The Promise of the Chavez Offensive C.P. Chandrasekhar

On February 2, the two month-old, private sector-led strike in Venezuela was lifted. That general strike had come as the culmination of 18 months of unrest, in which a mainly capitalist opposition attempted to dislodge President Hugo Chavez. Clearly, Chavez has won a major victory, despite the fact that the domestic industrial sector, international capital, developed country governments and the mainstream international media had all joined the covert coalition to displace him from power.

The reason why the right was and is uncomfortable with Chavez is obvious. Ever since, as a Lieutenant Colonel, he led an unsuccessful coup attempt in 1992, his strong left predilections have been known. Subsequently, Chavez had been elected President on a radical platform in 1998, with a 56 per cent mandate from a people who had tired of the inequalising economic policies of governments that ruled the country for four decades since 1958, and delivered inflation and unemployment, but little growth. Chavez used this support to launch his Bolivarian revolution and replaced the 1961 constitution with what the conservative Economist has described as “a left-leaning and state-centred charter”. But winning a democratic mandate, Chavez and the world realised soon, could only be the first step in the long road to a people-centred economic policy. His principal task has been to face up to the campaign to dislodge him by declaring him an eccentric autocrat with little popular support and inadequate capacity to manage the economy, who would be dumped by foreign capital and therefore be responsible for a collapse of the Venezuelan economy.

Those who made these allegations failed to take account of one reality. Venezuela is by no means among the poorest countries of the world. With income per head in 2001 estimated at $5,073 at market exchange rates, it ranks among the better-off developing countries. It also has the largest oil reserves in the Western hemisphere, with production estimated at 3.1 million barrels per day (bpd), of which, under OPEC quotas, 2.6 million bpd are exported. With oil prices prevailing at levels at which they have stood in recent months, this should ensure a comfortable balance of payments position. And since reserves are estimated at 78 billion barrels, Venezuela has more than 60 years in which it can use the benefits offered by its oil reserve to restructure its economy.

Restructuring is of course imperative. The advantage of oil abundance is also Venezuela’s principal weakness. It has encouraged the elite which has ruled the country to free ride on oil, maintain an open economy and invest little in developing agriculture and industry. Oil still accounts for more than a quarter of GDP, half of government revenues and three quarters of exports, showing the economy’s extreme dependence on this sector. While this failure to use oil to spur development in other sectors was understandable till 1975, which was when the foreign oil companies were nationalised and the state-owned Petroleos de Venezuela (PdVSA) came to control oil exploration, production and refining, the persistence of this structure for the next 30 years is a clear sign of developmental failure. In fact the failure to use the opportunity offered by oil reserves had a damaging effect when oil prices fell in the late 1990s and the country found itself mired in recession. It was the disillusionment that experience gave rise to that brought Chavez to power.

The Venezuelan elite not only failed to use oil to restructure the economy, it also failed to use the benefits from the oil reserve to redress the extreme inequalities that characterise most Latin American economies. Despite Venezuela’s high per capita income, when unemployment soared during the recession of the late 1990s, the percentage of people identified as being below the poverty line rose from 30 to 50 per cent. Recent data on income distribution in Venezuela suggests that just as in Brazil and Chile, the richest 10 per cent of the Venezuelan population accounts for close to 45 per cent of the country’s income. The programme of “macroeconomic restructuring” which Venezuela, like many other Latin American countries adopted on IMF prodding in order to bring inflation under control, only worsened the position of the poor. Despite improved oil prices, unemployment averaged 14 per cent in 2001. It is such extreme inequality that provides the seeds for a strong left surge in Latin American countries with relatively high per capita incomes, resulting in left leaning regimes in Ecuador, Peru and Brazil, besides Venezuela.

But long used to dominating the system with autocratic rulers, Latin America’s elites have not been known to adjust to the needs of democracy or accept the popular verdict when it moves to the left. Among the many moves they adopt, one which has gained currency since the time of Allende, is a strike by the owners of capital against a government biased in favour of the workers and the poor. This is precisely what has been attempted in Venezuela where besides a failed coup aimed at displacing him, Chavez has faced 4 major strike actions on the part of capital. The most recent, which began on December 2 has, however, pushed sections of capital into bankruptcy, leading to a gradual end to the strike. That end would have come earlier, but for the strength the strike action gained because of the alliance of managers and workers in the oil industry, who in Chavez’s view constitute a labour aristocracy which has joined the elites in the drive to bleed the system. Seeing themselves as above the government, oil-industry managers were irked by the fact that Chavez attempted to gain influence over PdVSA by appointing Alfredo Riera, a close associate, to the board. As a first response seven directors on the board resigned. Subsequently, managers and workers joined the strike, as a result of which oil production fell from 3 million bpd to 200,000 bpd.

What is most noteworthy is that in the midst of all this Chavez has won out by sticking to his radical agenda, which includes land reform, regulation of goods and capital markets and nationalisation. The sustained opposition to Chavez and the constant political and economic disruption at home did slow down his effort to push ahead with the Bolivarian revolution. The opposition took many forms. Demonstrations, strikes, international pressure and a media campaign that suggested that Chavez had lost all support. To bolster the view of loss in support, declared quite recently as being down to 30 per cent, the domestic and international media constantly referred to a set of polls. It is now known that these polls were conducted by two firms, Datanalisis and Keeler and Associates, which are headed by anti-Chavez propagandists. In fact, Gil Yepes who heads Datanalisis has been reported by the Los Angeles Times as saying that only the assassination of Chavez can solve Venezuela’s problems. There has been no section of the conservative international media that has not pushed the view that Chavez has little support, with rather peculiar consequences. Thus The Economist reported in a story datelined December 10, 2002, that Chavez is “still backed by one Venezuelan in four.” More recently, after the lifting of the strike, in a story datelined February 6, 2003, the journal declared that the opposition “underestimated Mr Chávez, who probably still enjoys the support of one Venezuelan in three.” That was indeed a concession made with a sense of despair.

What is surprising is that Venezuela’s elite had bought its own propaganda, and believed that Chavez actually had the support of only a few lumpen elements. Even when this was proved wrong by the quick reversal of the April 2002 coup which momentarily brought Pedro Carmona to power, the business-led opposition was not convinced, leading to the strife that has followed. As has been commented by a number of political observers, including Fidel Castro, what is surprising is the fact that, on return to power in April 2002, Chavez refrained from seeking revenge, and allowed the plotters of the coup and their supporters in the oil industry to continue with their campaign. He even joined negotiations, led by the secretary-general of the Organisation of American States, to seek a peaceful end to the stand-off between the government and the business-led opposition.

The most damaging offensive was of course the near-closure of PdVSA. This not merely resulted in domestic fuel shortages, but the stoppage of exports and the loss of much needed foreign exchange, to the tune of $4 billion. The Venezuelan Bolivar fell from an end-2002 peak of close to 800-to-the-dollar to close to 2000-to-the-dollar. And despite the recent victory, restoring growth in the economy is bound to take time, even if the projection of a 20 per cent decline in GDP this year, on top of an 8.5 per cent decline last year, is a gross exaggeration.

Chavez held out and having won the battle is putting in place new leaders and workers in the oil industry and refusing to take back 5000 sacked workers, is working to restore oil production levels that are inching towards 2 million bpd and has suspended currency trading as a first measure to stop the fall in reserves and the decline of the Bolivar. But things are not going to stop there. Having won the prolonged battle that the two month strike signified, he has with him the social sanction to push ahead with his Bolivarian agenda. He has already called for price controls on basic commodities, to protect his constituency of the poor from the most ravaging effects of inflation. He has decided to use exchange controls to prevent a financial crisis resulting from capital flight. He has fixed the value of the Bolivar at a level well above the rate which prevailed on the last day of free trading. And indications are that he would soon be redressing inequalities in asset-holding, particularly that of land. If this agenda is extended, we can expect the shaping of an egalitarian, domestic-market centred development programme that runs counter to the neo-liberal strategy that dominates policy making in most of Latin America.

If Chavez does move ahead, in a context when left-leaning regimes have come to power in a number of Latin American countries, the war against neo-liberal policies and corporate globalisation would witness an advance and the geo-politics of the region is bound to change. Chavez and his supporters are conscious of this. Eliecer Otaiza, an adviser to the President, is reported to have declared: “The happy society we want to create is in order to change…the system of production and trade and the international political system.” With the US being a neighbour and dependent on the region, as Venezuela’s contribution of close to 15 per cent of US oil imports suggests, this shift would not go unchallenged. The battle has only just begun.