FRFI 167 June / July 2002
The US government objects to the Venezuelan government and wants ‘regime removal’. Why? Firstly this President is the first ever to openly side with the poor and attempt to deal with the poverty endured by 80% of the people. To do this means to challenge the existing system of economic plunder. So new policies towards the oil industry in particular, which provides 75-80% of export revenue and 40-50% of government revenue, had to be formulated. The new President took the initiative within OPEC to strengthen its ability to maintain oil prices, to the detriment of the US and other industrial importing states. President Chavez is committed to reduce poverty through universal education, health care and rural resettlement and development programmes.
As the world’s fourth largest oil producer Venezuela has been the object of constant US interference for the last century. Venezuelan oil was used to shatter the 1973 OPEC embargo and break OPEC targets. It is critical for US policy. The surge in US oil imports, from 30% of domestic consumption in the mid-1980s to 54% last year, leaves the US economy reliant on outside sources. Venezuela is the third largest supplier to the USA, providing 1.3 million barrels a day. The political conflicts in the Middle East make oil from the Americas vital. Democracy in Latin America has always been disposable for US imperialism. It is now even more dangerous as an obstacle to easy access to oil supplies.
President Chavez has thus sought to establish a regional ‘Bolivarian’ group to restrain US influence, developing strong relations with the Cuban people and condemning US support for Colombian state terrorism (Plan Colombia). The USA was further frustrated when on 1 February 2001, Chavez placed civilian statesman Jose Rangel as head of the nation’s armed forces, after it was discovered that some of the military establishment were conspiring with Colombia’s vicious AUC terrorist organisation to form paramilitary death squads in Venezuela. In August 2001 it was announced that the US mili- tary mission at the country’s main army base would be closed. Cuba and Venezuela signed an Agricultural Co-operation Agreement under the auspices of the UNFAO, whose director Jacques Diof called it the first example of ‘South-South’ co-operation. The October 2000 agreement to provide 56,000 barrels of oil a day to Cuba on preferential terms infuriated the US.
The contradictions in the reform
Chavez has thrown his weight against the ‘Washington consensus’: ‘the poison we carry within us’ as he called it, but only to the extent that he wants ‘fairer terms’ on which to deal with the USA. He was delighted to learn that foreign direct investment in Venezuela had increased by 29% in 2000 to $4.1 billion, from the $3.2 billion of 1999. This happened as the price of oil fell to $10 a barrel. Nevertheless, this investment is still below that of 1997 and 1998, the year Chavez was first elected. Direct non-oil related investment was $449 million in the first five months of 2001, 83.4% more than over the same period in 2000. The US, Netherlands and Spain are the main investors. However, with the economic slowdown and the ‘November measures’, 49 economic laws restraining private enterprise, new capital will be harder to come by. Capital is invested to exploit labour. Ameliorating exploitation will not attract capital! Venezuela is dependent on investors and markets that can only expand at the expense of the poor.
The poor demand action
President Chavez inherited a $21 billion debt in state wages and pensions. The average income per head had been declining by 1% per annum since the early 1980s. Previous governments had refused to meet the needs of the masses (see FRFI 152). As a result of Chavez’s efforts, and medical support from Cuba, the infant mortality rate has fallen from 24 to 17 per 1,000 live births since the new government came into office. The official urban unemployment rate fell from 18% to 14% by August 2001. Chavez promoted educational reform which schooled over 1 million children for the first time and doubled investment in education; introduced a large-scale micro-credit programme for the poor and for women; reformed the tax system which dramatically reduced tax evasion and increased government revenue; and tripled literacy courses.
At the visit of President Castro in August 2001, as at all events addressed by Chavez, thousands of the poor attend holding scribbled notes and letters to him, appealing for individual help in every way, for homes, jobs and medical help that the state cannot provide. The downturn in the world economy during 2001 and the 11 September events saw oil prices falling to $19.37 by 6 November, below OPEC’s aim of $22-28. Thus oil revenue in 2000-1 was $13bn, in 2001-2 only $8bn.
On 13 November 2001, after pressure from the masses, President Chavez, bypassing the legislature, announced 49 economic laws, causing great anger in the ranks of the private sector and its political representatives. These laws will enable the government to determine land use, irrespective of market conditions. They increase royalties paid by private, notably US oil companies from 16.6% to 30% on new investments, and require a minimum 51% state share in joint ventures. A fisheries law aims to help traditional fishermen, regulating fishing businesses and enforcing taxation. These steps put into practice the new radical constitution – a nasty pill for imperialism that it wants to be rid of.
