Venezuela: A Last Warning

By Jorge Martin
In Defense of Marxism

https://i0.wp.com/venezuelanalysis.com/files/imagecache/images_set/images/2016/05/6064094-3x2-700x467.jpgImports dropped by 18.7% in 2015 due to collapsing oil prices, forcing Venezuelans to queue up for government-regulated goods or purchase on the highly inflated black market. (Jorge Silva/Reuters)


The assault against the Bolivarian revolution has intensified in the recent days and weeks. Editorials and front pages in US and Spanish newspapers are screaming about hunger in Venezuela and demanding the removal of the “dictatorial regime”. Ongoing scarcity problems have led to instances of looting. The right-wing opposition is attempting to trigger a presidential recall referendum, but is also threatening violent action and appealing to foreign powers, including in some case for military intervention. What is really happening in Venezuela and how can these threats be faced?

On Friday May 13th, Venezuelan president Maduro extended the “Economic Emergency Decree” which had given him special powers in January, and further decreed a 60-day State of Emergency which includes sweeping powers to deal with foreign military threats and to deal with problems of food production and distribution.

As was to be expected, the world’s capitalist media joined in a chorus of denunciation, screaming about a “dictatorship”, while one of the main right-wing opposition leaders, Capriles Radonski made a public appeal to disobey the decree. The threats, however, are very real. It is worth giving a few examples. A month ago,an editorial in the Washington Post openly called for “political intervention” by Venezuela’s neighbours. At the weekend, former Colombian president Alvaro Uribe, at a “Concordia Summit” in Miami, made an open call for the Venezuelan Armed Forces to carry out a coup or, failing that, for foreign military intervention against “the tyranny”.

The Venezuelan right-wing opposition has made repeated appeals for the Organisation of American States to use its “Democratic Charter” to intervene against president Maduro. They feel emboldened by the successful removal of Dilma Rousseff in Brazil and want to go down the same road as soon as possible, by any means necessary, legal or illegal. Influential Venezuelan right-wing journalist and blogger Francisco Toro (editor of the Caracas Chronicles) has just written an article openly discussing the pros and cons of a coup, which he says would be within the constitution and “The Opposite of a Crime”.

Today, the Venezuelan government reported violation of the country’s airspace by US military aircraft.

In an attempt to capitalise on the severe economic problems the country is facing, the reactionary opposition has been busy trying to create a situation of chaos and violence which would justify a coup or foreign intervention to expedite the removal of president Nicolás Maduro. There have been incidents of violence in Zulia and Tachira. There are constant, mostly false, rumours of looting and rioting.

A very serious crisis

I have been involved in the defence of the Bolivarian revolution for more than 13 years now, visited the country often and written about it on a regular basis. None of what I have just described is really new. Since the very beginning, when Chavez was elected in 1998, and particularly since the enabling laws in December 2001, the Venezuelan oligarchy and imperialism have been engaged in a constant campaign of harassment, violence, destabilisation, coups, lies and slanders, diplomatic pressure, economic sabotage, you name it, they have done it.

This time, however, something is different. On all the previous occasions, the revolutionary will of the Bolivarian masses of workers, peasants and the poor, has defeated the counter-revolutionary attempts to put an end to the revolution. This was the case even against the coup in April 2002 and then the lockout and sabotage of the oil industry in December of the same year, before the revolution was able to grant any real improvements in living standards. Those came mainly after the government was able to get full control of the state-owned oil company in 2003.

For ten years, the revolution was able to grant widespread reforms and massively improve the living standards of the masses. This was accompanied by a process of political radicalisation in which the late president Chávez and the revolutionary masses pushed each other forward. Socialism was declared as the aim of the Bolivarian revolution, there were wide ranging experiences of workers’ control, factories were occupied and expropriated, companies were re-nationalised. Millions became active at all levels in an attempt to take their future into their own hands. The motor force of the revolution and its main source of strength which allowed it to thwart all the attempts of the oligarchy and imperialism were the revolutionary masses, active, politically aware and engaged at all levels.

Of course, this period was helped by high oil prices (which reached a peak of over $140 a barrel in 2008). The government could use a massive amount of money from oil revenues to fund social programs which benefited millions (in education, healthcare, food, housing, pensions, etc). The question of taking over the means of production was not immediately posed.

