Venezuela is a Latin American country that did not gain any type of attention until 1998, until Hugo Chavez got elected as the president of Venezuela. It was considered as a stable country even under the pressure of the neo-liberal economic reforms. In the event of initialization of the socialism of the 21st century, many programs like economic independence, import changeover was brought, and also the foreign investment was kept under control.
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Organization of Oil Producers and Exporters (OPEC), which was remaining stagnant for many years in that country, was restarted. Many other oil producing countries were persuaded to cut the production so that the oil prices could be hiked. Opposition from many parts began to occur because of his new policies and procedures.
Venezuela is one of the most powerful “petrostates” on the earth with 80 million barrels of conventional oil, which is 7 percent of the conventional reserves. Its reserves to annual production ratio (73 percent) are also highest and stand third in the world. And because of all these factors, Venezuela can continue to become a stable economy in the years to come. It is currently challenging to organize its crude oil as ‘proven reserves, which will also get doubled in the coming years and will become 360 billion barrels, which will be the worlds largest oil reserves.
But the factor is that the revenue generated from this should be properly managed. “According to Paul Isbell, Senior Analyst of International economy and trade, Hugo Chavez was very much successful in enforcing control over the oil sector of Venezuela which helped in surviving against the oil crises that occurred during the year 2002 and 2003. But his style of management of the oil resources and his peculiar style of foreign policy will put the economy in danger” (Source: Hugo Chavez and the future of Venezuelan oil: Resurgence of energy nationalism).
The critics of Chavez also argue that the in the long run, the economy could survive only if the oil prices continue to boom. The stability of the economy and a sustainable reduction in the poverty not only rests on the oil prices alone, but also on the maintenance of the existing levels of production, which will be under threat due to the lack of investment during the recent years also the uncertainty prevailing in the oil prices. In order to punish the US, Chavez began to establish strong relationship with the countries like Asia and other Latin American countries, Chavez followed some aggressive foreign policy which might turn risk to the country.
If Chavez is continuing with his state interventionism, it will divert more revenue from the energy sector to his own political purposes, which will jeopardize the investment in the oil and also will reduce the future production of the oil. Thus the government should take measures to relax the aggressive measures taken against the economic development of Venezuela. The boom in the oil prices will help Venezuela to achieve the highest economic growth rates during the coming years with an annual pace of 10.2 per cent. (Source: Chávez and the future of Venezuela, 2006, Pages 6 and 7).
According to Mark Weisbrot and Luis Sandoval, The main challenges faced by the Venezuela economy during the reign of Chavez were in the areas of exchange rate and inflation. The currency was overvalued, and the government was hesitant to devalue the currency since it would lead to inflation. Inflation in Venezuela was at its maximum during the pre-Chavez period, which was 100 percent in the year 1996 and 36 percent in the year 1998. Since the country is facing huge current account surplus, large reserves, and low foreign debt, the government has taken various measures to bring the currency into alignment and also to control the inflation. (Source: Update: The Venezuelan Economy in the Chávez Years
By Mark Weisbrot and Luis Sandoval) Venezuela faced the problem of inflation since its public finances were not in order and the situation continued for more than 25 years that is from 1998 to 2006. The government spending is more than its revenue, and thus the currency devaluation becomes automatic.
This problem has a close connection with the income generated from the oil sector. “In the opinion of Sabal, the economic situation of the country became worsened during the period of Chavez since he was a person who was more dependent on the income from petroleum. Due to the hike in the oil prices, the government earnings were incredible, and they spend the money for the welfare measures for the poor, and others considered it as wasteful money. There was no limit for the money spent by the government and the result was huge inflation” (Venezuela Prepares for a Change in its Currency and Constitution. 2007).
In order to support that the Venezuela will become a stable economy in the future, it is also necessary to understand its collapse during the earlier years. There was an oil boom in the country during the presidency of Carlos Andres Perez, when he nationalized the oil industry by creating a state company called PDVSA. This has led to the flow of income to the economy, mainly from the U.S. The income of the country was expected to rise during the coming years, but an unexpected crash in the oil prices reversed the situation of Venezuela. In the year 1989, there was a civil and the military upheaval which shattered the overall economy of Venezuela.