But reforms like these need higher oil prices. As a result of continuing uncertainty in oil prices, on 12 February 2002, and with IMF approval, the state budget was slashed by $2 billion to $24 billion. The GDP is $110 billion. State debt rose 1% to $8bn, as oil prices fell to $16 per barrel. Central bank profits, VAT reform, a new bank debit tax and other changes were to be employed to support state spending at this reduced level. Spending cuts will affect regional and municipal governments. The currency band system was replaced with a ‘dirty’ floating rate with a new reference price system set by the central bank. On 18 February, the first day of a new system of trading, the bolivar fell 23%, stoking fears of inflation. Interest rates shot up as liquidity contracted. The economy’s rating for investors was lowered. All this threatened the middle class as well as the poor. The limit to President Chavez’s reforms is clear.
The rich demand action
In July 1999, Luis Garcia Morales, then Captain of the National Guard created a ‘Patriotic Junta’ to defeat Chavez, admitting that it discussed assassination. The right wing has been reconstructing its political fronts, using a new party, ‘Primero Justicia’, founded to attract the young middle class. The Chamber of Commerce seized upon the November measures to call a 12-hour stoppage against the Chavez government on 10 December. It arranged marches of the middle classes on 23 January and 27 February 2002. In February the head of the PDVSA (state oil industry) was replaced to reinforce government policy to stop the trend towards privatisation. The privileged managers of the oil industry threatened to strike against the changes. US oil companies Chevron-Texaco and in particular Exxon Mobil and Conoco, which worked closely with the old board, objected to the new royalty payments. Rear Admiral Carlos Molina became the fourth senior officer in two weeks to demand the President’s resignation, joined by General Nestor Gonzalez in April. The labour aristocracy (the CTV Union) signed a 10-point agreement with the Chambers of Commerce agreeing with the Catholic church ‘to reduce poverty not by redistribution but by increasing productivity and increasing wealth’. This means increasing the rate of exploitation thereby expanding the production of surplus value for private owners and their gang.
With no political party to win an election the bourgeoisie now resorted to posturing with its little ‘Bonapartes’. Press speculation about a ‘bloodless military coup by installments’ by the air force and navy dissidents continued.
Preparing the 11 April coup
While the unholy alliance between the Chambers of Commerce (the millionaires’ club), the high earners in the CTV ‘trades union’ and the Catholic church was being cemented, senior military, political and labour aristocratic officials made a series of visits to Washington, seeking approval for the removal of Chavez. Here they either met Otto Reich or members of his team. This US Assistant Secretary of State helped organise the terror campaign against the Nicaraguan Sandinista government. He protected and sought asylum in the USA for terrorist Orlando Bosch who, together with Luis Posada Carriles, was responsible for the bombing of a Cuban civil aircraft with 73 passengers.
By November exchanges between US officials and plotters were so regular that, for appearances sake, the US ambassador asked the US military to stop them. Unlikely given President Chavez’s later condemnation of US bombing in Afghanistan.
At the end of February a six week campaign of strikes and protests was started by the CTV and the managers of PDVSA against the government’s anti-privatisation steps. Oil shipments to Cuba were blocked. Nevertheless, the strike was losing steam despite two killings on 5 April and assaults on employees trying to work on 9 April. For ‘two weeks e-mails circulated containing detailed plans of the confluence of events – the impact of the PDVSA stoppage, the business-labour strike, and the moment when the armed forces would step in – and how they would lead to Mr Chavez being toppled’ (Financial Times 13/14 April). The precipitating event seems to have been the call for an oil embargo to the west by Iraq and Libya on 8 and 9 April (most of Iraq’s oil goes to the USA) in response to the Israeli assault on Palestine. Exceptionally high deliveries of oil to the commercial stock and US strategic oil reserve, to offset losses from Venezuela during the week after the coup attempt, indicate a well-prepared plan.
Some TV channels recorded statements from the military plotters a few days before the coup, ready for broadcast. Molotov cocktails were found at the offices of the opposition Democratic Action Party on 10 April.
Chavez has exposed and can now legitimately clear out the most dangerous opponents of democracy in Venezuela. His opponents however are already re-organising, determined to defeat him. Under threat of trial for conspiracy Carmona has fled to the Colombian embassy in Caracas.
Alvaro Michaels
