Stuart Munckton
On January 12, as part of Venezuela's commitment to provide cheap heating fuel to the US poor, an agreement was signed with Maine state governor John Baldacci to provide heating oil at a 40% discount to low-income residents in Maine. Venezuelanalysis.com reported that day, "This humanitarian aid will also reach four Native American tribes and homeless shelters in the state of Maine."
This agreement, one of a number across the US via Venezuela's state-run oil industry PDVSA, is just one example of the way in which the government of socialist President Hugo Chavez is putting Venezuela's oil at the service of human need. Venezuela is the fifth largest supplier of oil in the world.
At the November Summit of the Americas in Argentina, Chavez proposed an Alliance Against Hunger and Poverty plan for the region, and offered US$10 billion over 10 years to help finance it. According to a January 13 news bulletin published by the Ministry of Communication and Information, the Chavez government aims to open a Latin American Children's Heart Hospital in April. Described by the bulletin as the Chavez government's "most important social work", it will assist 5000 children from Venezuela and the region with heart problems each year.
Chavez announced that his government would assist the newly elected government of President Evo Morales in Bolivia with a $30 million donation to help establish social programs. He also promised to supply all of Bolivia's diesel fuel needs in exchange for agricultural products. Venezuela also signed a deal with Paraguay in December, along the lines of existing agreements that guarantee cheap oil to 14 Caribbean nations.
Inside Venezuela, revenue from PDVSA has been the backbone of financing an ever-growing number of social missions. These missions have begun to significantly reduce poverty, which dropped from 47% to 37% in 2005 according to the government.
On December 15, Venezuelanalysis.com reported the creation of a science mission, funded mostly by oil revenue, which aims to "democratise" science. On January 16, Venezuelanalysis.com reported the establishment of a new mission aimed directly at assisting the most vulnerable in society, such as street children, drug addicts and the extremely poor. The government has also put aside $1.2 billion for salary increases for government workers, with the lowest paid to receive an increase of 80%.
Opponents of the Chavez government claim that any gains using oil revenue in this way are illusionary and even dangerous. They argue that if current high oil prices drop suddenly, the Chavez government and its pro-people economic policies would be thrown into crisis. However, this ignores the changes the government has introduced into PDVSA.
Through barrels of oil produced entirely by foreign oil corporations, or via operating agreements between PDVSA and multinationals that gave huge advantages to the latter — a result of agreements signed by pre-Chavez governments — the Venezuelan government receives little or no revenue from around one-third of the oil produced in Venezuela. Foreign companies were allowed to pay extremely low royalties and the operating agreements often guaranteed them a certain profit level. In some cases this meant that the government actually had to pay the multinationals to ensure they met their guaranteed profit levels.
Last year, however, the government began to implement legislation that significantly increases the revenue paid by foreign oil corporations. It also forced the multinationals to pay $4 billion worth of back taxes they had dodged. Dutch oil giant Shell's operations were shut down for a period of time until it agreed to pay the taxes it owed. The government also forced the 20 foreign oil companies operating in Venezuela to re-sign their contracts with PDVSA in order to give PDVSA majority control over all joint ventures. All companies complied, except Exxon-Mobil, the world's largest oil company, which attempted to fight Venezuela in the courts. The government threatened to boot Exxon-Mobil out of the country and the company sold its investments in Venezuela at the last minute. So even with a drop in oil prices, Venezuela should receive higher levels of oil revenue than in previous periods.
Another crucial plank of the economic strategy being pursued by the revolutionary government is to break the decades-long dependency on the oil industry and to overcome the crippling underdevelopment of the rest of the economy.
The government is beginning to have some success. As a result of an across-the-board crackdown on corporate tax evasion, for the first time in many years the 2006 budget is expected to receive less that 50% of its revenue from oil, with the majority of funding coming from taxation. As a result of strict control over the purchasing of foreign currency in order to stem capital flight, Venezuela's international reserves have grown to over $30 billion.
The government passed legislation that forced reluctant officials at the Venezuelan Central Bank to hand over $6 billion of the reserves to help develop the agricultural industry (Venezuela has had to import up to 70% of its food). On the back of significant economic growth, over 17% in 2004 and 9% in 2005, the government has been able to both increase social spending — which in the 2006 budget will be more than three times pre-Chavez levels in 2006 — and maintain a budget surplus.
Venezuela's oil wealth is being invested in building up the rest of the economy via a strategy known as "endogenous", or internal, development. A number of new state-run industries are being created — a telecommunications company is one of the most recent — and existing state industries are being expanded. At the heart of endogenous development is the promotion of development through the creation of a "popular economy", operating according to the logic of solidarity rather than the market. To achieve this, with the assistance of a range of new state banks, more than 70,000 new cooperatives have been formed.
Through the promotion of cooperatives, the government can both economically empower millions of the poor who were previously unemployed or operating in the large informal economy, and harness this previously unproductive sector of society to drive its plans to develop different branches of the economy. A December 17 Venezuelanalysis.com article reported that according to government figures, 54% of cooperatives are in goods and services production and 30% are in agriculture.
By using Venezuela's oil wealth in an increasingly planned way, according to actual human need rather than the logic of the market, the Chavez government is actively disproving the lie that there is no alternative to the savagery of capitalism. Venezuela is showing it is possible to create a different sort of economy — one that puts people before profit.
From Green Left Weekly, January 25, 2006.
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