Capitalism cannot be regulated

Measures were taken which limited the normal functioning of the free market capitalist economy in order to defend the revolution against the sabotage of the ruling class. These included foreign exchange controls (to prevent the flight of capital) and price controls on basic food products (to defend the purchasing power of the poor).

Soon, the capitalists found a way around this. Foreign exchange controls became a swindle and resulted in a massive transfer of hard currency from oil revenues directly into the pockets of unscrupulous capitalists. How did that happen? The government instituted a subsidised foreign exchange rate which was to be used to import basic products (food and medical supplies) as well as parts for industry.

Instead, private capitalists applied for preferential dollars which they then syphoned into the black market (which developed as an inevitable side effect of currency controls) or to offshore bank accounts. Thus we witnessed the incredible situation where imports in volume decreased, while imports in value (in dollars) massively increased. Marxist economist Manuel Sutherland has worked out the figures for imports of pharmaceutical products:

The red column represents pharmaceutical imports in millions of Kg, the blue column represents their value in millions of US$.
Source: http://www.rebelion.org

In 2003, Venezuela was importing pharmaceutical products at 1.96 US$ per Kg. By 2014 the price had reached 86.80 US$ per Kg. Imports had collapsed by 87% in volume, but increased nearly 6-fold in price! Similar figures can be produced for almost every sector of the economy in which private capitalists were receiving subsidised dollars to import goods.

A similar situation developed with price controls. The private sector, which still has almost monopoly control of food processing and distribution of many basic items, refused to produce anything covered by price controls. Thus, in order to bypass regulated prices for rice, for instance, they started producing flavoured or coloured varieties, which were not regulated.

This blocking of production on the part of the private capitalists forced the whole weight of producing and distributing basic food products onto the state. The state imported food from the world market, paid at world market prices with oil dollars, then sold it at heavily subsidised prices in state-run supermarket chains (PDVAL, MERCAL, Bicentenario).

For a period, while oil prices were high, this situation worked, more or less. Once oil prices went into freefall and the economy entered into a deep recession, the whole edifice came down like a house of cards. In 2014 Venezuelan oil was still 88 US$ a barrel. In 2015 it halved to $44. In January 2016 it had reached its lowest level for over 10 years, at $24.

Venezuelan money supply. Credit: www.tradingeconomics.com

In order to continue to pay for the social programs (including subsidised food products), the state started to print massive amounts of money which was not backed up by anything. Between 1999 and 2015, the M2 measure of money supply increased by over 15,000%!

Inevitably, the combination of massive flight of capital, the associated development of a huge dollar black market, the massive expansion of the money supply at a time of economic recession (2014 -3.9; 2015 -5.7%) inevitably caused hyperinflation. In 2014 the annual inflation rate reached a record 68%, but in 2015 it was even higher at 180% according to the Venezuelan Central Bank. It has to be pointed out that inflation for food and non-alcoholic beverages was even higher than the average.

The black market exchange rate for the dollar jumped from 187 Bolivars per $ in January 2015 to over 1,000 Bolivars per dollar now (having reached a peak of 1,200 in February this year). This is the exchange rate at which most prices of products are now calculated.

Another effect of this massive economic dislocation is the rapid depletion of foreign reserves:

Foreign exchange reserves. Credit: www.tradingeconomics.com

From US$24bn at the beginning of 2015, they have collapsed down to US$12.7bn now, according to the official figures of the Venezuelan Central Bank.

This dire situation has led to a sharp decrease in government imports of food and other basic products. Overall imports went down by 18.7% in 2015. This has created permanent scarcity of basic products in the state-owned supermarket chains selling them at regulated prices. In turn this has created a huge black market for these products. The root cause of the black market is scarcity, which is then aggravated by the existence of the black market itself. The massive difference created between the regulated prices (ever more scarce) and the black market, then acts as a huge magnet for products towards the latter. This is a comparison of the prices of some basic products as sold by bachaqueros (black marketeers) in the working class and poor neighborhood of Petare in Caracas in March:



Smuggled Flour in the Colombian border city of Cucta.
Credit: teleSUR 

The government has decreed increases in the minimum wage, several times, over the last two years, from around 10,000 Bs in November 2015 to 15,000 now (to which we have to add 18,000 Bs of the cesta ticket (food supplement). Still, if you have to purchase most of your weekly basket of products in the black market, this is not enough. Since state imports of food have sharply gone down, scarcity of regulated products has increased and people are forced to get a bigger share of their shopping basket on the free and black market.

