Revolution, Counter Revolution, and the Economic War in Venezuela: Part II

William Camacaro and Frederick B. Mills offer an important overview of the current economic war in Venezula. Part II focuses on the need to change the economic model in Venezuela and explores the balance of political and economic forces in Venezuela today.


3. The Economic Model Must Change

Today there is universal agreement among both the broad spectrum of Chavismo and the various factions of the opposition: Venezuela is facing an economic crisis, perhaps even an emergency, that requires urgent “rectificación”. While high inflation, a broken currency exchange system, and falling oil prices have indeed been urgent issues, the scarcity of basic goods reached crisis proportions in the days preceding and during Maduro’s trip abroad and still stands in need of a sustainable remedy. The government and the opposition approach these problems from radically different perspectives and propose dialectically opposed solutions. Something has to give, and give soon.

3.1 The MUD–Fedecámaras Position

The opposition MUD–Fedecámaras position is that the current economic crisis can be resolved by free market oriented reform. Fedecámaras has called on the government to respect private property rights, repeal the Law of Just Prices, deregulate the economy, correct the “excesses” of Labor Law, and establish one floating exchange rate. The director of the Chamber of Commerce of Caracas, Victor Maldonado, maintains that “If we begin to make these corrections today in the economy in the medium term one will see the results.” Fedecámaras representatives also blame some of the scarcity of consumer products on a lack of sufficient divisas (dollars) available at preferential exchange rates for the import sector.

For Capriles Radonski, Venezuela is facing a state of emergency on account of a failed economic model and therefore the game is up for the Bolivarian project. On January 14 he called for a divided opposition to unite in the common cause of a “constitutional” change of government. His call appears to have gotten some traction. On January 18, Jesús Torrealba, executive secretary of the right wing MUD, announced that the various factions within the MUD have united: “This (situation) is grave and for this María Corina [Machado], [Leopoldo] López and [Henrique] Capriles are in agreement.” Torrealba also said that on the 23rd of January the opposition will march and go “where the pueblo are, where there is urban and rural poverty, we recall that 54% of the population live in the barrios.” [As we noted above, the MUD demonstration appears to have been changed to January 24.]

3.2 The Government Position

The government position is that basic commodity shortages are being caused by elements of the private sector that control the importation, production and distribution of food and other products and criminal speculators and smugglers who are sometimes allied with this sector. These actors are allegedly responsible or complicit in the illegal stockpiling of products in warehouses aimed at bringing about artificial shortages. There is empirical evidence for such claims. Thousands of tons of products, including subsidized items, have been diverted from the marketplace for sale in Colombia in 2014. Warehouses full of goods that ought to be on store shelves are frequently discovered by the authorities. Subsidized food items are often purchased by speculators for resale at higher prices in the domestic market. Some importers have been buying products at the subsidized currency exchange rate but then selling those products as though they were purchased at the much higher parallel rate. Fictitious “importers” are also blamed for massive amounts of currency fraud by obtaining divisas (dollars)at the preferential exchange rate under pretext of importing priority goods and then selling those dollars on the parallel market or holding on to them in expectation of further devaluation of the bolivar, a practice that suggests the corruption of some public servants as well.What are we to make of these observations about scarcity?

To be sure, the government has made its share of mistakes in managing the economy and Maduro has made it clear in his address to the nation (Memoria y Cuenta) on January 21 that some changes to economic policy, and in particular the currency exchange system, will now be implemented as part of an Economic Recovery Plan. There is empirical evidence, however, reported with some frequency in Venezuelan newspapers and by Venezuela Analysis, that while some of the hoarding, reselling, and speculation is likely being perpetrated by opportunists, there is also collusion by the private sector. So there is an economic war underway in Venezuela aimed at producing leverage through scarcity to scale back government price controls and labor protections and cause disaffection with the government. As the President of Fedecámara, Jorge Roig remarked, during a recent interview with journalist Vladimir Villegas: “how long will the lines last? As long as the government continues to attack private enterprise.”

For Maduro, the game is up for the economic coup being waged by the political opposition and its allied collaborators in the private sector. He has delivered an ultimatum to food distributors to cooperate with efforts to overcome food shortages and in his January 21, 2015 address to the nation (Memoria y Cuenta) vowed to immediately launch an all out effort to bring the diversion of commodities from the marketplace under control. This means that the government will more aggressively enforce laws against hoarding, continue to intercept contraband, and move to alleviate panic buying. There is growing pressure on the Maduro administration to also increase prosecutions of those committing currency fraud, including collaborators in the state bureaucracy, and to allow an independent audit of the currency exchange transactions. The state, backed by workers, is also expected to continue to support the resumption of production in plants abandoned by the owners.

