Venezuela’s Chavez Suggests Switching Part of Reserves to Euros, Asks for Funds for Agriculture

President Chavez added specificity to the on-going controversy about his request for the Central Bank to loan up to one billion dollars to farmers. Also, he suggested that the Bank keep a part of its monetary reserves in Euros.

Venezuela’s President Hugo Chavez added specificity to the on-going controversy about his request for the Central Bank to loan up to one billion dollars to farmers. Also, he suggested that the Bank keep a part of its monetary reserves in Euros.

During his weekly television program, Venezuelan President Hugo Chavez read from the Constitution and other law books to back up his argument for central bank financing of agriculture development programs.
Photo: Venpres

Caracas, Venezuela. January 11, 2004 ( During his weekly television program, Venezuelan President Hugo Chavez reiterated his request to the central bank of Venezuela to set aside up to a billion dollars to provide loans to farmers as part of a national agricultural development plan.

Chavez emphasized that the requested money will be paid back. “We are not asking them to give money away… the money will be paid back with interest,” said the President.

“We are defending our producers and consumers here. It is unpardonable that we must wait for foreign ships to arrive in our ports so that we can eat some black beans and chicken drumsticks,” Chavez said.

Venezuela imports 70% of the food it consumes. As a way to lower the country’s dependency on imports, the government has implemented an aggressive program to develop agriculture. Through the Land Reform Chavez has sponsored, thousands of acres of public land have been transferred to farmer’s cooperatives. Along with the land, farmers receive low interest loans, machinery and technical support from the Ministry of Agriculture.

Chavez suggested several options for how the central bank could lend money to the farmers without breaking any of the bank’s laws. The President accused the bank’s board of directors of acting under the influence of neo-liberal economic theories.

The President’s request for central bank money has been supported by the National Assembly, where his party holds a slim majority. Opposition media and leaders, however, have repeatedly accused Chavez of attempting to take over Venezuela’s independent Central Bank and that turning over one million dollars of foreign reserves to the executive would not only be illegal, but would also cause massive inflation.

Venezuelan President Hugo Chavez talks to a woman from the audience during his weekly television program on January 11 broadcasted from the Yaracuy state.
Photo: Venpres

Holding the Constitution on his hand, the Head of State indicated that article number three establishes that the State has among its essential aims to support the development of agriculture. “The Constitution is not speaking only about the Government but about the State as a whole, and the central bank is a fundamental institution of the State. The law of the central bank also establishes that the central bank can give credit to farmers or can give financial support for the agricultural development,” said Chavez.

Chavez’s arguments were endorsed by lawyer Jesus Caldera Infante who, during the program, presented legal arguments that require the central bank to accept the request made by the Executive.

Caldera argues that article 320 of the Constitution explicitly demands support for the development of the country. “The state must promote and maintain economic stability, to avoid any vulnerability in the economy, and to look after the monetary and price stability to guarantee the country’s social welfare.

For that reason, Caldera said, the refusal by the central bank to grant a billion dollars to finance agricultural projects is nothing more than “a subterfuge based on legal mambo jumbo and full of formalisms lacking any substance”. Caldera added that “when the central bank, as part of the State, inhibits agro industrial production, and when it denies financial resources for agriculture, it is making the country more vulnerable”.

Venezuela can take advantage of its favorable conditions such as fertile land, capable personnel, and other resources, and could thereby be exporting agricultural products instead of exporting capital. Caldera argued in direct reference to the central bank’s policy of leaving the growing international reserves untouched.

In the opinion of Caldera, it is lamentable that the board of directors of the central bank could pretend to turn their backs against the country and the Constitution. He hailed a protest by farmers in front of the central bank last week as “part of a hurricane of hope that’s sweeping the nation.”

President Chavez informed the country of his decision to ask the National Assembly to create a law which would facilitate that excess monetary reserves be used to finance development projects, “just as it is done in other countries of the world”.

Switch to Euros

Chavez said that Venezuela has lost money by keeping all of its monetary reserves in the declining dollar. He said that it would make sense to have part of those reserves in Euros.

Venezuela’s international reserves have grown from about 14 billion US$ in January of 2003 to 21.4 billion US$ in early January of 2004.