Professor Pasqualina Curcio has written extensively about Venezuela’s economy during the Bolivarian Process. Her published work includes numerous articles, as well as the books The Visible Hand of the Market: Economic Warfare in Venezuela and Hyperinflation: An Imperial Weapon. In Part I of this interview, Curcio explained how the US blockade compromises the country’s sovereignty and damages the economy. In Part II she talks about policies that should be applied in the face of this unconventional war directed at the Caribbean nation.
While Venezuela still suffers from inflation, the situation has improved considerably in the past year. Some say that a bigger supply of foreign currency from Venezuela’s Central Bank [BCV] is the key factor explaining the trend. What do you think?
The inflationary curve hasn’t decelerated because there are more dollars available than before. In fact, inflation in Venezuela has decelerated because the attack on the bolívar is less intense now.
Neither the number of bolívares circulating nor the supply of foreign currency are key factors accounting for Venezuela’s inflationary trend. The bolívar’s fluctuations depend on the overt attacks coming from the US.
To the question, “Why has the inflationary spiral been contained?” I would answer: the attack on the bolívar slowed down, and that is why inflation is somewhat lower.
There are several factors that help explain this. First, as we said before, imperialism does not care about the inflation curve per se nor about the exchange rate. Its aim is to deteriorate the living conditions of the Venezuelan people, and thereby promote social and political instability. Now that the purchasing power of the Venezuelan salaries has dropped 99%, the margin to continue attacking the bolívar narrows. However, there is another factor: the dialogue and negotiation between the government and opposition sectors linked to imperialism.
However, we are not yet out of the woods. Imperialism could intensify its attack against the bolívar at any moment, if its leaders consider it opportune. That is why pegging the bolívar to the Petro [Venezuelan cryptocurrency] – including salaries and the national budget – remains a good idea. We must be prepared to neutralize future attacks.
Beyond indexing the Venezuelan economy to the Petro, we believe that backing up the bolívar with gold would be an important step towards currency stabilization.
In short, the deceleration of inflation is not the consequence of restrictive monetary policy, nor is it related to the greater availability of US dollars. It’s the outcome of a shift in the imperialist policies, and it is temporary. That is why we argue for reorganizing the country’s monetary policy and pegging the bolívar to the Petro.
Venezuela is one of the countries in the hemisphere where the rich pay the lowest taxes. In a nation where the gap between the rich and the poor is growing rapidly, what fiscal policies should be applied?
Whereas the rich in other countries in the region pay around 40% of their earnings, here their tax burden does not exceed 13%. But I would go further: of that 13%, only two points correspond to actual income tax. The rest is value-added tax [VAT]. Yet the VAT is a regressive tax because all Venezuelans have to pay it regardless of their income.
We have made several proposals that point toward what we call “a tax revolution.” The first one is to lower the VAT. This is a neoliberal tax, leftover from the Fourth Republic [1958-1999]. Reducing the VAT has to go hand in hand with increasing taxation of wealthy individuals and corporations.
Another important policy change that we are promoting is doing away with the prohibition of double taxation. As it is right now, transnational companies operating in Venezuela do not pay taxes here. This exemption is a neoliberal policy left over from the 90s, and it is truly backward. We also propose taxing extraordinary profits.
Our tax revolution is simple: it proposes that those with the highest income – the bourgeoisie and corporations – should be the ones who pay the highest taxes.
Instead, what we have seen in recent years is quite the opposite: custom duties have been eliminated and the proposed Organic Law for Special Economic Zones would reduce income taxes to zero for those who are investing in such Zones. Supposedly this will attract foreign investment.
However, it is an illusion to think that Venezuela’s economy will recover through foreign investment. Why do I say this? When we examine an economy’s recovery, we have to look at the whole picture. Here the capitalist class obtains extraordinary profits by various means: first, low wages come with high profits; second, the bourgeoisie does not pay taxes and so doesn’t contribute to the national budget; and third, corporations don’t have to pay customs on imports. Can this logic really benefit the country’s economy?
As it is, the state does not have the capacity to redistribute wealth and provide basic services to the population, because it has a very small budget. It’s obvious that the taxation scheme must change.
The government claims that an “economic recovery” is underway. What can you tell us about this?
Unfortunately, the BCV [central bank] does not release official data, and in order to make a precise and rigorous analysis regarding the causes of the so-called “economic recovery,” we would need access to that information. The BCV issued GDP figures up to 2019, and disaggregated GDP up to 2017.
