Welcome to the desert of the real
Our so-called “public opinion” focuses large part of its attention on electoral events, official appointments, statements by the principal leaders of political parties, disputes in the national and international media spheres, or on the polarized action of state institutions. For this reason, we shouldn’t be surprised by the continuous omissions and limitations that we have in our knowledge about the extraordinary economic crisis Venezuela is going through; the lack of consciousness regarding the economic restructuring, which has been underway in drip-drop fashion since 2013; and as a result of all this, the very weak level of popular interpellation vis-à-vis the government with regard to the economic program and corrective measures that could point towards a model that responds to the hardest hit of the population.
The noises and tremors of the intense political dispute we are living through prevent us from hearing the murmur of the prolonged economic earthquake that is shifting the tectonic plates of old rentier capitalism, and represents the material foundation of this crisis. Therefore, this kind of deaf politics is nothing more than politics in the desert. In the unfolding of this crisis, it’s not enough to know who will govern, but also how they will govern and above all under what business framework. Or, to put it more colloquially, how will the cake be divided? Who will bear the costs of the crisis?
Beyond the polarized rhetoric, the heroic murmuring, and the will to power, the course of history in which we find ourselves is also being determined by the rationality of capital, by the maintenance or increase of the average rate of profit, by the search for means of accessing the so-called “natural resources” of the country, by the economic and state elites’ overriding necessity to increase the accumulation of rents and profits, by the demands for greater juridical security for economic projects, or by guarantees of viability for short, medium, and long-term business ventures.
These dynamics and rationalities – which we don’t have the space to elaborate on here – are undergoing the conflictual process that we are living through, currently and in the times to come. Where does the population fit in this story? And what about our territories and ecosystems?
The “lifejacket” of public debt
Surely detailing the characteristics of this long crisis of Venezuelan rentier capitalism – which has brought us to this historic point of bifurcation of the model – merits more than a couple of lines. But this not part of our objective here. For the moment, it’s enough to say that we are in the midst of the confluence of exogenous and internal factors; a conjuncture of historical components with variables of social, cultural, political, geopolitical, and ecological factors that have entered into crisis, hand in hand with the economic sphere. The volatility and cyclical collapse of the dynamic factor of the Venezuelan economy – the oil rent, determined largely by international crude prices – converges with the accumulation of the model’s own internal limits: the structural blockages and inability to “sow the oil”[i], the historical effects of what we have called the three impacts of the Venezuela Effect (the first in the 1920’s, the second following the oil boom of 1973, and the third due to the commodities boom beginning in 2004, promoted by the “China effect”) together with the progressive erosion of productivity as well as the tendency toward the intensification of “natural resource” extraction, or the economic/geological decline in the sources of conventional oil, which are more profitable than the extra-heavy oil of the Orinoco Oil Belt (FPO)[ii].
All of these factors are fused with the renewed outbreak of political and social conflict that the country is currently going through – which worsens all of the ills of the oil-rentier model – as well as the global economic crisis (2008+), the rising geopolitical tensions and violence, the transformations in the world energy market, the metastasis of corruption in Venezuela and the collapse of formal institutions.
But here is a detail that we want to emphasize: in the face of the insufficiencies and vacuums left by oil – the great dynamic endogenous factor of the national economy – since the new collapse of global oil prices from 2014 onwards, the “life vest” of public debt is greatly expanding, which is accompanied by the sustained fall of international reserves (25.9% in 2015 and 32.8% in 2016), reaching their lowest level in 21 years (10,004,000 US dollars in the first semester of 2017).
According to ECLAC’s (Economic Commission for Latin America and the Caribbean) 2017 Economic Study of Latin America and the Caribbean, the gross external debt of Venezuela reached 132 billion dollars in 2016. In a May 2017 report, ex-Minister for the People’s Economy Oly Millán and Paulino Nuñez, who are members of the Platform for a Public Citizens’ Audit – which has the international support of the Committee for the Abolition of Illegitimate Debt (CADTM) – revealed that the total public debt (classified as internal and external) for the close of 2016 is 137.287 billion US dollars, which if combined with the financial debt of PDVSA reaches 181.038 billion US dollars.
To this we have to add three factors. First, the percentage distribution of this debt would be nominally 69.4% internal (resident creditors) and 30.6% external (non-resident creditors). However, it was already denounced several years back that the public internal debt is perfectly “externalizable” due to the fact that under the classification of “double denomination”, the holders of Venezuelan bonds who buy them in bolivars can demand repayment in foreign currency. This is a de facto dollarization of the internal debt in bolivars.
