Venezuela: the battles to come

Venezuela Rally

2016 was a challenging year for the Bolivarian revolution. Since winning a majority in 2015’s National Assembly elections, the Democratic Unity (MUD) opposition has launched multiple attempts to overthrow United Socialist Party (PSUV) President Nicolas Maduro. These include attempting to nullify his election by claiming he is really Colombian; launching a recall referendum; manoeuvring to impeach him, and calling violent street protests. This has been accompanied by a campaign to isolate Venezuela internationally. Obama renewed a 2015 decree declaring Venezuela an ‘unusual and extraordinary threat to the national security and foreign policy of the United States’, attempted to expel Venezuela from the Organisation of American States and attacked the country’s participation in the Mercosur trade bloc. The past year saw crippling inflation and the depreciation of the bolivar currency, a slump in oil prices and devastating drought. Despite this the PSUV government allocated 73% of its budget to social expenditure, guaranteeing free health care and education, launching a network of local committees for direct distribution of subsidised food and built over 370,000 units of social housing. Sam McGill reports.

That the PSUV has been able to hold on to government is because the Venezuelan poor have yet again mobilised to defend the gains of the Bolivarian struggle for socialism. The US-backed MUD has also made significant political errors. Delays and fraudulent signatures stalled the strategy to hold a recall referendum in 2016 which could have triggered fresh presidential elections. Irregularities in the election of delegates from Amazonas state led the Supreme Court to declare the National Assembly’s decisions void until the issue was resolved, restricting the opposition’s legislative capacity. Cracks have widened in the MUD coalition: three major parties participated in renewed dialogue with the government, whilst the influential Popular Will and a breakaway group of smaller parties boycotted the talks. This led to a stalemate with the PSUV forced onto the defensive, unable to move forward and the fractured opposition unable to take advantage of their increased political power.

A crucial problem facing the Bolivarian movement is control over the economy. Venezuela is dependent on exporting oil (96% of export earnings), making it vulnerable to vacillating global oil prices and external financial shocks. A century of oil extraction has produced an entrenched culture of corruption. The revolutionary movement has not escaped this as state contracts with the discredited Brazilian firm Odebrecht demonstrate. The government awarded $11bn of construction contracts to Odebrecht between 2006 and 2015. The company is now under investigation in the US and Brazil, with its CEO sentenced to 19 years imprisonment. Proceedings have revealed Odebrecht paid $98m in bribes to secure contracts in Venezuela, pointing to widespread state corruption. Mega projects including the eight-mile Orinoco bridge, a bridge and tunnel across Lake Maracaibo and an intercity railway system remain frozen.

Oil extraction has resulted in an acute dependence on imports, undermining agricultural production and industrial development, driving rural to urban migration. Odebrecht’s failure to complete projects in rural Venezuela has set back plans to develop the infrastructure needed to reverse this pattern. 60% of land remains idle in the hands of large estate holders. Despite decrees to give deeds to landless small farmers, 50,000 land dispute cases remain backlogged in the National Land Institute which has recently been exposed for demanding bribes, again illustrating the difficulty in eradicating corruption in the very institutes tasked with facilitating revolutionary social change.

Reliance on oil extraction binds Venezuela to the dollar-dominated global market. Prices fell to $24 a barrel in early 2016, while the state budget was set at a $40 benchmark, creating a serious short term budgetary crisis. Consequently Venezuela’s international reserves dipped to $10.9bn. Shortage of dollars meant imports dropped by 40%. Vigorous efforts by Venezuela led to December’s OPEC deal to cut international oil production, rallying the price of Venezuelan crude to nearly $45 a barrel. This provides much needed respite, but does not fundamentally change the dependence on oil exports. As in other financially oppressed extraction economies, there is a battle over currency. Inflation hit 180% at the end of 2015 (no figures have been released for 2016). Whilst currency controls set the main official exchange rate at 10 bolivars to the dollar, the currency lost 55% of its value last November with the unofficial exchange rate hitting 4,000 bolivars to the dollar.

Oil revenue is received in dollars, which mainly come from PDVSA (the national oil company). The national currency, the ‘bolivar fuerte’ is used to pay wages, pensions and benefits. Meanwhile dollars are sold at an official rate to the local capitalist class for approved imports. The middle class, receiving their income or business revenues in bolivars, have no direct access to dollars, and are driven constantly to exchange bolivars for dollars. This contributes to the bolivar’s spiralling depreciation, and so creates further pressure on the working class to trade their bolivars for dollars. In effect the imperialist dominance of the dollar sees the class struggle in Venezuela appearing as a financial struggle between currencies. The resulting chasm between official and unofficial exchange rates produces a plethora of schemes to turn a profit through currency fraud.

The government periodically raises the minimum wage, increasing it by 50% in January. However the value of wages and food vouchers are constantly outstripped by inflation. As the increased supply of bolivars doesn’t correspond to an increase of dollars, nor an increase in the production of domestic consumer goods; a rise in wages is quickly followed by a rise in consumer goods prices. Although subsidies aim to protect the poorest, there is widespread hoarding and speculation in food, medicine and fuel, whilst smuggling exacerbates the problem. Many Venezuelans have turned to ‘bachaquerismo’, queuing for hours to buy subsidised products to resell at unofficial rates to supplement their income, resulting in shortages at state-run supermarkets and astronomical prices on street stalls. As fraud investigations into the former heads of the Venezuelan Food Corporation and Abastos Bicentenario state supermarket chain illustrate, it is not just small-scale street vendors playing the speculation game.

