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News: Economy | Social Programs

Communal Banks Of Venezuela Receive Big Boost

Mérida, November 14, 2008 (venezuelanalysis.com)-- As Venezuelan President Hugo Chavez handed over credits to over a thousand communal banks, he highlighted the need for social networks of distribution and for the private banks to also contribute.

"We're preparing for a large expansion of the communal banks," Chavez said during a ceremony to hand over funds to communities in Caracas on Wednesday.

Communal banks are social organizations that administer the financial and non-financial resources of the communal councils, the organizing mechanism of communities. Through the communal banks, organized communities can finance social projects, assist members in cases of emergency, and make social investments.

In the 2009 budget, he explained, BsF 3.4 billion (US$ 1.6 billion) has been assigned to the communal banks. That is, almost three times the amount for 2008.

Chavez noted the irony that while large, small and medium sized banks are collapsing around the world as a result of the financial crisis, Venezuela is "giving birth to thousands of banks that are banks of the people, the communal banks, the banks for popular power... and [this] popular power is vital for the future of the revolution... so this ...can't fail."

However, he highlighted the importance of the national government coordinating with regional and local governments in order to develop plans that work well together.

"The resources for the communal banks can't exclusively come out of the national budget. [They must also come from] the state budgets, the local budgets... the governors and mayors must direct resources to popular power," he said.

However Chavez also invited the private banks and companies to support the communal councils. He felt that with the large amount of profits they make, they could better contribute to the financing of the communal councils. He called for a meeting between the vice president, the minister for communal economy, and private bank representatives to evaluate the idea for 2009.

"I'm prepared to make an agreement where [the private banks] make a fund and the government makes another fund to support the communal councils. Maybe they can deposit something similar to what the government deposits, and like this we would raise BsF 7 billion  (US$ 3.3 billion)."

Chavez is also encouraging the communal councils and the national government bodies to create networks of social distribution of the products that are made in the socialist companies and collectives.

The idea of such a network would be to counteract the capitalist networks of production, which have been generating speculation in the price of products. Also, he outlined, the network should sell products at a price that corresponds more to the true value, and with a profit that is necessary to sustain the family of the producer or intermediary.

"The produce of the collectives shouldn't go to the speculative capitalist market," he said, and added, "We can't allow ourselves to fall into the exploitative dynamic that capitalism generates, where the producer spends 1 bolivar, and the product ends up costing the consumer 30 bolivars."

Hence, he stressed, the main aim of the network would be to decrease prices by the time the product reaches the consumer.

At Wednesday's event, Chavez delivered BsF 300 million (US$ 140 million) credit to 1,000 communal banks from across the country through the Micro-financing Development Fund (Fondemi).

He concluded that giving money to the communal banks is one way of redistributing the power that was "in the hands of the bourgeoisie who controlled the resources of the country...they managed the whole economy."

According to Chavez, there are currently 3,500 communal banks. In order to receive credits and resources, the spokespeople of the communal banks must go through a process of formation that Fondemi provides.

Published on Nov 15th 2008 at 4.12pm