of the two leading banking groups in Spain) was also taken over by the state.

All these nationalisations, as well as those that had occurred earlier (in the electricity sector, telecommunications, the Orinoco oilfields, etc.), led to generous compensation for the former owners. Venezuela uses part of its oil revenue to regain control of certain strategic sectors of the economy. The main objective of such compensation is to avoid legal penalties for not abiding by bilateral treaties on investment signed by Venezuela. International law makes it possible for states to nationalise companies provided they give reasonable compensation to owners. Venezuela could proceed in a more radical way if it withdrew its signature from bilateral treaties on investments, left the ICSID (International Centre for the Settlement of Investment Disputes, i.e. the World Bank’s tribunal on investment issues) and secured its liquidities and other assets abroad so as to avoid seizure.

This of course would further increase the hostility of the establishment in industrialised countries and of the TNCs within the country (all the major transnational oil companies are present in Venezuela as well as General Motors, Mitsubishi, Daimler-Chrysler, etc.).

The rather cautious way chosen by the government did not prevent a company like ExxonMobil from trying to have US$12 billion belonging to PDVSA (Petróleos de Venezuela Sociedad Anónima) seized by Dutch and British courts in 2008. This is one good reason for Venezuela to enter into an alliance with other countries of the South so as to repudiate bilateral treaties on investments that include clauses that could be detrimental to the nation’s interests, to withdraw from the ICSID and WTO, and to set up a multilateral body in the South to settle disputes – in other words, an ICSID that would be a Southern alternative to the World Bank’s ICSID, which serves the interests of large private TNCs.

Workers' control

In 2009, further nationalisations again raised the issue of workers’ control. Left-wing trade unions and workers’ collectives are in fact demanding the implementation of control mechanisms through which workers can control the boards of nationalised companies. They want in this way to ensure that the original objectives of such nationalisations will be adhered to; they also want to prevent bad management, wastage, embezzlement, corruption and misuse of company assets by insisting on the opening of ledgers, transparent commercial and industrial strategies, and the periodic submission of balance sheets and accounts.

They rightly voice their distrust of many of the private executives who stayed on after nationalisation, but also of some new executives who look after their personal interests rather than seek what is good for the community. Achieving and indeed demanding control increases workers’ self-confidence and their capacity to collectively contribute to a socialistic kind of management and labour relations on the one hand, and, on the other, create a counter weight within companies in the hands of private capital.

We see instances of workers occupying private companies and demanding their nationalisation. Inevitably the issue of workers’ control will have to be raised again in the oil industry. It first flared up during the oil lockout (December 2002-January 2003), when workers, who wanted to resume production, had called an oil conference. Later Hugo Chávez rejected the idea of workers’ control in this key industry because of its strategic importance, whereas of course it would be a good reason to go for it.

The same applies to the production and distribution of electricity, which were also nationalised. Workers in this sector started demanding control in September 2009. Electricity supply in Venezuela is critical since over 50% of its production |5| is "lost" or diverted (meaning stolen) during distribution. Losses are mainly due to the use of old equipment because before they were nationalized by the Chávez government, certain companies like Electricidad de Caracas (owned by AES, a US-owned TNC) were almost systematically deprived of the necessary investments to buy new machines. On the other hand, large private industrial companies steal and squander large quantities of energy. There are also unauthorised electric hook-ups in residential areas but in the case of working-class households, which are not big consumers, such piracy is limited.

Workers in the electricity sector are in the best position to solve the issue of supply and to fight squandering and bad management by senior executives – and thus avoid power cuts. These are the arguments being developed by trade union leaders to demand workers’ control. Ángel Navas, president of the Electricity Sector Workers’ Federation (FETRAELEC), told the media during a demonstration by some 3000 workers in Caracas on 25 September 2009:

We the workers are in touch with users in the neighbourhoods. We know how we can solve the crisis... We have to change the bureaucratic structures and the structures of capitalist management into structures with a socialist vision. We must change production relations and do away with all this bureaucracy which is killing the company. |6|

During the first half of 2009 Hugo Chávez stated at a public meeting with worker managers that he was favourable to a law on the election of managers of nationalised companies |7|, but nothing has happened since then to put this commitment into practice.

This struggle for workers’ control of company management is essential. Its outcome is decisive for the ongoing process in Venezuela. |8|

[Translated by Christine Pagnoulle and Judith Harris, in collaboration with Francesca Denley and Stephanie Jacquemont.]


|1| On 2 December 2007 51% of voters said "No" to Chávez’s constitutional referendum as against 49% voting "Yes". This is Chávez’ only electoral setback between 1998 and 2009. See Éric Toussaint, “The failure of 2 December 2007 can be a powerful lever for improving the process currently unfolding in Hugo Chávez’ Venezuela”, December 2007,

|2| It should be remembered that article 72 provides for the possibility of citizens recalling the President of the Republic and all other elected officials half-way through the term of office.

