In Defence of Rory Carroll and Venezuela's Persecuted Elite

Even in a regulated economy such as Venezuela, financial traders and the commercial elite, the same bourgeoisie which Carroll continues to cite as a reliable source on all things Venezuelan at the expense of engaging with ordinary citizens, have found a way of speculating and exploiting the economic situation whilst giving the proverbial finger to the majority of Venezuelans and the national government.

By Rachael Boothroyd - Venezuelanalysis.com

feria-navidea1-mercal.jpg

The government's Mercal markets have helped reduce infant malnutrition by 58% and boost food consumption in Venezuela over the last eleven years (Aporrea).
The government's Mercal markets have helped reduce infant malnutrition by 58% and boost food consumption in Venezuela over the last eleven years (Aporrea).
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This week was the very first time that, in spite of myself, I really felt that I should commend the Guardian’s Latin America correspondent, Rory Carroll, on his investigative journalism skills. To his credit, Rory’s latest article addresses an issue that quite frankly had slipped right under my nose – “Chávez's daughter posts picture of herself posing with dollars”.

This week in Venezuela the government signed more bilateral agreements with Argentina, confirmed that participatory democracy would be central to government policy in coming years, continued with registration for its “Knowledge and Work” mission in a bid to further reduce unemployment, and withdrew from the World Bank’s arbitration body, the ICSID, on the grounds that its rulings were biased in favour of trans-national corporations.

So involved in all of this had I become that I barely even noticed that 14 year old Rosinés had changed her profile picture on the social networking site Instagram, that is of course until Rory came to the rescue.

In order to save readers the unnecessary trouble of reading the article, I’ll provide the gist: Rosinés Chavez, Venezuelan President Hugo Chavez’s daughter from his marriage that ended in 2003, posted a picture of herself holding some $1 and $5 dollar bills on her Instagram profile. Rory Carroll says that this “angered” many Venezuelans due to the government’s controls over the acquisition of U.S. dollars through the state agency CADIVI, which currently limits their purchases to US$3000 per annum.

Despite the rampant sensationalism of the article, if you look hard enough there does seem to be a more serious, if somewhat unoriginal, complaint directed against the Venezuelan government: mainly that the economy is so heavily regulated that it not only severely restricts civil liberties but also, horror of horrors, the cash flow of international business. This economic attack is certainly worth addressing, not least because it is one of the most frequent charges levelled against the government by the mainstream press.

In international media reports, the government’s decision in 2003 to implement foreign exchange controls and fix the bolivar to the U.S. dollar (currently at 4.3/1) is presented as autocratic madness, some kind of pre-age protectionism that died along with the Soviet Union and that has been foisted upon an unwilling population. As often happens with the (mis)representations of Venezuela in the mainstream press, this picture is not exactly in sync with reality.

If you visit the historic centre of Caracas, you will see dozens of street hawkers who gather daily within ten metres of the government’s National Assembly, selling everything from traditional Venezuelan sweets to jewellery and pirate CDs. Around half a dozen of these street hawkers will also offer to buy dollars at the black market rate. They do this freely, even openly, and I have yet to see them bundled into the back of a van and escorted to the local gulag (or as they are referred to in Venezuela, humanist prisons where inmates can learn a trade or to play musical instruments).

Evidently, the economic measure wasn’t implemented in order to repress great swathes of the Venezuelan population or to further stoke the elite’s ire for the Chavez administration; so what was it actually for? Well, mainly to stem mass capital flight following the devastating 2 month long opposition-led lockout of the oil industry in 2003, reportedly causing US$20 billion worth of damage to the national economy.

The Chavez administration is certainly not the first Venezuelan government to pursue such an economic policy when faced with the problem of capital flight en masse; in the midst of the 1980s debt crisis, the government of Luis Hererra implemented both exchange controls and a two-tiered exchange rate in 1982 and 1983 respectively.

