Venezuela's economic and energy woes?

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The Venezuelan government is taking stronger measures against those responsible for the economic problems — the capitalists. Photo: Ques communismo/Flickr.

By Federico Fuentes, Caracas

May 23, 2010 -- In recent weeks, local and international media have attacked the left-wing Venezuelan government over alleged “economic woes” and electricity problems (see article below). Pointing to Venezuela’s inflation rate — the highest in Latin America — and an economy that shrank 3.3% last year, the private opposition media is raising fears of a serious economic crisis.

These same media outlets, which have been predicting the fall of President Hugo Chavez for years, argue recent government actions will worsen the situation. Venezuelan business federation Fedecamaras warned on May 5 that Venezuela faces an “economic and social crisis”. The federation helped organise a 2002 military coup against Chavez that briefly installed Federcamaras leader Pedro Carmona president before a mass uprising restored Chavez.

Federcarmaras argued: “The government has to be called to account [and] assume the cost of its errors [and the] destructive economic, social and moral process it has submitted Venezuela to.” Speaking on the rabidly pro-coup TV station Globovision, Fedecarmaras president Noel Alvarez said: “The government is radicalising, therefore businessmen should radicalise also to defend private property.”

Behind such attacks is the fact that, faced with the deepening world economic crisis, the Venezuelan government is taking stronger measures against those responsible — the capitalists. These measures include new nationalisations to tackle food hoarding and underproduction, a clampdown on illegal money trading and speculation, and the creation of a new state import-export company.

The government is also promoting the process of workers’ control in the industrial heartland of Guayana, swearing in several new presidents of state companies selected by the workforce. These measures occur in the context of an intense campaign for the September 26 National Assembly elections.


Contrary to claims the Venezuelan economy is worse off because of government policies, the worst aspects of the crisis have been avoided because of these policies.

A crucial turning point for Venezuela was the two-month-long battle that began in December 2002 over who would control the state oil company, PDVSA, which represents almost a third of Venezuela’s gross domestic product. The right-wing opposition launched a bosses’ lockout, which included the shutting down of PDVSA by its corrupt management, aimed at economically strangling the country and bringing down the Chavez government.

The mobilisation of workers, poor communities and the armed forces was able to restore control of PDVSA to the Chavez government. Counter-revolutionary elements, encrusted in PDVSA upper and middle management levels, were removed.

The lockout caused GDP to fall by 27.8% in the first quarter of 2003. But over the next 11 quarters, government policy of redirecting oil rents to social spending meant the economy rebounded. It grew by 94.7%, or 13.5% annually. During the same period, extreme poverty fell by 72% and unemployed more than halved.

Ironically, while the government nationalised a number of companies in strategic sectors, the private sector grew the most. Between 2004 and the third quarter of 2008, the private sector grew by 49.5%, representing 70.9% of total GDP. Meanwhile, the national currency, the bolivar, which was subject currency controls to prevent capital flight, becoming increasing overvalued. This made it difficult for the government to move away from dependency on oil. An overvalued currency made imports artificially cheap, disadvantaging national production.

It also created an unofficial, or parallel, currency rate two or three times higher than the official one. Speculators tended to import at the official currency rate of US$1 to 2.15 bolivars, but sell at the much higher unofficial rate.

In 2009, after a sharp drop in oil prices and the onset of the global economic crisis, Venezuela’s economy began to shrink for the first time since 2003. But Mark Weisbrot, co-director of the Washington-based Center for Economic and Policy Research, said in a May 9 British Guardian article that talk of economic ruin is misplaced. Rather, Venezuela faces “a policy choice”.

Weisbrot said that in 2009, “the government’s fiscal policy was too conservative — cutting spending as the economy slipped into recession”. As a result, public sector growth dropped from 16.3% in 2008 to 0.9% in 2009.

However, Venezuela’s control over its oil resources, low debt level (20% of GDP compared with 115% for Greece, 100% for the US and 79% for the European Union) and high level of international currency reserves means it has room “to try new economic and political experiments and learn from its mistakes as well as successes”, Weisbrot said.

Attacks on capital

This is exactly what the Venezuelan government has done since announcing the bolivar’s devaluation. It is using its strong position to move against private capital, punish those sabotaging the economy and promote workers’ control experiments. [See also]

In January, the government adjusted the exchange rate, introducing a two-tier system. The rate is now $1 to 2.6 bolivars for essential imports, such as food and state industrial needs, and $1 to 4.3 bolivars for other imports.

Receiving 4.3 bolivars instead of 2.15 bolivars for every $1 of oil sold, the government has significantly increased its revenue. It also partially corrected the grave distortion caused by an overvalued bolivar by making it more expensive to import. Together with promises of government loans, domestic production will benefit.