|3| The campaign depicting Hugo Chávez as a “despot for life” played on the scandalous nature of unlimited re-election. Yet several European democracies work in the same way. This is the case in Spain, Italy and the United Kingdom for the post of prime minister, and in Germany for the post of chancellor (in all four countries, it is the head of government who really holds the reins of power). In France, up to the adoption in July 2008 of the constitutional law on the modernisation of institutions, there was no limit on the number of consecutive mandates. Since then, the number of consecutive mandates is limited to two.


|5| We should also note, however, a very positive structural feature in Venezuela: electricity is very largely produced from dams and rivers. Fossil fuels are only rarely used and there are no nuclear power plants.

|6| See a very interesting video of the demonstration with interviews of several trade union leaders on the Marea Socialista website:

|7| This was the case on May 21, 2009, during a meeting between Hugo Chávez and 400 delegates from the steel and aluminium industries held in the state of Guayana. A meeting to consolidate other commitments made during this important assembly took place on August 21, 2009, in the context of the “Plan Guayana socialista”. See Marea socialista, no.22, p. 3.

|8| To know more about initiatives or position statements on workers’ control in Venezuela, read issues 19, 20, 21 and 22 of the magazine Marea Socialista, July-August 2009, which discuss the situation at SIDOR, CorpoElec, Cadafe, cement works, Cafeaca, Alcasa, Carbonorca…See

Part 2: Debate and contradiction in the PSUV

June 18, 2010 -- CADTM |1| -- During the 2007 constitutional referendum, one might have thought that the party created by Hugo Chávez in 2006 was stillborn since fewer people voted "Yes" than the number of people officially enrolled in the party. |2| But this impression was partially belied in the following months: grassroots meetings multiplied, which resulted in the nomination of candidates for the municipal elections and for governors of the 23 states that make up Venezuela.

However, the process is contradictory. While participation from the party’s rank and file was active and effective and while grassroots members did appoint candidates for the elections, the fact stills remains that when it came to the party’s executive board, ordinary members could not vote for all the leaders and Chávez himself put his government’s ministers in the party’s key posts (for example, the eight vice-presidents of the PSUV). This creates a regrettable confusion between the state, the government and the party.

In this respect, some voices have been raised within the PSUV to challenge the fact that the party’s management and coordination are left to the ministers who are already overloaded with their governmental missions. Moreover their position as ministers gives these leaders the power to disproportionately influence the decisions taken by the party. It is also easier for them to influence some party members when the latter are called to the polls. A critical view, shared by a substantial number of activists, was expressed by Martha Harnecker as follows:

One of the things that surprise us and, I imagine, must shock people abroad, particularly in Europe, is that the State is the instrument with which the party is built. It is in clear contradiction with our vision of the party. |3|

Gonzalo Gómez, a PSUV activist and co-founder of Aporrea, also shows concern regarding the relationship to be built between the party and popular power (which he also calls “the constituent player”):

The party can seek to propose and give direction, accompanying social movements in the building up of popular power, but it cannot subjugate popular power: in other words subjugate this constituent player by the constituted power. |4|

Communal councils: when `constituent power' challenges constituted power

The law entitled Ley de los consejos municipales (LCC) |5| was voted without any genuine debate on April 7, 2006. Its article 3 states: “The organization, functioning, and action of communal councils must meet the principles of co-responsibility, cooperation, solidarity, transparency […], honesty, effectiveness, efficiency, social responsibility, social control, equity, justice, and gender and social equality” (art. 3, LCC).
A citizens’ assembly (Asemblea de ciudadanos y ciudadanas), “the grand decision-making body of communal councils” (art. 6, LCC), must consist of at least 20% of inhabitants from the age of 15 and over (Consejos comunales, Expresión del poder popular). The communal council defines its jurisdiction, and its members are not paid (art. 12, LCC). Its various areas of intervention are defined as follows:
Health, education, land management in towns or rural areas, housing, social protection and social equality, popular economy, culture, security, communication and information, leisure and sports, food, technical guidance on water, technical guidance on energy and gas, services, and any other matter the community may decide useful to proceed with.” (Art. 9, LCC)
President Hugo Chávez set up communal councils back in 2006, as a way of introducing participation in the drafting and implementing of local policies. The government sets great hope in these councils, which it sees as “territorial grassroots units of popular participation and self-government.” As the president said, this “revolutionary explosion of popular power” must be the realistic and sustainable basis for a new type of state, for “a socialism of the 21st century.” (…)
Talking about the 15,000 councils already extant in June 2007, Juan Leonel M. (FONDEMI, Microfinance Development Fund) does not hide the fact that relationships with municipalities are sensitive:
Actually the mayors, or at least many of them, are opposed to this new mode of election and way of organizing communities. They see the communal councils as organizations in competition with their own administrations. But the idea today is that the established power must move hand in hand with the constituent power of communal councils. The State is initiating a revolution within the State system. The people’s constituent power must be the motor of change. Communal councils are the cornerstone of municipal self-government where the people have direct access to power.” |6|.
The 2006 law on communal councils is currently being changed. It is likely to be replaced shortly by a new law that is being drafted |7|. To know more about this experiment, read Martha Harnecker’s books on the subject. She lives in Venezuela and has devoted much time in the last few years to the experiment with communal councils. |8|