However, President Maduro announced that there was a growth of 4% in 2021. We believe that this recovery is mainly due to increased oil exports. In November 2021, the country's oil production was approximately 700 thousand barrels per day [bpd, according to OPEC], and in December the President announced that production stood at one million bpd.
Recall that production reached a nadir of less than 400 thousand bpd in August 2020. Moreover, Venezuelan oil went as low as $20 per barrel in 2020. Now the barrel is close to $80 in the international market, although that’s not necessarily the price of Venezuelan crude. Both the growth in production and the high oil prices have helped.
Furthermore, the increase in oil production and higher prices haven’t been offset by currency destabilization. That is because there have been fewer attacks on the bolívar.
When there is an attack on any currency, the exchange rate increases, which causes production costs to increase and aggregate supply to contract. In recent months, with the exchange rate remaining steady, aggregate supply and demand haven’t dropped.
High-end restaurants and bodegones [expensive stores] are popping up all around Caracas, and new luxury cars are a common sight here. Who benefits from this so-called “economic recovery”?
That is a question that must be asked in a revolutionary process like ours. The important thing is not only to grow – although we have to grow – but rather to see how the new wealth is distributed. In an inflationary scenario, with severely depressed wages, the new wealth is being captured by the bourgeoisie. It’s that simple.
Simplifying things greatly: if workers’ wages are 10 and the price is 100, then the profit is 90. If wages are 20, then the profit is 80. This is how capitalism works, and Venezuela continues to be a capitalist country. That is why wages are so important: if wages were raised, that would generate a fairer distribution of the new wealth.
We don’t have data on the distribution of wealth in Venezuela since 2017, but between 2013 and 2017 we saw the gap between labor and capital grow. Most likely this gap continued to grow after 2017, given the differential between the prices of basic goods, on the one hand, and wages, on the other.
In Caracas, you can see growing inequality: witness the many upscale restaurants opening their doors, while there are more and more barefoot children roaming the streets, as well as homeless mothers and elderly people begging. This is a recent phenomenon. It had not been seen in Venezuela for many years.
That is why I say that we cannot talk about an “economic recovery” without qualifying the claim. What is happening comes with a lot of inequality. We are scrutinizing it very carefully.
What does the Bolivarian Revolution teach – in terms of how to manage an economy – to all those who struggle to build post-capitalist societies elsewhere?
The Bolivarian Revolution, and other revolutionary processes, teach us that every time a pueblo decides to advance toward building a new economic, social and political model, capitalist interests will react: they will heed the imperialist libretto and attempt to weaponize the economy.
What is happening in Venezuela also happened in Nicaragua, the Soviet Union, Chile, and in other countries that sought to implement a socialist model. The libretto that imperialism applies is basically the same: an unconventional war the aim of which is to generate internal instability in both the economic and social spheres.
This goes hand in hand with a discourse that blames socialism for all the country’s problems. The enemy begins talking about supposed human rights violations and a “humanitarian crisis.” From there they go on to induce street actions and violence. All this is accompanied by diplomatic isolation. These are some of the moves in the playbook of how to carry out an unconventional war.
The economy is central to this kind of unconventional warfare. One of the key lessons to learn from historical processes, and from the Venezuelan experience in particular, is that the enemy has an economic arsenal that is truly deadly.
The imperialist arsenal has a key weapon in its big transnationals and monopolies, which can generate shortages and long queues. These queues are weapons of war.
The attack on the currency is another weapon, perhaps the most powerful one, since it generates a multiplicity of problems within the country: from inflation to the fall in production, from dollarization to the deterioration of wages.
Finally, the economic sanctions and the blockade are also powerful weapons in the imperialist arsenal.
That is why countries that attempt to move away from capitalist precepts should simultaneously prepare their defense. They will need to be able to neutralize the effects of such imperialist attacks. One key to doing so, is to build diversified economies that are not dependent on the US market and that are sovereign in a technological sense.
These are some of the important lessons we can learn from the past. However, I would add that the Bolivarian Process teaches us how a pueblo’s consciousness is also very important. The Venezuelan people went to school with Comandante Chávez. Chávez taught us who the real enemy is, how it behaves, what neoliberalism is, and so on.
Now, the Venezuelan people, the organized and mobilized working class, are better prepared ideologically. To neutralize the imperial attacks, it is necessary to have a political strategy, correct economic policies, and a conscious and mobilized pueblo.