This revolution caused depression in the overall investment climate, political and economic instability and also reintroduction of the investment climate. Also there was uncertainty on the part of the government, and it could not overcome these unfavorable situations. Because of the unfavorable growth of the economy, the investors tried to withdraw from the market, and in turn, the market began to fall. During the year 1994, exchange rate control and price controls were initiated by the government, which affected the international business and also the investment climate. Many countries hesitated to invest in Venezuela due to its unstable socio- economic policies. Hugo Chavez was the person who organized the Revolutionary Bolivarian Movement, to bring into control the forces that are troubling the economy.
During the 1990s, Chavez became successful in organizing the people and raised voice against the IMF imposed neo-liberal policies. He drafted a fresh constitution and gave a new turn to the revolutionary stage of the country. He commenced many programs like economic independence, import changeover and also kept the foreign investment under control.. He persuaded many other oil-producing countries to cut the production so that the oil prices could be hiked. Opposition from many parts began to occur because of his new policies and procedures. The socialism that was initiated 21st period was different from the socialism that was initiated in the 20th century.
The 21st century socialism was less state- oriented and gave more importance to the ideals of equal opportunity, autonomy, and social justice. It would be rather called as a “libertarian socialism”, which assures “free development of each is a condition for the free development of all” (Wilpert 2006). Even though Chavez faced so many oppositions, in the later years, he got economic and political support.
Chavez government was against the free trade agreement. The government has moved away from the private influence since the revenue from the oil has increased. The increased oil revenues made the government to spend freely with out any worry on the disinvestment and also to insist more on the tax policies. It has also introduced participatory democracy in most parts of the state by actively participating the citizens in all the social programs. In the recent years, with the participation of the citizens, many local planning councils, communal council laws etc were initiated so as to increase the participation of the poor people in the participatory government.
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The participation of the citizens in all levels of government initiatives has increased their accountability to the government. Only due to the policy adopted by the Chavez, the economy started to grow, which was a major achievement in his political history. “During the Chavez rule from the year 1998- 2006, the oil prices rose from a low of some US$10 per barrel to their historical high of more than US$78”. (Source: Hugo Chavez and the future of Venezuelan oil: Resurgence of energy nationalism).
According to available literature review, the political and social scientists took pride in Venezuela as a role model for Latin American countries, especially with regard to the absence of class and racial conflicts which permeated Latin American social living and created deep fissures in human development aspects of the country. Most social scientists considered Venezuela, as the best destination in Latin America for the sound political system. However, over the years, this compliment has eroded with social inequalities, widening economic gulf between rich and poor and overdependence on petroleum and gas resources, as a result of other areas being ignored or disregarded.
Venezuela’s president has introduced more around 26 laws which cover all aspects from military to small businesses. These laws gave an increased stress to agriculture and to set up a band of band of soldiers just like the neighborhood countries. The new law would act against the speculation and also bring optimum control on the products and services, which ensure greater participation of producers. Strict punishment measures are also initiated in order to prevent hoarding and other illegal measures taken by the producers and the retailers. The law also allows the government to prohibit the import and export of certain goods and services and also take over the distribution measures when they considered it necessary.
The state has increased their control over publicity, commerce and publicity. Much opposition aroused against the 21st century socialism of the Chavez government. But many of the policies which were initiated in favor of using the oil wealth to help the poorer sections of the society were welcomed by all. The laws regarding the setting up a band of soldiers like the neighborhood countries also faced much criticism. (Chavez Decrees 26 New Laws. 2008). Alex Holland is of the opinion that the association of the rest of the Latin American countries is very generous.
Chavez considers that all the Latin American countries are part of one nation, and all have to be brought together so that the political , economic, and the social integration becomes possible.
For this integration, the government has brought a ‘petrocaribe ‘agreement, in which Venezuela is agreeable to provide thirteen Caribbean countries with oil. Such an agreement was initiated so as to reduce the poverty prevailing in the Caribbean nations. Cuba has taken the full advantage of this agreement and has received huge oil supplies from Venezuela, and in return, they are providing them with personnel to implement the welfare measures which will help the Venezuelan economy to continue with its socialists reforms initiated during the 21st century. Venezuelans relationship with Argentina has helped them in the acquiring quality agricultural products from them.
Many other countries like Uruguay, Bolivia, and Paraguay have signed beneficial agreements with Venezuela. Chavez, in order to go with his 21st century socialism and also to show his opposition against the America, he has formulated an integrated plan called the Bolivarian Alternative for the Americas or ALBA. The relationship of the Venezuela with China, Iraq, Israel, and Russia has brought them so many advantages and has been able to reduce their relationship with America.