The PSUV congress was held in several sessions from November 2009 to April 2010. The 772 delegates who took part in the congress were elected in a secret ballot by rank-and-file party members (according to official figures, half of the 7,253,691 party members turned out for these internal elections). There were very few workers and trade unionists among these delegates; on the other hand many delegates were employees who are answerable to the party or to local authorities and are therefore easily influenced. Even though Hugo Chávez, as president of the party, called on delegates to act in congress as spokepersons for the popular base and social movements, with congress composed as it was, it is hard to see how this could really lead to positive results.

In June 2009, the PSUV was the centre of attention and debates, when 30 of the most eminent intellectuals invited by the Miranda International Center (CIM) |9| discussed the progress of, and remaining obstacles to, the revolutionary process currently taking place.

The CIM published a summary |10| of these days for reflection entitled “Intellectuals, democracy and socialism: dead ends and paths to follow”. Here are some extracts from the summary which give an idea of what is at stake in the party itself and beyond, if a genuine revolutionary project is to be implemented.

What is the future of a party whose base rarely gets the opportunity to have their say? (…) Is this non-separation between State and party merely repeating a mistake of the 20th century socialist model? Was the PSUV created as a top-down structure out of a political necessity felt by the government, rather than a necessity felt by the base?

Another important aspect that came up several times was the need for collective leadership of the party, which is effectively based on grassroots social movements (and which does not merely use them as the government’s communication channel during election periods), thereby putting an end to harmful, partisan vote-catching. This would create the base of a true revolutionary party which recognizes the right to express criticism and which fosters greater democracy within the party.

Among other issues debated: the nature of the new revolutionary state (“If the State was the instrument used by neo-liberalism to implement its own agenda, should it also be used to free us from neo-liberalism? Can this State put us on the path to socialism or, on the contrary, it is an obstacle to socialism?); the role of the media, both pro- and anti-Chávez; the characteristics of the revolution – it was said that it contained “many types of revolutions within it: student, farmer, worker, socialist, feminist, military and popular”, thus the need for a constant dialogue between these groups; the definition of 21st century socialism; popular participation, especially through communal councils (see box above), which were described as “a prime example of participation” but “not [playing] a sufficiently participatory role” in practice because “they run the risk of being co-opted by the party”.

The final issue considered during the meeting concerned the place and role of criticism in a revolutionary process, and the main question discussed was the following:

"Is it possible for a revolution to succeed if it does not make criticism one of its main driving forces?” It was acknowledged that “criticism has lost some of its rightful place. In media that are sympathetic to the process, it is not difficult to find reactions reminiscent of 20th century socialism where those who openly criticize are accused of being “counter-revolutionaries” or “CIA agents”. This considerably weakens the process as it prevents the government from implementing changes when things are not working.” At the same time, the intellectuals said they “were pleased that the Executive had given them a space for criticism - something which had not happened in ten years. They also stressed the fact that this event proved that fear of criticism was unfounded. The claim made by the anti-Chávez opposition that there is a lack of freedom of expression in Venezuela is equally false.

The controversy raised by this meeting showed how relevant these questions are. These days were broadcast live in full on a public channel (TVES) and then re-broadcast over a period of some 10 days.

Important sectors of the government strongly criticised the CIM initiative as well as the content of these meetings. Among the critics were the minister for oil, Rafael Ramirez, and the minister of foreign affairs, Nicolas Maduro, both of them important political figures in the PSUV. One of the pro-Chávez daily newspapers, VEA, published several articles condemning the CIM initiative and stating that

they convene meetings amongst intellectuals whose positions are confused, whilst allowing them to let off steam at Chávez’s leadership which they describe as a “hyper-leadership” or “progressive autocracy”. Without a doubt, these are pro-Chavist supporters without Chávez, ashamed to show their true colors and get on the other side of the fence (published June 6, 2009 under the collective signature Grano de maíz).

After 10 days of controversy, both in the pro-Chávez and the opposition press, Hugo Chávez, in his televised programme Aló Presidente of June 14, seemed to agree with those who criticised the International Miranda Centre. That merely served to increase public interest in the event: different trade union worker leaders as well as the Communist Party of Venezuela and Homeland for All (two parties which support the government while refusing to join the PSUV) defended the CIM and stated that the critical contribution of revolutionary intellectuals was a positive event. It was feared that at some point the CIM would be brought to heel or even shut down but nothing of the sort has happened. This shows once again the complexity of the changes taking place in Venezuela, whose government cannot be considered as totalitarian.