Scarcity has led to massive corruption at all levels, diverting products from the official state-run supply chain onto the black market. From the family that queues for hours and then re-sells some of what they’ve bought, to the state supermarket manager who diverts whole lorries full of products (in connivance with the national guard officers guarding the establishment), to criminal gangs who hire people to queue for hours and buy whatever subsidised products are available (threatening and paying off supermarket workers, national guards, supermarket managers, etc), to the nationwide director of the Bicentenario state supermarket chain who diverts ship-loads of products.

To this we have to add a thousand and one different ways in which the private sector breaks the price regulation regime. Maize flour is permanently scarce, butareperas are always well stocked. Chickens are almost impossible to purchase at regulated prices, but roast chicken joints never lack them. Wheat flour can’t be bought at the official price, and bakeries use lack of flour as an argument not to produce the normal loaf of bread (the price of which is regulated), but then they are mysteriously able to produce any other variety of bread, cakes and biscuits, which we have to assume are made with flour. What’s behind this mystery? The fact that private wholesale producers do supply these establishments, but of course not at regulated prices.

Any attempt to clamp down on this situation by using repressive measures against black marketeers, though necessary, is bound to fail. The root cause is not thebachaqueros big or small, but the actual inability of the government to fund the supply of the necessary amount of products to cover the whole demand combined with the unwillingness of the private sector to produce and sell products at the regulated prices fixed by the government.

One of the main reasons for this unsustainable economic dislocation is therefore, the “natural” rebellion of the capitalist producers against any attempt to regulate the normal workings of the “free market”. This is the real meaning of the “economic war” that the Bolivarian government has denounced for many years. Yes, there is, undoubtedly, an element of deliberate economic sabotage aimed at hitting the working masses in order to undermine their support for the revolution. But at the same time it is easy to understand that from the point of view of the capitalists, if they can get a profit margin of 100%, 1000% or even higher in the black market, they will not sell, nor produce regulated products on which they can make only a very modest gain or sometimes a loss.

What has failed in Venezuela is not “socialism” as the capitalist media likes to highlight in their propaganda campaign. It is precisely the opposite. What has clearly failed is the attempt to introduce regulations in order to make capitalism work, even if only partially, in the interest of working people. The conclusion is clear: capitalism cannot be regulated. The attempt has led to economic dislocation on a massive scale.

The government’s response: appeals to the private sector

The majority of Venezuelans are aware, to one degree or another, of the despicable role played by private companies, like Grupo Polar, in creating this situation of hoarding, racketeering, black market, speculation, etc. In my last visit to Venezuela I witnessed the following argument at a supermarket queue: “- Mujer A: “aquí tienen su patria bonita” – Mujer B: “a ver si creen que es el gobierno que produce la Harina PAN”” [Woman A, scornfully: “here’s your beautiful fatherland” (meaning: this is what chavismo has given you, queues) Woman B, sharply: “do you think it is the government that produces Harina PAN” (in fact it is Grupo Polar which has a monopoly control over the production of maize flour).] The problem is not that people do not realise that the private sector is sabotaging the economy. The problem is that they cannot see the government as being able or willing to take the necessary measures to solve this situation.

To the problems of food scarcity and crime we have to add the severe drought affecting Venezuela as a by-product of El Niño which has meant problems in energy generation at the El Guiri hydroelectric dam. This has led to regular power outages in recent months. In April, the government decreed a 2-day working week in public institutions as a measure to reduce electricity consumption.

Even on this question we have to factor in a deliberate campaign of sabotage of the country’s power grid. There have been, for a number of years now, regular bomb attacks against power generating plants, power stations and substations in different parts of the country. They usually coincide with election campaigns and moments of heightened political tension and they have the aim of provoking power outages in order to spread a feeling of collapse, chaos, instability…

What has been the government’s response to these extreme problems? Since at least 2014 there was an open recognition of the failure of the previous model of regulation of capitalism and the use of oil revenues to fund social programs. You could say that the turning point was the exit of the former finance minister Giordani from the government in July 2014. Since then, the dominant line in the economic policy of the government has been one of making even more concessions to the capitalists in the hope of winning back their trust so that they can collaborate with the government in order to turn the situation around. This has been expressed in a whole series of concrete measures which have been taken: the partial liberalisation of foreign exchange, partial lifting of the subsidy on the price of fuel, the establishment of Special Economic Zones in order to attract foreign direct investment, as well as the repatriation of capital held abroad by Venezuelan capitalists, the opening up of the Arco Minero (111,000 Sq Km of land) for mining exploitation, etc.