With the advantage of the lower bolivar rate for state imports, it has begun to move against those using speculation and sabotage aimed at causing discontent via rising inflation, increasing food shortages caused by hoarding and underproduction.

Since February, the government has taken over two private supermarket chains. Using the preferential exchange rate, the government will now import food and white goods via a newly created state import-export company.

The products will be sold cheaply in the state-owned supermarket chains, undercutting speculators. Six formerly private-owned Bicentenary hypermarkets now offer goods up to 50% cheaper than private supermarkets. The aim, Chavez said, is to “displace the hegemony of the bourgeoisie in handling resources that belong to the people”.

On May 13, Chavez announced the takeover of Mexican-owned food processor Gruma, which had refused to sell flour in April despite a national shortage. This was just the latest of a series of nationalisations carried out to stimulate food production, and stop hoarding and speculation. These included the takeover of three sugar mills accused of hoarding and under-producing, a coffee processing company, and the expropriation of land belonging to Venezuela’s largest food and beverage company, Polar.

To combat speculation in the informal currency market, the government has intervened in 31 of the country’s 107 brokerage firms during May over accusations of illegal currency-trading and money laundering.

Chavez said: “If we have to eliminate the whole bunch of brokerages ... well eliminate them. This country doesn’t need them, we don’t need the savage capitalism of these rich money-bags.”

The government also halted trading of government bonds. Under a reformed law passed by the National Assembly, only the Central Bank of Venezuela will be able to authorise the purchase and sale of foreign currencies.

Workers’ control

Using its strong economic position, the government borrowed $20 billion from China in April as advanced payment for future oil deliveries. This is helping fund an increase in public investment. To tackle decades of disinvestment, the government plans to spend $6 billion on the state electricity sector — strengthened by the nationalisation of six private companies in 2007.

It has initiated a process of workers’ control in the sector. Workers are organising committees to help reorganise the industry. Workers have also elected representatives to management boards.

The government has also increased the minimum wage by 25% this year and raised pensions for widows and widowers.

On April 30, Chavez announced a $1.168 billion investment package for the state-owned iron, steel and aluminium companies in Guayana. The package will fund projects discussed and approved by workers in the relevant companies.

On May 16, Chavez swore in new presidents in eight out of the 15 state-owned basic industry factories in Guayana that had been chosen by the workers. Chavez also ordered the nationalisation of transport companies related to the industrial complex and Venezuelan chemical company Norpro.

‘Destroy the bourgeois state’

The new attacks on capital have also led to further splits in the pro-Chavez camp.

The Homeland For All (PPT) party, until recently allies of the Chavez-led United Socialist Party of Venezuela (PSUV), said it would not form an alliance for the September elections, but would stand against PSUV candidates.

The PPT has stepped up criticism of the government’s economic measures. Lara state governor Henri Falcon defected from the PSUV to the PPT in opposition to the government’s moves against Polar in his state.

At a May 19 public meeting to welcome discontented PPT members into the PSUV, Chavez denounced the PPT as “reformists” unwilling to deepen the anti-capitalist revolution.

Chavez told a May 7 meeting of PSUV candidates for the National Assembly that the government’s actions meant a battle against “the capitalist state and the hegemony the capitalists still exercise in different sectors of national life”. He said: “We cannot plan out measures thinking that we can or are going to execute measures in normal conditions ... we have to take into account that an adversary with a lot of forces is also involved: the bourgeoisie, with its economic and media power.”

With elections in September, the capitalists are playing hardball. They are trying to provoke economic chaos and shortages of essential goods — as they did before the defeat of Chavez’s proposed anti-capitalist constitution reforms in 2007.

“They are seeking out a way to retake the path of destabilisation”, Chavez said. “Either we finish off capitalism or capitalism will finish off the revolution.”

He said the revolutionary forces needed to win the elections and then push to “accelerate the destruction of the bourgeois state”.

[Federico Fuentes is a member of Australia’s Socialist Alliance and is based in Venezuela as part of Green Left Weekly’s Caracas bureau. This article first appeared in Green Left Weekly.]

`Power politics': AVSN replies to SBS's anti-Chavez propaganda

By the Australia-Venezuela Solidarity Network

May 25, 2010 -- The Dateline program “Power politics”, aired on SBS TV on May 23, 2010 (and on SBS2 on May 24) was one of the most blatantly biased reports on Venezuelan politics yet to be aired on Australian TV. The anti-Bolivarian line unashamedly pushed by reporter David O'Shea mirrors (in fact was shaped by) the most right-wing of Venezuela’s opposition parties.