[Translated by Francesca Denley, Judith Harris, Stéphanie Jacquemont and Christine Pagnoulle.]


|1| The first part of this series "Bolivarian Venezuela at the crossroads" was posted on the CADTM website on April 14, 2010.

|2| Officially, 6 million Venezuelans joined the PSUV at the time of the referendum on December 2, 2007. And yet the "Yes" won only a little more than 4 million votes, some of which certainly did not come from PSUV activists since the Communist Party of Venezuela and the PPT (Patria Para Todos, Homeland For All), among others, called for a "Yes" vote. In fact, during the phase when the party was launched, ministries were given membership targets, which resulted in a flawed process and an artificial inflation of membership figures.

|3| Speech of Martha Harnecker on the occasion of the meeting “Intellectuals, democracy and socialism: dead ends and paths to follow” organised by the CIM

|4| Speech of Gonzalo Gómez on the occasion of the meeting “Intellectuals, democracy and socialism: dead ends and paths to follow” organised by the CIM


|6| Quoted in « Les conseils communaux au Venezuela: un outil d’émancipation politique ? », by Anne-Florence Louzé, in Olivier Compagnon, Julien Rebotier and Sandrine Revet (eds), Le Venezuela au-delà du mythe. Chávez, la démocratie, le changement social, Editions de l’Atelier/Editions Ouvrières, Paris, 2009, 238 p

|7| See the project of the new law:

|8| See Martha Harnecker “De los consejos comunales a las comunas” This 61 page study includes a bibliography of Martha Harnecker’s 21 books on the subject of popular participation. Read also, by the same author, “Las Comunas, sus problemas y cómo enfrentarlos”

|9| The Miranda International Center (CIM) is an official institution created by the Venezuelan presidency and financed by the Ministry of Higher Education.

|10| The complete summary (in French and Spanish) is online on the CADTM website at and

Part 3: The Venezuelan economy -- in transition towards socialism?

June 24, 2010 -- CADTM |1| -- The capitalist sector is growing faster than the public sector and is still predominant in Venezuela’s economy despite the nationalisations. The share of the private sector (greatly dominated by the capitalist sector |2|) in Venezuela’s gross domestic product has grown from 64.7% in 1998 (before Hugo Chávez was elected president) to 70.9% in the third quarter of 2008. |3| Although the government has nationalised a significant number of large companies in the electricity, telecommunications, steel, food, cement and banking sectors, the capitalist sector has recorded more rapid growth than the public sector, which explains that its relative share in GDP has increased whereas the share of the public sector has decreased (from 34.8% in 1998 to 29.1% in 2008) |4|

This can be explained by the way the country’s oil income is used. The overwhelming majority of the Venezuelan state’s revenue comes from oil exports. The government massively uses the resources coming from oil to improve the living conditions of the poor majority of the population (as well as of the medium income brackets) in the fields of health (where results are impressive), education (also impressive), supply of low-priced basic products through the distribution and marketing channels Mercal |5| and Pdval |6| (staple food and other basic products for households), housing construction, the building of infrastructure and public transport (subway, train), wage increases in the civil service, increases in a large number of grants and social allowances, not to mention expenses in the field of culture and sports. It grants substantial subsidies for cooperatives, communal councils, etc.

The result is clearly positive: the percentage of Venezuelans below the poverty line was reduced by half between 2003 and 2008, from 62.1% to 31.5% of the population. As for the percentage of people in extreme poverty, it was reduced by two-thirds, from 29% in 2003 down to 9.1% in 2008; |7| illiteracy dropped sharply, the level in training improved, access to free healthcare increased greatly, mass consumption rose.

But to a large extent the capitalist sector is also benefiting from government spending because it is still dominant, by a long way, in the banking sector, in trade and in the food industry. The extra money that goes to the people and comes from public spending ends up in the capitalists’ pockets because it is in the capitalist banks that individuals (and also cooperatives, municipal councils, municipalities and many other public entities) deposit their money. It is the capitalist banks that issue consumer credit facilities in the form of credit cards, and support a growing share of the consumption (and charge high interest rates for this). It is the capitalist companies of the food industry that produce or market most of the food products consumed by the masses. It is the capitalist import companies that bring from abroad the many imported products consumed by Venezuelans. The private retail chains still dominate trade even if Mercal and Pdval are significant players in supplying basic products. When the state nationalises private companies that belong to the national capital, it is the local capitalists that receive buyout compensations from the state.

In brief, the capitalist sector continues siphoning off most of the money spent by the state to help the poor or middle-income sectors of the population.

According to a study |8| by Mark Weisbrot and Luis Sandoval that is in fact very favourable to the Chávez government, the private financial sector grew by 37.9% in 2004, by 34.6% in 2005 and by 39.2% in 2006, while the growth of the public sector (all sectors taken together) was only 12.5% in 2004, 4.1% in 2005 and 2.9% in 2006.

As stated by Victor Álvarez:

During the previous mandate of President Chávez (2000-2006), most financial, fiscal, exchange rate incentives, most public spending, most technical assistance, etc., went to the existing production apparatus, fundamentally consisting of commercial companies, which reproduce a capitalist mode of production that is, paradoxically, the very one we want to overtake and transcend.