Traditionally a dumping ground for cheap U.S. imports and with an economy that for the best part of a hundred years has been dominated by petroleum, the government’s pegging of the bolivar to the dollar and the subsequent devaluations of the bolivar in 2005 and 2009 were designed to boost national investment, aid local and national production, which has been unable to compete with a flood of cheap imports from the North, prevent capital flight and to make exports more competitive on the international market.  As the government also began to look towards other trading partners, such as Russia, Iran and China, and to create regional trade initiatives such as the ALBA (Bolivarian Alliance for the Peoples of our America), the move was simultaneously designed to lessen the country’s dependency on the dollar and to begin the construction of a “multi-polar” world.

In conjunction with measures such as funding agricultural and textile cooperatives, providing them with credit, training, tools and nationalised land and increasing bilateral projects and nationalising key industries, the move has had some success in increasing the production of domestic goods.

Foreign investment from other developing nations such as China and Brazil has increased and is evident through a series of mixed projects, including the Venezuelan-Iranian car manufacturing company Venirautos in Maracay, where cars are currently produced with around 35% Venezuelan parts. Agricultural cooperatives also currently provide their produce to the government’s Bicentenario national supermarkets and Mercal network, where the population can access non-branded food items at up to 50% below the market price. Having nationalised the Venezuelan cement industry in 2008, the government has also seen a 10% rise in cement production in the past year alone, a crucial increase for the national house building programme that was announced by the state last year. These are just but a few of the ways in which government policy has successfully managed to diversify the nation’s highly dependent economy, although real structural change will obviously not happen overnight.

Black Market Bourgeoisie

Evidently, the fact that a parallel exchange rate has been created on the black market as a result of the government’s exchange rate controls is of course problematic, especially in terms of its negative impact on inflation. Whereas the government sets an exchange rate of 4.3 bolivars to the dollar, the latter can currently be bought on the street for a price of up to 9 bolivars. In a country which continues to import most of its goods, having the retail price of these imports calculated at this black market rate by commercial entrepreneurs can see prices for goods such as shampoo and deodorant reach exceptionally high levels for the average Venezuelan. Although the government made an attempt to deal with this by implementing a two tier exchange in 2010 which differentiated between “essential” and “non essential” goods, with the latter being imported at a higher rate, this was removed as the economy began to recover last year.  Despite these obvious issues, the government has managed to keep inflation at a respectfully low level whilst crucially improving living standards for the majority of the population. Although currently fluctuating around the 27% mark, this represents a historic low in Venezuela, where inflation averaged 50% between 1988 and 1998 and hit 103.2% in 1996 under the government of Rafel Caldera; just 2 years before Chavez took office.

An even more uncomfortable conundrum for Rory Carroll than how to go about diversifying a historically dependent economy might be: Who exactly is creating this parallel exchange rate, pushing it to twice the official rate set by the government and using it to their advantage to create maximum profit? Venezuelan financial traders and the commercial bourgeoisie of course. For the market does not possess its own cosmic energy or obey the laws of nature as many of its proponents would have us believe. More precisely, the market is driven by the hand that guides it; the traders, the stockbrokers, in short; the capitalists who continue to direct, perpetuate and profit from it, whilst simultaneously describing it as an autonomous entity and imbuing it with dynamic qualities in order to carefully detach it from any human agency or culpability. It is not the market which is “free”; but rather the “marketeers” who are free to operate how they want. Never has this held more true than in pre-Chavez Venezuela, and despite the state’s attempts to curtail the commercial bourgeoisie’s powers, it continues to act as if it were still a government in and of itself.

Just one instance of this can be seen back in 2010, when it emerged that certain Venezuelan stockbrokers had been buying local government debt in bolivars and selling it on abroad in the U.S. as a way of circumventing exchange controls and obtaining U.S. dollars. Driven by greed, the stockbrokers somewhat predictably then began to carry out fraudulent transactions in order to be able to buy more dollars - one of the factors which contributed to a sharp rise in inflation.

Nevertheless, we are still subjected to the familiar old adage that the market will regulate itself, and Venezuelan opposition candidate Maria Machado still continues (unsuccessfully) to try and sell the concept of “popular capitalism” to the Venezuelan electorate. “Popular capitalism”, a seemingly catchier version of the “responsible capitalism” that is currently being promised by Ed Miliband [ leader of the British Labour Party] in the UK, and everywhere else where the belief that “the market will regulate itself” still holds fast, in spite of all the evidence to the contrary.