O’Shea’s key spokesperson for the supposedly widespread public disgruntlement with President Chavez and his government was Aixa Lopez. Lopez is presented as an ordinary citizen/mother of an asthmatic daughter/lawyer turned activist who set up the "Association of Victims of the Blackouts" out of fear for her child’s safety. What O’Shea fails to mention is that Lopez is also a long-term, committed activist for the political right, including holding the position of Women’s Secretary in the conservative Accion Democratica (Democratic Action, AD) party.

Almost everyone interviewed by O’Shea are middle-class professionals with axes to grind, and he gives them free, uncritical rein. Their vague but vehement claims that the Chavez government silences dissent are ridiculous in a country where there is greater freedom of movement, speech and assembly than even in Australia.

In this regard, O’Shea’s apparent refusal to absorb the significance of some of his own script is stunning. For example, just seconds after footage showing government critics freely demonstrating outside the ombudsman's office, anti-Chavez leader Vladimir Villegas is presented accusing the Chavez government of “shutting down critics, restricting debate, trying to impose a political view that monopolises society and preventing dissidents from expressing their views, especially internally”.

Just minutes after O’Shea reports that Venezuela’s government has recently armed 30,000 farmers and other ordinary people in national defence militias, Chavez is described as an “egotistical, militaristic totalitarian”.

It doesn’t make sense. If Chavez is such a totalitarian, why would all members of Venezuela’s armed forces be required to pledge not harm their fellow citizens? Why would Chavez have led the radical reform of Venezuela’s military to include social and community work as part of military life?

What does make sense is that, in the face of coup threats and plots, the alarming militarisation of surrounding countries by the United States, and Western TV stations like SBS actively promoting “regime change” in his country, Chavez wants an armed population.

Before Chavez was elected in 1998, Venezuela was ruled by only two parties: Democratic Action (AD) and Copei, the Christian Democrats. By contrast, the September 26th, 2010, national assembly elections will be contested by around 10 major parties, as well as dozens of smaller parties. This is hardly a state that does not allow dissent.

In fact, this Dateline program is very like the many aired daily in Venezuela by the opposition, who own the licences for all but one state-owned and one community TV broadcasting frequency. Again, hardly evidence of a state that does not allow dissent.

For a program supposedly focused on a basic service -– electricity -– it is remarkable that there was no mention of the many infrastructure projects the Chavez government has successfully undertaken: a huge expansion of public housing, schools, universities, hospitals and health clinics. Compared to 1998, more than 4 million more Venezuelans now have access to clean drinking water, and more than 5 million more Venezuelans now have access to sanitation.

It is even more remarkable that, having mocked the Chavez government’s public education campaign to reduce energy consumption, Dateline did not even mention the more significant attempts of the government and workers in the electricity sector to address the energy crisis. There was no mention, for example, of the two-day presidential consultation with the rank-and-file electricity workers in April, or the May 15 handover of control of various primary production plants to the workers.

Setting aside the absurdity of implying that President Chavez is somehow responsible for the current drought in Venezuela, or that low-energy light bulbs are evil tools of communist dictatorships, it in evident in every election result since Chavez first came to power that the poor of Venezuela know they would be the last to get any electricity had this happened before Chavez was elected.

And that is the nub of it: it is not Chavez the individual that fills the opposition with fear and loathing as much as the poor majority -- the millions of Chavistas who are determined not to let themselves be driven back into an underclass of excluded and oppressed people. Despite undeniable obstacles and problems, in Venezuela a large proportion of people are starting to play an active role in their shaping their society, organising collectively to overcome their problems through mass movements, social missions, communal councils, community media and so on.

Rather than providing a well-researched, credible investigation of the social, economic and political situation in Venezuela, this Dateline program appeared, as one viewer’s comment on SBS’s website put it, to be little more than “an English version of the election launch for the Democratic Action (AD) Party … AD ruled Venezuela badly for 40 years. AD chose to boycott the last elections - their mistake. But now they are running for office with Dateline's help!”

We suggest that SBS endeavour to repair some of the damage to its reputation by commissioning another Dateline report that strives honestly to document the views of some of the majority of Venezuelans, who have repeatedly re-elected Chavez with increasing majorities each time, and who support his efforts to put such vital resources as electricity and the media under their/public control.

As another viewer commented on the SBS website: “For those who have missed out on dreams of a gravy boat ride or a green ticket to the US I imagine that Chavez would be hard to swallow. For the people of the world who support … equality across all economic groups, Chavez is a hero. Chavez supports the poor, obviously the rich are going to cry, they will have to share. Viva Chavez!”

[Visit the Australia-Venezuela Solidarity Network website at]