We are thus far from the assertions made by the mainstream media, which see in the Chávez administration a rampant imposition of state control over the Venezuelan economy.

Gifts made to the banks

An additional issue, stems from the policy of overvaluation of the Venezuelan currency against the US dollar. This question requires some explanation. Since 2003, companies that want to import goods and services have had to buy dollars from a state administration called CADIVI. This is a useful measure taken to fight capital outflow. The problem is that the exchange rate between the bolivar and the dollar overvalued the value of the former. It therefore exacerbated a perverse pattern: for a capitalist who has a large amount of bolivars, it is more profitable to change them for dollars which are sold cheaply by the state and import products from the United States or elsewhere than to produce them in the country. Thus the policy of an overvalued bolivar deterred productive investment and encouraged trade based on the frenetic import of goods |9| and sale of the same through the big private retail networks.

These massive imports are in fact subsidised by the state since the state sells the private sector the cheap dollars it has accumulated through its oil exports. Another point also needs to be examined: how this policy of an overvalued bolivar and a high level of imports influenced the inflation rate, which has been particularly high in Venezuela in recent years. This high inflation rate reduces the impact of the pay rises granted by the government.

One vicious example of this policy of an overvalued bolivar and of gifts made by the government to the private banks: the Venezuelan state bought debt bonds issued by Argentina in 2004-2005. The problem is that it sold part of these Argentine debt bonds, drawn up in dollars, to the private banks. These banks bought them with bolivars at the official overvalued exchange rate. What did some (in fact many) of them do with these bonds? They sold these Argentine debt bonds in the United States or elsewhere to obtain dollars. This allowed them to bypass the control imposed by the Venezuelan state over capital movements. Officially, they did not export capital; they only got Argentine debt bonds out of the country.

Since then, the state has kept on making gifts to private banks thanks to similar manoeuvres. PDVSA and other public entities issue public debt bonds drawn up in dollars that are bought in bolivars by Venezuelan banks at the official exchange rate. Then these banks sell part of the bonds on the international market for dollars |10|. In brief, the state policy has two negative consequences: first, it permits capital flight in a circuitous but perfectly legal way; second, it encourages parasitic banking behaviour (buying of debt bonds) to the detriment of productive investment.

The conclusion that can be drawn is that although the state is trying to carry out a policy of endogenous development (i.e. designed to meet the internal demand through greater domestic production), the way the oil money is redistributed, combined with the overvaluation of the bolivar, tends to strengthen the capitalist sector and its importing pattern.

In a speech given during the meeting of intellectuals organised by the CIM, the writer and lawyer Luis Britto aptly summed up the situation:

We live in a dual society, and in a fable I wrote I explained that if one tries to set up a mixed system with hens and foxes in one single henhouse, then the following week, there will only be foxes left, and then they will eat the farmer. |11|

Thorny question of exchange rates: the January 2010 devaluation

In January 2010, the government carried out a devaluation. What does this devaluation consist of? Two official rates were set: the first one represents a 21% devaluation of the bolivar against the dollar (instead of 2.15 bolivars, 2.6 bolivars are needed to obtain one dollar); the second rate represents a 100% devaluation (one has to pay 4.3 bolivars for one dollar instead of 2.15 bolivars). The first rate (2.6 bolivars per dollar) is in force for expenses considered to be vital or at least to be a priority: imports of food, medicines, technologies, equipment for industrial or agricultural production, imports made by the public sector, the payment of scholarships to Venezuelan students studying abroad, of pensions to retired people living abroad. The second rate (4.3 bolivars per dollar) is applied to imports of automobiles, beverages, tobacco, cell phones, computers, home appliances, textiles, chemical and metallurgical products, rubber, etc.

In the short term, this devaluation will increase the state’s tax revenues. The dollars that the state gets from oil exports will be sold for a larger amount of bolivars. This is certainly one of the main goals pursued by the government which has seen its tax revenues dwindle due to the impact of the international crisis on the country’s economy. But this does not mean that the Venezuelan state is going to win on all fronts. The repayment of the public debt, 67.8% of which is drawn up in dollars, will cost the government more. The Venezuelan bankers and other capitalists who bought debt securities drawn up in dollars will get richer once again.

Obviously there are other consequences: for the workers and all low income earners who receive this income in national currency, the devaluation means lower purchasing power: the cost of the products they consume will be higher because many products are imported or produced in the country with a large imported component. Importers, retailers, producers will pass on the additional costs to the retail price. This loss of purchasing power can only be limited or compensated if wages increase in proportion to the cost of living, which is not the case. On May 1, 2010, Hugo Chávez decreed a 15% increase in minimum wages and pensions but inflation reached 25% in 2009 and will probably be even higher in 2010.