3.3 The Economic Model Debate

Opposition leader Capriles is certainly correct that the current economic model is not sustainable, but what is that model? While there has been a great deal of state intervention in the economy and significant social investment through the missions under Chavismo, Venezuela is still largely a capitalist country, and food imports and distribution, despite the growing number of cooperatives and socialist or mixed run enterprises, is still mostly in private hands. So the debate is not over whether the economic model has to be changed, all are agreed, but in what direction: should there be more or less social control over the means or terms of the production and distribution of goods and services?

As Venezuelan philosopher Carlos Lanz points out, the problem of scarcity and price gouging is not an aberration but a symptom of what he has called “the model of speculative accumulation” being imposed by the major food distributors and importers, a model that drives the economic war and is the major cause of scarcity in this South American country today (Email communication, 01-19-2015). The so called “economic war” is not just something being waged by elements of the private sector. It is at least in part an expression of the contradiction between the interest of capital in maximizing profits and the interest of labor in a more equitable distribution of socially produced wealth and of the income generated by the nation’s natural resources. In this light, one can interpret management induced production slowdowns and hoarding as a form of leverage to obtain concessions from the state on the repeal of price controls and to rein in some of the legal guarantees that favor labor over private interests. Maduro has taken a firm stand on the answer to this question in his speech to the nation on January 17 and again on January 21, 2015: “It is necessary to further advance the model, not to change it.”

4. The Balance of Forces

The announcement by the MUD of a march that would enter the Chavista strongholds in Caracas on January 23 (a march that we indicated might not take place) drew a quick response from the mayor of Caracas,Jorge Rodríguez: the MUD does not have permission to realize any sort of gathering in the municipality of Libertador this 23rd of January. “We will not permit demonstrations of a violent nature in the municipality of Libertador. How does one believe the opposition, that they are going to develop a peaceful demonstration if up until now they have not done this…. It is inadmissible, we have the obligation to protect the physical integrity of the inhabitants and the property” he emphasized. Rodríguez also indicated that the security forces are prepared for whatever irregular situation that might be posed by the opposition. “We have to assume as though it were an equation, that the opposition will behave in a violent manner.”

Historic memory probably plays some role in Rodríguez’s decision to deny permission to the opposition march to enter his municipality. On the 9th of April 2002, fedecámaras, together with the CTV called for a general strike to force the resignation of then President Chávez. The march calling for the general strike congregated on the 11 of April 2002 at the main headquarters of the PDVSA. From there the then president of of the CTV said in an impassioned manner: “I do not rule out the possibility that this crowd, this human river, marches to Miraflores to expel the traitor of the Venezuelan people” (see Jones, 2007, p. 319). They marched up to the areas near to the Miraflores palace with the permission of the then mayor of Caracas, Alfredo Peña who was part of the opposition. In hindsight, this march arguably had as its objective the creation of chaos, assassination, and eventually the justification of a coup d’état. On the heels of a violent attempt at extra constitutional regime change earlier last year, and amid rumors of an imminent coup, the municipality of Libertador has decided not to lend itself at this time to the contingencies of an opposition march that may harbor, however unintentional, similar golpista elements.

Both the Maduro administration and the MUD now seek to augment their respective bases of support especially among the undecided and disaffected voters who will determine the outcome of the upcoming parliamentary elections. The opposition has suffered divisions over the past year between the more moderate forces open to dialog with the government and committed to liberal democratic procedures, and the hardliners who want to defeat the Bolivarian cause even if it takes extra constitutional means. The MUD defeat at the polls in the nominal “plebiscite” municipal elections of December 2013 led to the resignation of the executive secretary of the MUD and a leadership vacuum. Just months later national polls indicated that the large majority of Venezuelans (88 percent) rejected the violence at the barricades. After these setbacks, it appears that the major players within the opposition, at least according to the new MUD executive secretary Jesús Torrealba, have regrouped and now seek to win seats in the upcoming parliamentary elections as part of an effort to bring about a change of government.Capriles has recognized, perhaps more than his colleagues in the MUD, the importance of winning over at least some of the traditionally pro-government electorate in order to garner enough votes to retake the legislative and executive helm of the liberal democratic state. One of the slogans that the MUD is presently using in this regard: “Chavista Comrades, Unite With Us.”