A second factor addresses the proportions of the debt, with existing estimates indicating that it lies somewhere between 20% and 80% of GDP. The third factor is very significant as it has to do with the high cost of Venezuelan public debt, fundamentally determined by the rating of Venezuela’s bonds, considered among the highest risk worldwide. These ratings by agencies like Standard and Poor’s or Moody’s Investors Service undoubtedly have a strong geopolitical dimension to the extent that they represent attacks against the Venezuelan economy, which cause terrible financial pressures forcing the country to allocate more and more resources of the ordinary budget just for debt servicing.
According to the National Office of Public Credit, Venezuela is scheduled to pay 20.677 million dollars in debt service this year, 18.883 million dollars in 2018, and 18.415 million in 2019, totaling nearly 58 million dollars in 3 years.
Irrespective of the debates about Venezuela’s ability to pay or the controversies about which figures are more reliable, the problem is not only the debt, but all that it entails in terms of international subjugation and economic restructuring of the country. Here David Harvey has characterized the “debt trap” as the fine art of the deliberate redistribution of wealth from the poor countries to the rich, which he called at that time the “new imperialism”.
The paths of economic restructuring and accumulation by dispossession
Debt can be considered as applying a remedy after the wound, but in reality it’s also a beachhead for initiating and driving forward a process of economic restructuring. Due to the effects of the global economic crisis in the country (2009 onwards), but fundamentally beginning in the period of crisis of the national economy (2013-present), a series of economic reforms have been advancing in Venezuela, which, more than a series of scattered and unconnected policies, have been configuring a new business framework.
The current president of PDVSA, Eulogio del Pino[iii], has called this business framework a “special regime of investment”, taking as a reference the FPO as a blueprint to be applied to the rest of the alliances and economic agreements to be negotiated and established. This special regime has been developed fundamentally as a solution to internal liquidity problems and as an adjustment favorable to foreign investors, by way of a series of policies of economic flexibilization and a broadening of the frontiers of extraction. To illustrate, we will outline some examples of these policies:
• Loans provided by transnational corporations (basically Chinese or Russian) who are investors in mixed firms in the FPO to their Venezuelan counterparts in exchange for imports of goods and services from the countries out of which these foreign companies are based.
• New statutes of majority private shareholding, particularly in petrochemical activities, as specified in the reform to the Organic Law for the Development of Petrochemical Activities (Decree No. 2,171, 12/30/2015).
• Guarantees for foreign loans received by Venezuela by way of direct payment with oil, as occurs with the lines of credit granted by China to Venezuela.
• On October 10, 2014, the Venezuelan government agreed to a restructuring of its debt with China – the “Fourth Protocol of Amendment” on the financing of the China-Venezuela fund – which alleviates the burden in terms of the number of oil barrels sent daily and the payment window. Practically a month after negotiating this restructuring (11/13/2014), the government decreed the creation of Special Economic Zones, which entail a radical liberalization of territories for accelerated “development”. The SEZ are a format adopted from the Chinese model beginning with the liberalizing reforms of Deng Xiaoping in that country. The capital principally involved in the territories declared as SEZ – such as the FPO or the Orinoco Mining Belt – is Chinese.
• Preferential exchange rates for oil companies participating in mixed firms in the FPO as a way of considerably lowering production costs and making these projects more attractive.
• Invitation to companies not only to participate in the ventures as shareholders, but now also as financiers, covering in reality the share that was previously provided by PDVSA (which in practice gives them a much greater level of political and economic influence over the extraction).
• Incentives for investment in extractive projects on the basis of the proposal to pay directly with the extracted commodity, with one part of the financing assumed by Venezuela, as proposed by PDVSA President Pdvsa Eulogio Del Pino to kick start “production” in CarboZulia, offering “high quality” coal as payment.
• The creation of quantifiable payment guarantees based on the certifying of natural resource reserves such as that outlined in the Magna Mining Reserve Project, which extends nationally.
• The liquidation of PDVSA bonds or national bonds at discounts reaching up to 70% of their value, with the objective of obtaining foreign currency rapidly, such as what took place with the sale of bonds of the state oil company through the Central Bank of Venezuela to Goldman Sachs in May 2017, granting a 69% discount.