This devaluation aims at other objectives in the longer term, but it would be risky to say whether they can be reached or not. Among these objectives, the most important one is certainly the promotion of import substitution. Since importing now costs 21% or 100% more (depending on the products imported), imports should decline and local producers should be in a better position for selling their production on the national market. Even better: the devaluation should convince them that it is profitable to produce products that were formerly imported. This could create a virtuous circle thanks to which the country could strengthen its industrial and agricultural base by replacing imported products with local ones.

[Translated by Stéphanie Jacquemont and Judith Harris, in collaboration with Francesca Denley and Christine Pagnoulle.]


|1| The first part of this series was posted on the CADTM website on April 14, 2010, under the title "Venezuela. Nationalization, workers’ control: achievements and limitations", the second part was posted on June 18, 2010, under the title "Debate and contradiction in the PSUV (United Socialist Party of Venezuela)". Both are also above here.

|2| For instance, the share of social economy within the private sector is very low: it reached 1.6% of gross domestic product at the end of 2008, up from 0.5% in 1998. Out of a total of 11,692,071 working people at the end of 2008, only 201,773 work in the social economy cooperatives, i.e. barely 1.7%.

|3| See Victor Álvarez “The transformation of the Venezuelan productive model: review of ten years of government”, Revista La Comuna n°0, p. 37 to 55. Victor Álvarez was minister of basic industries in the Chávez government from January 2006 to August 2007.

|4| This statement has to be qualified: until 2002, although a public company, the operation of PDVSA (Petróleos de Venezuela Sociedad Anónima) had progressively favoured the private sector. A large part of its revenue was declared and taxed in the United States. The measures taken by the Chávez government from 2002 onwards enabled the state to take over the company’s management, which resulted in a strong increase in revenue to be later used to finance social policies.

|5| The Misión Mercal S.A. (MERCado de ALimentos) is one of the social programs promoted by the Venezuelan government. Officially launched on April 24, 2003, the Misión Mercal is designed to serve the food sector and comes under the control of the Ministry of Food. The program involves building shops and supermarkets and supplying them with staples and basic products at low prices that are affordable by the needy. Food products are subsidised and arrive on the shelves without middle men, so that the prices offered usually represent a discount of 30% to 45%, compared to the prices charged in other distribution channels.

|6| Productora y Distribuidora Venezolana de Alimentos (Pdval) was created in January 2008

|7| Quoted by Victor Álvarez.

|8| See Mark Weisbrot and Luis Sandoval, The Venezuelan Economy in the Chávez Years, Center for Economic and Policy Research, Washington, 2007,

|9| A personal anecdote: in late November-early December 2006 in Caracas, I was utterly astounded to see in the middle-class neighbourhoods that thousands of Christmas trees imported from Canada were being sold. In the shops, they were also selling quantities of devices to spray artificial snow on the trees. It should be added that in Caracas the temperature around Christmas is over 20°C. The massive import of Christmas trees from the Great North is very profitable thanks to the overvalued bolivar. It is true that Chávez criticised this pattern of systematic imports, all the more so as, he said, it was linked to cultural traditions (Santa Claus for instance) that were also imported and unquestioningly adopted to the detriment of local cultures.

|10| The foreign financial papers The Economist and the Financial Times regularly stress that Venezuelan private banks are very pleased with this opportunity given by the state to bypass capital movements control.

|11| See and Martha Harnecker “Selección de las opiniones más destacadas de los intelectuales reunidos en el CIM” (Selection of the most prominent opinions of the intellectuals in the CIM meeting), which takes up extracts from several speeches given during the meeting of intellectuals organised by the CIM in early June 2009.

Part 4: Suggested paths to 21st century socialism in Venezuela |1|

By Eric Toussaint

Reduce dependency on hydrocarbons and on the United States

July 1, 2010 -- One of the challenges that several previous governements have had to face, just as Chávez’ government must, is to diversify the productive apparatus in order to shake off the country’s extreme dependency on hydrocarbons (this is also true for the majority of the big oil-exporting countries). It was precisely to this end that, in the 1960s, a company such as SIDOR, the iron and steel corporation, was created. Later, during the 1980s and 1990s, the neoliberal governments privatised several public companies like SIDOR and decided to rely on foreign investments to diversify the economy. This was a failure.

In recent years, the Hugo Chávez government has in its own way been endeavouring to diversify the production infrastructure:

1. development and reinforcement of a steel and iron pole by carrying out a policy of import substitution (for instance, Venezuela is going to produce the pipes it needs for its pipelines whereas, up to now, they have been imported; with the help of the Chinese, Venezuela is going to produce railway equipment and re-develop its rail network);

2. support for local food production so as to come as close as possible to a situation of food sovereignty, while currently almost 90% of food products consumed in the country are imported (legacy of a decade-long use of oil revenues to import whatever Venezuela needed);

3. development of a petrochemical industry;

4. improvement of the production and supply of electricity, produced in the great majority from hydro energy (and fortunately not from oil). In this regard, contrary to the official position, Venezuela must avoid getting into electricity production from nuclear power; |2| nationalisation of the cement industry so as to develop the government’s housing construction policy.