Even in a regulated economy such as Venezuela, financial traders and the commercial elite, the same bourgeoisie which Carroll continues to cite as a reliable source on all things Venezuelan at the expense of engaging with ordinary citizens, have found a way of speculating and exploiting the economic situation whilst giving the proverbial finger to the majority of Venezuelans and the national government. The chances of them acting responsibly in the laissez-faire free for all that the opposition has in mind for the country is about as likely as Sarah Palin attending Fidel Castro's birthday party, yet this barely gets a passing reference in the majority of news reports.

Economic Goals

At the time of implementing the exchange controls in 2003, Planning and Finance Minister Jorge Giordani said that the government was pursuing the measure in order to “fulfil its economic goals”.

Clearly, there is a substantial divergence between the “economic goals” of the government and Rory’s pals. Whereas the government’s economic policy has been visibly centred around human development, the Venezuelan bourgeoisie’s prerogative has historically been to make as much profit as possible and repatriate it abroad.

It is no surprise then that Mr Carroll’s international business chums take issue with the government’s new financial direction and its challenge to the economic status quo; seething as they reminisce over Venezuela’s golden era when dollars came in, and more often than not, out of the country with more ease than a bird in flight and they could slip off to Miami at the drop of a hat. From what I can glean from the opposition press, it would seem that Venezuela’s persecuted elite has now been reduced to unimaginable levels of hardship; entire families in Altamira [an upmarket Caracas suburb] with access to just one Humvee and forced to spend their weekends at the designer malls in Chacao [another wealthy area of Caracas]and other bastions of communist activity.

However, it’s not all doom and gloom, and there is an upside to this hellish nightmare so readily depicted by the international press at every opportunity; and that is the fact that poor people can now actually eat and that Venezuelan farmers can now produce for national consumption and demand.

If you talk to the majority of people in the country’s barrios about the 1980s or the pre-Chávez era, you will hear heartbreaking stories about children being fed on spaghetti water to stave off hunger pangs, or just not being fed anything at all. I very much doubt that Mr Carroll has heard any of these stories.

I’ll always remember being told one by a friend as he recounted his experience of the 1989 Caracazo to me, of how his next door neighbour had taken part in the looting and had returned home with a rack of ribs.

The neighbour was seasoning the ribs and getting ready to barbecue them outside in the street, as many residents did with their newly acquired prizes, and he remarked; “Now I finally feel like a person”.

These are not the “many ordinary Venezuelans without enough dollars for trips or business” that Rory would have us pity in his article. These are the “ordinary” Venezuelans who previously didn’t have access to food or healthcare. These are the ordinary Venezuelans that continue to vote for and to benefit from the Chavez government’s policies, and they are the ordinary Venezuelans that never get a look in or a voice in the mainstream media.

Whilst the national bourgeoisie was busy plane hopping from Caracas to Miami, it was this reality that dominated in the country’s dirt poor barrios. It is also a reality that the international media avoid talking about like the bubonic plague. Just like they avoid talking about the Mercals in Venezuela, which can now be found right up in the shantytown’s hilltops, so that the country’s poor can have access to nationally produced staples like rice, beans, flour and meat at government regulated prices - an initiative which has helped to reduce the infant malnutrition rate by no less than 58% in Venezuela, and increase the population’s level of consumption by 26.8% in the past 11 years.

 I would like to hope that all of this is of some comfort to Marisel Ramirez, who is featured bemoaning the government’s control over the exchange rate in Carroll’s article; although I very much doubt it. Not least because a gentleman called Williams Prieto tried to explain these issues to her as a response to the comments that she had posted in the very same newspaper that Rory Carroll refers to. Unsurprisingly, he did not care to include Prieto’s comments in his piece for the Guardian.

In a world where free-market fanaticism rules the roost, it is understandable that any attempt to challenge the quasi-divine status of neo-liberal economic doctrine and curtail the absolute freedom of market forces is going to be met with furious backlash from the capitalist ruling class. It is just a shame that a newspaper with such a progressive history as the Guardian continues to employ Rory Carroll to act as a mouthpiece for these interests.