In 2016 an estimated 980,000 litres of fuel was smuggled out of Venezuela each day over the Colombian border to be sold at triple the price. Consequently PDVSA has begun charging for petrol in dollars and Colombian pesos along the border. The government estimates 300m bolivars have been lost to a circular scheme that sees bolivars traded for Colombian pesos at devalued rates in border towns, exchanged for dollars at much higher official rates at the Colombian central bank, then smuggled back into Venezuela and exchanged for bolivars at the soaring unofficial rate or used to buy subsidised goods for resale at exorbitant profits. December’s decision to close the border, recall 100 bolivar bills and issue new currency notes temporarily boosted the bolivar, nearly halving the unofficial rate. However such measures, whilst bold and defensive, do not resolve Venezuela’s currency conflicts.

The collapse in oil prices has forced Venezuela to rely on international finance. Chinese loans have been integral to Venezuelan planning for nearly a decade. China has loaned Venezuela $62bn since 2007, investing around $2.5bn a year in infrastructure. In January 2017 Venezuela issued $5bn of sovereign bonds at a 6.5% interest rate, seeking hard currency for imports. Meanwhile in November PDVSA closed a deal with bondholders to exchange $2.8bn of bonds due in 2017 for $3.4bn of new bonds due to mature in 2020. The deal provides just under $2bn of immediate cash relief, but bumps up overall bond payments between 2018 and 2020 by almost $3bn. To date, Venezuela has continued to pay interest on its bonds, however debt dependence leaves the nation exposed to global markets and fluctuating oil prices.

Despite the Bolivarian revolution holding presidential power for 18 years, Venezuela remains a capitalist country. The private sector’s share of the economy increased from 65% to 71% between 1999 and 2011. Particularly crucial is the import and distribution network. In 2016 the private sector accounted for $11bn of imports (60%) whilst the public sector was responsible for $6.8bn. Dollars at the preferential rate are handed to the private sector for imports but it is far more lucrative to resell the dollars at the rocketing unofficial rate, drawing up fake invoices for imports that were never bought, or to import the goods at subsidised rates but sell them on the unofficial market for several times the import cost. In this way, at no extra cost, the wealthy can increase their claims on domestic resources and further enrich themselves.

Private control over food plays politics with the stomachs of Venezuelan voters. The Polar corporation is the country’s biggest private food chain and controls around half of all distribution. Its millionaire owner Lorenzo Mendoza backs the MUD and has been exposed numerous times for generating production stoppages and hoarding, promoting scarcity particularly around elections. Only ten of Venezuela’s 34 banks are publicly owned and the private sector controls around 69% of total banking sector assets. Following the announcement to recall 100 bolivar notes, cyber-attacks crashed Credicard, the nation’s main digital banking system, resulting in chaos in the run-up to Christmas. Private bank ‘Occidental Descuento’, which owns considerable shares in Credicard, was implicated in the attacks.

Venezuelan revolutionaries have their work cut out. There are no quick fixes. Whilst the Bolivarian revolution needs to wrest control of imports and distribution, this must not result in a total collapse of the food supply. Meanwhile oil dependence can only be counteracted by longer term development of industry and agriculture. Such responsibility can’t simply be placed in the hands of a state ministry without a massive drive to root out corruption. Essentially it comes down to challenging the private control of the economy and dismantling the old state, building new structures to direct the economy in the interests of the Venezuelan working class, poor and peasantry. A formidable task.

The Bolivarian revolution has begun this construction, propelling an explosion in participatory democracy. Hundreds of thousands participate in 45,000 communal councils which, alongside cooperatives and enterprises of social production, connect to form 1,500 communes. Cooperatives and communal enterprises run a multitude of local production initiatives, from urban organic farms to local bakeries, small scale ironworks and brickworks. This grassroots democracy and productive organisation has the potential to provide the building blocks of a new socialist society. For example, last year saw over 29,400 productive units in 180 urban areas produce nine thousand tonnes of fresh produce for direct distribution in their communities. However the communal network has no direct legislative authority within the National Assembly. For the communes to develop beyond this would require a decisive battle with the pro-imperialist elite which has already shown its willingness to shed blood through coup attempts, oil lock outs, street violence and assassinations.

It is not clear that the PSUV is the political force able to lead this battle; rather it is a cross-class electoral alliance of different interests, containing revolutionaries alongside careerists who have grown rich through lucrative state contracts and influential positions. Up until now the PSUV has been desperate to avoid the civil war that could be unleashed through direct confrontation. However talks have once again broken down and whether through economic strangulation or violent coup, the opposition will fight tooth and nail to restore a neoliberal agenda.

This is the challenge the Bolivarian socialist project faces. Whilst the communes are indispensable, socialism cannot triumph by simply building up a communal network to edge out the capitalist superstructure. The stalemate cannot continue indefinitely: at some point there must come a battle for state power. What is taking place in Venezuela is a class war on every level, a struggle for socialism within the framework of an oppressed capitalist country dependent on exporting one of the most financially volatile resources on the planet. Venezuela’s revolutionaries have courageously fought to construct a new society despite all these limitations. In the battles to come, Venezuela demands our solidarity.

Fight Racism! Fight Imperialism! 255 February/March 2017