Venezuela is also seeking to reduce the share of exports to the United States,|3| its main buyer of hydrocarbons, by trying to increase its supplies to China (according to some goverment sources, there is hope that China will be buying as much as the United States by 2014, which seems a difficult objective to achieve).

Land policy

A land reform has been carried out, |3| cooperatives and small farms have been granted substantial subsidies, but the initial situation was very delicate. The share of agriculture in the country’s GDP is very low |4| and, with some important exceptions (for instance the regions of big market-garden production in the Andes |5|), Venezuela is one of the countries where the system of farmers’ smallholdings has been notably weakened due to the importing model that has prevailed for decades.

How can a local farming population be reconstituted so as to ensure food sovereignty for a population that will reach 30 million inhabitants in the coming years? The problem is admittedly a difficult one to solve. To this end, the state needs to implement a vast package of incentive measures such as: a substantial improvement in the quality of public services in rural areas so as to reduce rural exodus; support for family farming and other traditional forms of agricultural production without favouring cooperatives exclusively; |6| the development of a public retail network for farmers’ production, guaranteeing stable outlets and prices high enough to encourage producers and save them from the clutches of the private networks that impose their prices on producers and secure excessive profit margins for themselves.

Michael Lebowitz made a number of proposals regarding farming policy in Venezuela that should be implemented to improve the situation:

taking into account the existing contraband due to an overvalued bolivar and the diversion of goods through the black market, the solution does not lie in subsidizing by supplying free inputs such as means of production, nor in direct monetary subsidies to agricultural production (except in cases where new production facilities are built). Why? Because, given the circumstances, there is no kind of control ensuring that products go where they are needed – especially when control or monitoring mechanisms, which involve high transaction costs, are lacking.

Therefore to ensure that subsidies lead to a real increase in food supply on the national market, and at decent prices, the best form of subsidizing is through a State agency that buys products at a set price. This State agency can offer the producers a price that encourages production and can later make sure that the items are sold to the population via the Mercal network at prices lower than those paid to the producers.” |7|

The Venezuelan government’s debt policy

The public debt burden in percentage of GDP has been reduced over the last few years but one has to emphasise that the Chávez government is not initiating a comprehensive audit of the public debt, whereas it promised to do so on several occasions. |8|

Besides, one can only wonder about the appropriateness of taking on new loans when the price of the barrel of oil was high and when liquid assets were abundant. And yet, in 2006 PDVSA went into debt for 12 billion dollars by issuing bonds on the international financial markets. How can this decision, which was not discussed in the National Assembly, be justified? With the decline in the price of the oil barrel since July 2008 (even if the current price – between 70 to 80 dollars a barrel during spring 2010 – keeps Venezuela on the safe side for the time being), don’t the repayments by the PDVSA put a strain on its budget and excessively reduce its liquid assets? Why go into debt and transfer interests to the international (or national) private financial players if one has enough cash assets not to be forced to borrow money? These questions are unfortunately not being answered.

One should note that Chávez emphasises the country’s endogenous development, which he defines as “self-centred, based on domestic resources and an integral part of the strong comeback of the national dimension”. Reducing PDVSA’s external debt should be an interesting way of developing this definition.

Other steps to be programmed

One of the solutions that need to be implemented so that the state (instead of the present private banking sector) can retrieve a substantial share of the money it distributes (or spends) consists of transferring to the public sector (nationalising) the greater part or the whole of the capitalist banking sector of Venezuela. |9| The state will then be able to re-invest part of the money it distributes (derived from its oil income) into the economy in the form of social spending or productive investments, in order to generate a virtuous circle of accumulation and the development of a public sector of the economy, as well as other kinds of ownership to be supported and strengthened (small private ownership, cooperative ownership, traditional forms of property among indigenous communities, etc.).

A second measure could consist of state control on foreign trade, so as to prevent a great part of the revenues it generates from being diverted towards capitalist accumulation and/or towards other countries through outflow of capital. A series of incentives of different kinds (taxes, subsidies, priorities in state order) is also needed to support the non-capitalist sector of the economy (obviously including small private ownership). |10|

Citizens’ and workers’ control to avoid 20th-century socialism

But what is absolutely essential is to set up mechanisms aimed at avoiding two major pitfalls:

1) the monopolisation of decision-making processes by the state bureaucracy and

2) the emergence of a new bourgeoisie from within Chavism, which is already dubbed “bolibourgeoisie” (= the Bolivarian bourgeoisie, the section of the Chavist leaders who take advantage of their position to begin accumulating capital). |11|

Among other mechanisms, let us mention: establishing limits to the range of wages (for instance a scale from one to six) by reducing the highest wages and significantly raising minimum wages as well as other wages up to the average wages; forcing agents and civil servants to make an annual declaration of global incomes (salaries and other earnings and incomes) and personal wealth (since the accumulation of capital by bureaucrats is more often done through backhanders which do not appear in income statements whereas they do in statements of personal wealth); forcing citizens to declare their various bank accounts in the country and abroad (lifting bank secrecy); substantially increasing proportionality in income tax.