None of this has worked. The government holds regular talks with businessmen where concessions to their interests are agreed and appeals are made for them to invest. At the following round of talks, businesses demand even more concessions, but the economy remains in a state of deep crisis.

To be fair, the government’s concessions to the private sector are from time to time accompanied by threats of expropriation. These threats are never followed by actions. Thus on Friday, May 13, when president Maduro extended the Economic Emergency and decreed emergency powers for 60 days, he specifically warned that “any factory that a capitalist paralyses, we will take it over and hand it to the communal power”. Less than 48 hours later, in an interview with Reuters, the vice-president in charge of the whole economic area of the government, Perez Abad, reassured international capital by “ruling out the take over of plants which are paralysed for lack of raw materials”. In the same interview he stressed Venezuela’s intention to continue to pay its foreign debt obligations, religiously, in full and on time. He added that this would mean a further reduction in imports for 2016.

In fact, although Maduro’s warning was highlighted by the international media, in Venezuela people did not take much notice. He has made the same threat of expropriation, specifically aimed at Grupo Polar, on so many times, that it is like the man who cried wolf. Whenever workers in the recent period have taken over factories which had been paralyzed by the bosses, they have been met with either an endless string of bureaucratic obstacles or direct repression on the part of the Bolivarian police. In most of the cases, even though laws introduced by Chavez are on the side of the workers and allow for expropriations and workers’ control, in reality the majority of labour inspectors are in the pockets of the bosses. Instead of expediting expropriation, they keep giving the owners extensions in order to pay wages and restart production, which results in the demoralisation of the workers in struggle.

Perez Abad is a chief representative of this policy of concessions to the capitalist class. He himself is a businessman and former president of one of the country’s employers’ federations. He became minister in charge of economic affairs of the government in February when he replaced Luis Salas, who was seen by the capitalists as a “radical”. Just before Maduro decreed an extension of economic emergency powers, Perez Abad had already announced a further increase in the prices of regulated products, after discussions with the capitalist affected.

More recently, in an attempt to deal with the question of scarcity, the government attempted to promote the formation of Local Provisioning and Production Committees. The idea is that the organised communities themselves will deal directly with the distribution of subsidised food products to the families. This is a step in the right direction, which could strengthen the role of rank and file organisations. However, the measure has only had a partial impact, so far. Also, it only deals with the question of final distribution, but not with the more important question of production and processing, which is where the crux of the problem lies.

Impact on consciousness

I said before that something is different this time. What has changed from previous attempts of the counter-revolution to defeat the Bolivarian movement? The constant stress and strain of having to queue for hours to get basic products, the uncertainty created by scarcity and hyperinflation, the fact that this situation has been going on for over a year now and instead of getting better is getting worse, the realisation that while the masses are suffering there are those who call themselves “Bolivarian” in positions of power who are benefitting massively from corruption, the weariness brought on by having to battle against the bureaucracy within your own movement, etc., all of this has had an impact on the consciousness of an important layer of the masses who previously supported the revolution. This is the key reason for the defeat in the December 6 National Assembly elections which were won by the right-wing opposition for the first time in 18 years. At that time, the Bolivarian revolution lost about 2 million votes, allowing the opposition to win an overwhelming majority in the National Assembly.

That defeat created a situation of institutional deadlock. The right-wing dominated National Assembly has attempted to pass some reactionary laws (a scandalous Amnesty Law, the privatisation of housing), but these have been blocked either by the president or by the Supreme Court. Meanwhile, initiatives taken by the President are ruled out of order by the Assembly.

Currently, the opposition is attempting to trigger a presidential recall referendum (a democratic guarantee introduced by the Bolivarian revolution under Hugo Chávez). They need to get a certain number of signatures to trigger the process, and then, in an Electoral Council-supervised process, get 20% of the electoral census to sign for it (3.9 million). Then a referendum would be called in which the opposition would have to get more votes than Maduro received when he was elected in order to force his removal. If he is removed within this year, 2016, then the right-wing president of the National Assembly takes over until new presidential elections are held. But Maduro will attempt by all means to delay any recall referendum until 2017, because if he is removed at that time, the vice-president takes over for the remainder of his term (until 2019). This also shows how the leadership of the Bolivarian movement seems to view the struggle from a purely legal-institutional point of view.