If we are, in effect, facing a new economic policy on the national scale, this really represents a process of economic restructuring by dribs and drabs. In this way, while on the one hand they talk of the risks of Venezuela’s non-payment of its debt, on the other hand there are evident tendencies on the part of the national government to guarantee the fulfillment of its debt obligations, leading it to direct and formalize mechanisms for the mortgaging, use, and appropriation of our commons, territories, and labor power, in the interest of coalitions of foreign/domestic capital.
The new economic agenda of the coming years is being drawn up also on the basis of the one-off requests and expectations of foreign capital (Chinese, Russian, U.S., Canadian, etc.), which exerts power directly or indirectly over Venezuela largely by way of the public debt (external and externalizable). We are facing a new stage of accumulation by dispossession in the country.
The National Constituent Assembly and the historic dilemma of working-class Chavismo
This is the political-economic context in which the National Constituent Assembly (ANC) emerges and is formally established. In our opinion, the political process that is opening – beyond the juridical and normative questions that it entails – is a space of struggle, an event that opens up new scenarios, many of which are uncertain. It is from this angle that a part of the popular movement has taken up the ANC, for whatever its reasons. However, it’s not possible or sensible to omit or ignore the possibility of an authoritarian reordering of society (“pacification”) nor the formalization of this New Economic Policy, which has been under construction for several years now in Venezuela. This could be one of the probable results of the ANC’s actions.
In this way, if we take into account the current correlation of forces and the progress of this piecemeal economic restructuring, the framework of this “Refounding of the Nation” – as President Nicolas Maduro has called it – may be the work of transnational capital and foreign governments, who look towards the configuration of a governability model that guarantees the viability of the economic changes in process. The objective would be to overcome the most evident obstacles to capital or to amputate mechanisms of political auditing and division of powers in order to ensure that “National Security” and state interests prevail as well as to create frameworks for monitoring and “pacifying” society.
The announced extension of the term of the “plenipotentiary” ANC for two years reveals that the process could be a measured one (ruling out in the first place any shock therapy) – extensive, but sector-by-sector, hybrid, and mixed. Continuing advances in policies of deregulation and flexibilization, financialization, corporatizing and even subtle moves towards privatization (as is happening when foreign investors put up 100% of the capital in mixed public-private firms) can be accompanied by the formalizing and/or maintenance of certain policies of social distribution of rents, the acceptance of laws favorable to LGBTQ groups, decrees for national parks and cultural inclusion – or any number of juridically cosmetic proposals that deep down don’t affect at all the course of economic restructuring and accumulation by dispossession. This hybrid form of capital accumulation we have called “mutant neoliberalism”.
Evidently, this process will navigate the turbulent waters of seesawing internal political conflict, the world economic crisis, and the very aggressive threats from the US government[iv]. But in our view, if this new framework of business-governability is consolidated, it would end up tumbling the fundamental pillars of the political process known as the Bolivarian Revolution: energy nationalism, radical popular democracy, anti-neoliberal economics favoring the poor, and national sovereignty.
In the face of this situation, it seems that the principal actor that could confront and stop these regressive tendencies is working-class Chavismo itself: the grassroots political subjectivity that constituted itself not only on the basis of the historic struggles of the Venezuelan people’s movement, but also growing out of a wealth of experiences of street mobilization, territorial social management, debate, and ideological reflection, all of which served to steel Chavismo in the furnace of social struggle. These experiences have gained their meaning from the above-mentioned pillars, which are collapsing day by day. In this way, vital questions and dilemmas are emerging, which are becoming more and more intense and unavoidable: What will be the role of this popular, counter-hegemonic Chavismo in the face of the historical bifurcation we find ourselves in? What will be its political weight and will during the political process inaugurated by the establishment of the National Constituent Assembly? What will be its wager in the face of the potential approval of a new Magna Carta? What will be the implications of the new constitution’s rejection or approval? These aren’t questions that fall on deaf ears, above all in the face of what may be the final card in the hand of the national government.
[i] The slogan of “sowing oil” (sembrar el petroleo) was coined in Venezuela in the 1930s to describe the developmentalist project of reinvesting wealth obtained from oil rents in industrial and agricultural production. Over the past century, Venezuelan governments – no matter their ideological stripe – have used the slogan, including the Chavista governments of the 21st Century.
[ii] The Orinoco Oil Belt, a 600 km stretch along the Orinoco River in the east of the country, contains the largest proven petroleum reserves on the planet. The variety of oil is extra heavy crude, rendering it more expensive and technologically challenging to extract and refine.
[iii] On August 24, 2017, Del Pino replaced Nelson Martinez as oil minister, with the latter taking over as president of PDVSA.