Improving the training of managers in public companies is also vital, because nationalisations require the creation of a recruitment pool of managers with high technical competence and a high level of political, social and ethical training. To step up the pace of nationalisations, a pool of managers has to be created, while simultaneously developing, as mentioned above, a policy of workers' and citizens' control. Unless this is done, there is the risk of creating public companies that are inefficient, and even corrupt.

The essential and certainly the most efficient remedy is to implement a policy of workers’ and citizens’ control over the accounts and running of companies and public institutions. It would enforce transparent management (so as to prevent embezzlement, squandering, use of the resources of companies or institutions for projects which are not socially or environmentally justified) through a comprehensive audit policy in which workers and users of services must actively take part.

There is also a need for appropriate transition from workers’ control to company self-management (while maintaining an external control). The whole battle for workers’ control, for citizen control (which I also call control by users), for self-management, is part of the building up of grassroots popular bodies, such as the communal councils. The right forms still remain to be found so that this construction of grassroots entities is not restricted to a fragmented view. This raises the question of setting up a national federation of control organizations through which popular power can become a reality.

[Translated by Stéphanie Jacquemont and Judith Harris, in collaboration with Francesca Denley and Christine Pagnoulle.]


|1| The first part of this series Bolivarian Venezuela at the crossroads was posted on the CADTM website on April 14, 2010, under the title Venezuela. Nationalisation, workers’ control: achievements and limitations, the second part was posted on June 18, 2010, under the title Debate and contradiction in the PSUV (United Socialist Party of Venezuela); the third part was published on June 24, 2010, under the title The Venezuelan economy: in transition towards socialism?.

|2| According to the Instituto nacional de estadísticas, in 1999, the United States accounted for 47.36% of Venezuelan exports, and imports from the US amounted to 40.61% ot the total imports of the country. In 2007, these percentages respectively decreased to 52.4% for exports and 25.8% for imports.

|3| At the end of 2008, 2,675,732 hectares had been recovered from latifundias (large estates) and farmers had been given title deeds and contracts for a total of 1,862,247 hectares.

|4| The agricultural sector accounts for barely 4.39% of GDP whereas in Colombia it accounts for 12.1%. The Latin American average is 6.22% of GDP.

|5| See Alexandra Angeliaume and Jean Christian Talet, « Mutation maraîchère et accompagnement institutionnel dans les Andes vénézuéliennes (1950-2007) » chapter 4 of the second part in Olivier Compagnon, Julien Rebotier and Sandrine Revet (eds), Le Venezuela au-delà du mythe. Chavez, la démocratie, le changement social, Editions de l’Atelier/Editions Ouvrières, Paris, 2009, 238 pages.

|6| The impact of the creation of the many farming cooperatives (and other cooperatives) has been rather mitigated in Venezuela (as has been the case for other countries that prioritised cooperatives over individual family farming).

|7| Michael Lebowitz, “De los subsidios agrícolas a la soberanía alimentaria”, February 2, 2008, 7 pages.

|8| Hugo Chávez announced the launching of a debt audit when he met a hundred or so delegates of social movements from all over the world in Januray 2006 after the 6th World Social Forum, a polycentric forum held in Caracas, Bamako and Karachi. I attended this meeting, which was entirely broadcast live on public television. Chávez also made a commitment to audit the debt in late 2008, during an ALBA meeting.

|9| A first measure in this direction was taken in 2009 when Banco de Venezuela was nationalised.

|10| In this respect, see Victor Álvarez’s proposals in the final part of his document mentioned earlier.

|11| Roberto López, a professor at the University of Zulia, criticises a process “where private company sectors, which are not necessarily those trying to overthrow the government, but private sectors allied to the Bolivarian bureaucracy, have become multimillionaires during this period. An analysis should be made of these private groups and of their relationship with the economic assets of many leaders and prominent figures of the process. There seems to be a new Bolivarian bourgeoisie associated with business circles. For instance, a fact I heard about almost directly concerned subcontracting companies that had just been nationalized, expropriated, in the region of the Eastern Coast of the Lake and in almost all of them there were leaders who had participated in the coup (the military coup d’Etat of April 2002), in the oil lockout, and all were associated with PSUV leaders, revolution leaders, members of Parliament, Bolivarian governors, etc. ” See

[Eric Toussaint, doctor in political science (University of Liege and University of Paris VIII), is president of CADTM Belgium (Committee for the Abolition of Third World Debt). He is the author of A diagnosis of emerging global crisis and alternatives, VAK, Mumbai, India, 2009; Bank of the South. An Alternative to the IMF-World Bank, VAK, Mumbai, India, 2007; The World Bank, A Critical Primer, Pluto Press; Between The Lines, David Philip, London-Toronto-Cape Town 2008; Your Money or Your Life, The Tyranny of Global Finance, Haymarket, Chicago, 2005.]

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