The oligarchy also feel emboldened by the electoral defeats in Argentina, Bolivia and the removal of Dilma in Brazil. Their side “is winning” and now they want to “overthrow the regime” in Venezuela. They cannot wait to go through the whole process of a recall referendum, and even less until the end of Maduro’s term.

The situation has reached its limits from the point of view of the patience of the masses. A week ago a comrade from Catia, a revolutionary stronghold in Caracas, described the situation thus: “Up until a few weeks ago you had to queue for 4, 6, 8 hours, but you could do your shopping for two or three weeks. Now there’s nothing. On Monday, me and my mum queued and could only get rice and pasta. The rest you have to get it in the black market at bachaquero prices. Wages are not enough to get by. The national guard is now outside the local supermarket with assault rifles manning the queues and they pushed it back a few hundred meters to dissuade people from looting.” There have already been small scale incidents of looting in Aragua and Guarenas.

In these conditions, there is the danger that any appeals made to the masses to mobilise against the threat of counter-revolution could fall on deaf ears. The masses have shown over and over again their willingness to struggle and push the revolution forward. But they are not at all convinced that their leaders know where to go, nor how to get there.

A military coup?

The combination of an institutional stalemate, a deep economic crisis, and a situation of violence in the streets which the opposition wishes to create, could also push a section of the army to intervene “in order to restore law and order”. Over the last few weeks there have been constant rumours of a coup in the making. On Tuesday, May 17, reactionary opposition leader Capriles, called on the army to rebel against the president “in order to uphold the constitution”. Capriles, of course, is no stranger to coups, having played a role in the short-lived reactionary coup of April 2002. The top command of the army has repeatedly stated publicly its loyalty to Bolivarianism. But everything has its limits.

This is a very dangerous juncture for the Bolivarian revolution. A military intervention, whatever form it would take, would be the prelude for a “transition” towards the oligarchy retaking control of state power. A section of the Bolivarian leaders, some of the corrupt, bureaucratic and reformist elements at the top, are already preparing to jump ship and would be quite ready to participate in some sort of transitional government of “national unity”, as long as they are guaranteed some sort of immunity.

At the same time as a layer of the masses is tired and worn out, there is also a layer of the advanced activists who are very angry and have been radicalised as a result of the election defeat in December. There was a movement from the bottom demanding the radicalisation of the revolution.

If the Bolivarian leadership were to take firm and decisive action to address the problem of scarcity, this would rekindle a wave of revolutionary enthusiasm. Such measures would be: a monopoly of foreign trade; expropriation of the food production and distribution chain under the democratic control of the workers, communities and small peasant producers; a default on the foreign debt; expropriation of the banks and big businesses; a national democratic plan of production to satisfy the needs of the majority. This program, if implemented, would immediately provoke an even bigger clash with the Venezuelan oligarchy and its imperialist masters, but at least it would have the benefit of solidifying and extending support for it amongst the masses which would see their problems finally addressed in a serious way.

Let us be under no illusion. If the right wing were to achieve its aims of regaining full control of state power (by whatever means), Venezuela would not go back to “normal” capitalist democracy. No. The program of the ruling class in a country riddled by a massive economic and social crisis would be one of war on the working people. They would go on the offensive against all the social gains of the revolution. But they would also be faced with fierce resistance on the part of the masses and therefore they would attempt to crush the movement by force. Under those conditions a new Caracazo uprising would be on the cards.

Toby Valderrama and Antonio Aponte put it very sharply in a recent article: “The government must understand that economic war, foreign invasion, attacks by foreign spokespersons, be they [OAS secretary general] Almagro, be they [former Colombian president] Uribe, they all have the same name: capitalism! And they can only be fought with one weapon: socialism. It is not possible to fight them with capitalism, because that does not convince anyone and you cannot achieve victory. These are times of decisiveness, either you are revolutionary or you are capitalist, the ability of social-democracy of making fiery speeches and then acting as a firefighter to put them down is coming to an end.”

This is correct. As we have explained, the attempt to regulate capitalism has failed. There are only two ways out: either to go back to “normal” capitalism (that is, to make the workers pay the price for the crisis), or to go forward to socialism (that is to make the capitalists pay).

It it not too late. The hour is one of extreme danger. This can only be overcome by extreme measures and firmness. Enough with vacillations. Carry out the revolution to the end!