The Maduro administration, in the midst of an economic crisis exacerbated by plummeting oil prices, has been taking heat from both a determined opposition and Chavista dissidents who think he has been moving too slowly in advancing the transition to socialism according to the Plan de la Patria (2013 – 2019). Independent community media and a number of leading Chavista public intellectuals such as Luis Britto García, José Vicente Rangel, and Gonzalo Gómez have articulated an analysis that is not persuaded the government is principally responsible for the scarcity of basic goods, on the contrary, they express no doubt that there is an economic war being waged against the government. But as the keen observer and analyst of Venezuelan public opinion, President of Hinterlaces, Oscar Schémel points out, the government still has to communicate a stronger case, through deeds, that it can effectively deal with the economic crisis. If it can achieve this objective promptly, the government can shore up its electoral base in time for the parliamentary elections.

Another important factor in considering the current balance of forces is the civic military unity built by the late Hugo Chávez. This alliance was instrumental in reversing the coup of April 2002 and it ended the oil lockout and economic war of 2002-2003. This unity was demonstrated once again during the first quarter of 2014 when the guarimbas failed to gain a foothold in the popular barrios. These events indicate that without the support of the popular sectors the military is highly unlikely to intervene on behalf of imperial and oligarchic interests.

Perhaps most important to shoring up the government’s immediate fiscal position was the recent CELAC–China conference in Beijing and President Maduro’s twelve day international trip. Maduro has secured agreements with China (about 20 billion dollars in investments) and other countries that have given some needed oxygen to Venezuela’s federal budget. Although Maduro did not bring home an OPEC agreement, the trip at least set the stage for a meeting next week in Caracas of technical teams from OPEC countries with the goal of reaching “global consensus on petroleum prices.” At a time when the U.S. is imposing unilateral sanctions on Venezuela, Maduro’s trip has also fortified his relationships with a number of nations and raised the profile of Caracas on the world stage. Moreover, Venezuela has the strong support of allies not only in Latin America, but among the Non-aligned Movement countries as well.

While the images of long lines and empty store shelves are played over and over again in the international corporate media, there are other scenes that show another side to Venezuelan political reality. As the Worker-President Nicolas Maduro drove a bus through the streets of Caracas on January 17, upon his return from a twelve day trip abroad, he was greeted by well wishers at ten different points in the city. And as he walked to the National Assembly Building on the way to deliver his address to the nation on January 21, the streets were lined with cheering well wishers. There is indeed growing public resentment over the shortages and long queues as there was in 2002 and again in 2003. Nevertheless, in those cases popular power, at the critical hour, remained firmly on the side of the Bolivarian cause, despite the hardships caused by scarcity. The MUD is trying to capitalize on “the perfect storm” by whittling away at Chavista support for Maduro in the popular barrios, but this will be an uphill battle so long as the opposition retains the stain of the intensely unpopular April 2002 coup. As a number of political commentators have urged, it is most important now for Maduro to follow up on his announcements of remedies and reforms with more details and effective action if Chavistas are to achieve an electoral edge in the coming parliamentary elections. If the last fifteen years of the Bolivarian revolution are any indication of the future, then once again, just as during the coup of 2002 and the subsequent oil strike, the organized expressions of popular power will probably be decisive in determining the outcome of the present economic and political crossroad.

Note: Translations by the authors are unofficial.

See: Revolution, Counter Revolution, and the Economic War in Venezuela: Part I

References to Books:

Ciccariello-Maher, G. (2013). We Created Chávez: A People’s History of the Venezuelan Revolution. Durham: Duke University Press.

Coronil, F. (2011). “State Reflections: The 2002 Coup against Hugo Chávez.” In Thomas Ponniah and Jonathan Eastwood, Eds. The Revolution in Venezuela: Social and Political Change Under Chávez. Cambridge, MA: Harvard University Press.

Gott, R. (2011). Hugo Chávez and the Bolivarian Revolution. New York: Verso.

Jones, B. (2007). !HUGO! The Hugo Chávez story From Mud Hut to Perpetual Revolution. Hanover New Hampshire: Steerforth Press.

Kornbluh, P. (2003). The Pinochet File: A Declassified Dossier on Atrocity and Accountability. New York: The New Press.

Mancilla, A. S. (2014). El Pensamiento Económico de Hugo Chávez. Spain: El Viejo Topo.

Sanchez, G.(2012). LA NUBE NEGRA: Golpe Petrolero en Venezuela. CA: Vadell Hermanos Editores.

Wilpert, G. (2007). Changing Venezuela by Taking Power: The History and Policies of the Chávez Government. New York: Verso.