China is an oil customer of Venezuela, and they in turn supplies construction equipments and computer equipments. Iran is also a major oil producer and also is a supplier to OPEC, and due to this reason, it has got a healthy relationship with Venezuela. Thus along with the huge oil resources of the Venezuela and its relationship with the rest of the world, will definitely prove advantageous to the country and will stabilize the economy. (Source: Venezuela Iran’s Best Friend?, 2006, by Alex Holland).
In the context of Socialism, it is seen that President Hugo Chavez had initiated a socialistic pattern of society in Venezuela. In this context, it needs to be seen how well this could be ensured and how capitalism could be prevented to take place in the country and how efforts could be put forward towards the 21st Century socialism.
It is necessary to define the term capitalism and how it could be used in the Venezuelan context. The main ingredients of capitalism could be seen as:
- Private ownership as a means of production and capital formation. In capitalistic milieu, the state ownership may be minimal or even conspicuous by its absence
- Competition in a capitalistic set up is free and without inhibitions. Thus, reasonable profits augur well for all providers of capital, and there is free competition, devoid of protectionism or restrictions. However, the main risk in a capitalistic set up is that certain producers would try to make super profits by exploiting of natural resources or manpower, which needs to be avoided.
- The regulatory system is the quintessence of capitalism, in that the state needs to interfere and set things right, whenever there are irregularities in the functioning of capitalist systems; however, it also needs to be kept in mind that capital formation and financial servicing are backbones of capitalistic system and political servitude can be gained by use of wealth.
There is no doubt that factors like liberalism and globalization have facilitated more easy and meaningful international relations among world nations. Liberalism and neoliberalism have opened new horizons of international and bilateral relationship among world nations. International treaties, trade relations, and strategic ties among nations have gone to the extent of dividing the world into various power lobbies.
However, it is generally conceived that the Latin American nations very often fail to go with the pace of globalization due to poor coherent strategies and lack of strong capitalistic political initiatives. But, one can notice a considerable difference in the approach and outlook of Latin American nations today. Arie M. Kacowicz, in this respect, observes that the Latin American nations have now come out of hesitation to enthusiasm and that “the region has embraced the ideological orthodoxy and the policies of «neoliberalism,» within the framework of the world economy. As a consequence of these neo-liberal policies, Latin American states and societies have become firmly tied to market economies and more dependent and closely integrated into the global economy as exporters of their natural resources and importers of manufactures.” (Kacowicz 2008).
Venezuela, as a nation, believes in socialism and communism, and Chavez has been the major proponent of socialistic upheavals in the nation. His strong opposition to the capitalistic form of Government has adversely affected the nation’s international relations with the United States and its strategic and bilateral tie ups with communist nations like Russia, Cuba, Bolivia, and China also need to be understood in this respect. Its relationship with China deserves primary attention as one can notice that there is an international power shift from the West to Asia. Chavez is skeptical about America’s imperialistic policies and its policies of aggression towards other nations.
Chavez wanted to get rid of any sort of capitalistic traits from the nation, and it is evident from the speech he delivered during the swearing ceremony of his new cabinet. He made it clear that his aim is to enforce “Bolivarian Socialism”, whereby, he wanted to nationalize all that has been privatized hitherto and to establish “”social ownership over the strategic sectors of the means of production.” (Weston 2007). Chavez was an influential supporter of Marxism, and he strongly believed that the nation could undergo revolutionary changes only when the poor and the working class society in the nation are treated well and are provided with opportunities and power.
He criticized capitalism as he was sure that ““Within the framework of capitalism it is impossible to solve the challenges of fighting against poverty, misery, exploitation, inequality.” ( Martin 2004). There are many who think that Chavez’s opposition to capitalism has stood in the way of the nation’s economic growth and stability. The argument is that the attempts to make the common man literate and to offer him representation in all the nation’s affairs would make it difficult for the capitalists to amass economic growth by manipulating the human labor of the working class society.
Thus, complete negation of capitalism would result in egalitarianism: “Capitalism depends on the availability of cheap labor and uneducated, disenfranchised masses. Chavez’s success could create an egalitarian society that has the power to resist the United State’s hegemony.” (Pegueros 2004). However, despite Chavez’ neglect for capitalism, the nation has been able to build and maintain diplomatic and strategic relations with nations like Cuba, