Divisions within Chavism

Michael Lebowitz is professor emeritus of economics at Simon Fraser University in Vancouver Canada. He was director of the Program in Transformative Practice and Human development in Caracas, Venezuela from 2006-2011

Lebowitz discusses the divisions within Chavism and the outlook for Venezuela during Chavez's fourth term. Much of the material for this article is taken from an interview with a Croatian newspaper published on November 1st 2012. The original interview in Croatian can be found here. Although the interview was long before Chavez' death it nevertheless shows many of the problems that the revolutionary movement in Venezuela faces and gives a brief history of developments there that put the situation in context. Lebowitz discusses his general views on socialism, and the problems of promoting socialism in the 21st century, in the interview on the appended video.

Before Chavez was elected, Lebowitz descibes Venezuela as a rentist economy depending upon oil revenues, and a political culture that grew up around and depended upon oil rents. There was a culture of corruption and clientalism. Neoliberal policies resulted in cutbacks to social services and ending of subsidies on basic goods and also privatization. By the 1990s the situation was a disaster, and this helped Chavez get elected at the end of the decade.

Chavez gained power not only with the support of social movements and the poor but much of the middle class who also were fed up with the situation. At the time Chavez was calling for a ""good capitalism" and an ending of neoliberal policies.

He funneled oil revenues into education and health services. While Lebowitz sees these moves as basically populist, meant to maintain and develop political support, he also notes that they meet real needs and gave people the power to develop. In particular Chavez developed communal councils at the local neighbourhood level. These local councils grouped together to form communes which were designed to deal with wider problems.

These groups are what Chavez considered the cells of a socialist state. Also developed were workers' councils. These give working people a say in decision-making. However, Lebowitz points out that the transformation of Venezuelan society is far from smooth.

WIthin Chavism, Lebowitz identifies three main groups. One group is associated with the base and social movements, the local communities, and sections of the working class. A second group are people who have risen along with Chavism and who have enriched themselves through their positions. They continue corruption and clientalism exactly as did political leaders in the old regime. They think the revolution should now stop. They have a nickname in Venezuela the "boli-boourgeoisie". Finally, there is a third group who want to continue the process of change but through authoritarian means from the top down. They see themselves as vanguard leaders whose duty is to impose the proper socialist order from above.

The growth of cooperatives under Chavez has been astonishing. In 1998 when Chavez took power, there were 762 cooperatives in Venezuela but not long ago there were already 84,000. As Lebowitz points out, many of these small cooperatives fail or are discontinued although there are some in rural areas that have been quite successful. Lebowitz sees these cooperatives as schools where people learn to cooperate and to discover that they can carry out useful projects together. However, Lebowitz thinks that even more important as a training ground is involvinng workers in managing state enterprises

Lebowitz's vision of socialism involves people developing their powers through transforming both their circumstances and themselves through their practice. Venezuela has taken steps towards what he calls a protagonistic democracy. Lebowitz sees a considerable struggle within Chavism as well as with the opposition who want to curb the power of the people and return to an earlier period.

Meanwhile Chavez is still demonized quite often by the media in the west often being called a dictator even though he is an elected president in elections with international observers. The issue of demonization is discussed in this Al Jazeera discussion

Venezuela arranges oil for credit deal with China.

With lower oil prices Venezuela has suffered from the global recession and GDP shrank 3.3 per cent last year. However China needs oil for its growing economy and has been able to negotiate a mutually helpful oil for debt swap that has enabled Chavez to avoid turning to the IMF for a loan. The IMF still imposes neoliberal restraints on borrowers that often help global capital more than the borrowing countries. The United States is still the largest purchase of Venezuelan oil however! This is from the Wall Street Journal.

AMERICAS NEWS
Chávez, Shunning IMF, Gushes About China Oil-for-Credit Deal
By DAN MOLINSKI

CARACAS—China has become a much-needed funding source for recession-racked Venezuela, as well as a welcome alternative to the International Monetary Fund, which President Hugo Chávez continues to shun.

Mr. Chávez, a socialist who for years has been cultivating strong ties with China, said last week that Venezuela has already spent most of the $8 billion Beijing recently loaned it. He said he likes the arrangement so much so that he is asking for more.

"They [China] have provided $8 billion, and we're talking about them bumping that up to near $20 billion," Mr. Chávez said. "That's our proposal, and it's being discussed now."

The credit-for-oil arrangement benefits Venezuela, which puts the money in a fund used mostly for job-creating infrastructure projects as its oil-dependent economy reels from the impact of lower crude prices. Gross domestic product shrank 3.3% last year.

It also benefits China, which has plenty of access to dollars through its massive holdings of U.S. Treasury bonds, but faces increasing oil needs to fuel its robust economic growth.

After oil prices soared to records in mid-2008, China accelerated the reconfiguration of state-run refineries to handle more of the cheaper, heavy crudes—the kind Venezuela produces.

Officials at the Export-Import Bank of China and the China Development Bank were unable to provide information regarding the Venezuela fund.

The two banks have been involved in four credit-for-oil deals that China has signed since the start of last year—with Russia, Brazil, Kazakstan, and Venezuela.

Mr. Chávez is also using the loan from China to thumb his nose at the IMF and other Washington-based multilateral lenders, which he says have forced "savage neoliberalism" on Latin America and other regions in return for low-interest loans.

"When Venezuela used to get financing, the IMF would come here and impose conditions and rules, and sometimes it would even dismantle our laws," Mr. Chávez said last week. "But now, with China and Venezuela, we're on equal footing."

An IMF official in Washington said the institution wouldn't comment on Mr. Chávez's remarks.

While other Latin American countries have gone to the IMF for loans during the past decade, Mr. Chávez has never in his 11 years in power asked the organization for money, not even when the Venezuelan economy was going through some rough patches.

IMF country loans often arrive tagged with a requirement that the government undergo macroeconomic reforms such as privatizing unprofitable state concerns, reducing public spending, and meeting strict fiscal targets.

IMF conditions on loans "go against Chávez's DNA," said Boris Segura, an economist with the Royal Bank of Scotland, who said it is unlikely Mr. Chávez and the IMF would ever agree to a loan deal.

The deal with China makes sense for Mr. Chávez and China, Mr. Segura said, as it satisfies China's need for more natural resources, and doesn't seem to have any political agenda attached.

In 2007, Mr. Chávez said Venezuela was quitting the IMF, blaming its policies of tight budget controls and privatizations for the poverty that continues to grip his country and the region.

Technically, however, Venezuela remains an IMF member as a formal withdrawal would have broken by-laws of the country's sovereign debt and required that it fully pay back bondholders.

With credit-for-oil deals with China, it seems unlikely Mr. Chávez will be returning Venezuela to the arms of the IMF anytime soon. Two of Mr. Chávez's predecessors—Carlos Andres Perez and Rafael Caldera—swore during their presidential campaigns not to make deals with the IMF, only to agree to them once they were in office and facing economic woes.

The deal with the Chinese has the added benefit of boosting Venezuela's oil deliveries to China, which could help Mr. Chávez in his efforts to reduce oil sales to the U.S., currently the main buyer of Venezuelan crude.

Venezuela says it sends about 400,000 barrels of oil a day to China and hopes to lift that to one million barrels a day before long. Chinese data for 2009, however, show imports of Venezuelan crude oil and fuel oil at just under 200,000 barrels a day.

Venezuela currently produces about 2.3 million barrels of crude oil a day, according to independent estimates.

—Simon Hall in Beijing and David Winning in Sydney contributed to this article.

Venezuela Enters Fifth Consecutive Year of Economic Growth

This is not too surprising given the rise in oil prices. It is interesting that Argentina led South America in social spending although Venezuela intends to increase its own social spending. Venezuela has used price controls in an attempt to make many basic goods affordable by poorer people. In an economy that is basically a capitalist market economy this has caused problems that the government is attempting to mitigate. Unless prices are increased suppliers may not produce enough to meet demand. Unless socialisation of the means of production is more extensive and production planned for need rather than profit it is difficult to see how such problems can be completely solved.

Venezuela Enters Fifth Consecutive Year of Economic Growth
By Chris Carlson
Dec 29, 2007, 17:22

Paraguaná, December 20, 2007, (venezuelanalysis.com) - The Venezuelan
economy enters its fifth consecutive year of sustained growth in 2008,
according to predictions from the Economic Commission for Latin America

(CEPAL). Venezuela had the third fastest growing economy in the region
for 2007, but the growing demand of the domestic market could create
problems of undersupply in 2008, say some analysts.

Venezuela led the region in 2007 with a growth rate of 8.5 percent,
surpassed only by Argentina (8.6 percent) and Panama (9.5 percent), a
CEPAL report said last week. The region as a whole grew by 5.6 percent,

finishing its fifth consecutive year of economic expansion, in spite of

high levels of inflation and social spending that were criticized by
some experts.

The economic expansion is the greatest in 40 years and should continue
through 2008, although at a slightly slower rate, said the report.
CEPAL
attributes the growth in part to the growing demand from China and
India, as well as the recovery of Brazil. As a result, since 2003,
around 31 million Latin Americans have been able to pull themselves out

of poverty.

The economic growth has allowed Venezuela to improve in many respects,
including an improved purchasing power among its population of around 8

percent annually from 2004-2007, only surpassed by Uruguay at 10
percent
annually.

The unemployment rate reached its lowest point in November at 6.3
percent, according to the National Institute of Statistics (INE), a
decrease of 2.5 percent from 2006, and the formal sector of the economy

showed an increase from 2006, reaching 55.6 percent of the work force.
Venezuela also maintains one of the highest minimum wages in the
region.

The situation has also allowed Venezuela to drastically increase its
social spending, as well as reduce its external debt. Venezuela led the

region in social spending with an expansion of 37 percent in 2006-2007,

surpassed only by Argentina with 43 percent.

The Venezuelan government has approved a budget for 2008 of Bs. 137.5
billion (US$ 63.9 billion) with an emphasis on increased social
spending. 46 percent of the 2008 budget is directed toward social
programs and projects, reported Prensa Latina, with the government
“missions” alone receiving Bs. 5.6 billion (US$ 2.58 billion), a
61.5
percent increase from the 2007 budget.

External debt was reduced by US$ 1 billion during 2007, according to
the
director of the National Office of Public Credit, Luis Davila. Total
external debt is currently US$ 26 billion, said Davila, and will not be

increased in 2008. Internal debt will also be maintained around the
current level of US$ 6 billion in 2008, he said.

But Venezuela’s sustained growth has created an increased demand
among
the population that could create problems in 2008, according to some
analysts. Ex-director of the Central Bank of Venezuela, Domingo Maza
Zavala, warned that 2008 will be a “difficult, complicated, and
unpredictable” year for Venezuela for various reasons, and
recommended
that the government change its policy on price controls.

Zavala warned about the increase of imported goods in recent years, and

insisted that the government needs to take measures in 2008 to assure
supply in the domestic market. In his opinion, the most urgent measure
to be taken is increased flexibility in the government price controls.

“If effective measures aren’t taken to supply the market of the
most-demanded goods, the situation will continue as it is now, with the

consequence that the sectors with lowest income suffer the most,” he
said.

The ex-director of the Central Bank insisted that the government will
need to have dialog with the various productive sectors of the economy
to achieve a successful policy of price controls and supply. He also
warned of continued high inflation (18.6 percent in the first 11 months

of 2007) for which he said the causes have not been attended to.

However, Venezuelan Finance Minister Rodrigo Cabezas announced on
Wednesday that the national government was analyzing the possibility of

increasing the flexibility of price controls on some goods. Although he

didn’t give details, Cabezas explained that they would be developing
an
“extraordinary plan” for 2008 to supply the domestic market and
control
inflation.

Cabezas noted that last week’s decision to loosen the price controls
on
some types of milk is a part of the government’s plan to make price
controls in general more flexible, but he assured that they would not
totally remove controls.

Since 2003, the national government has maintained price controls on
around 400 basic goods and services to guarantee their supply to all
sectors of the population. National production has increased in recent
years, but imports have also increased due to the growing purchasing
power and demand of the Venezuelan population.

The Venezuelan economy is expected to continue to grow in 2008 at a
rate
of between 7 and 8 percent.

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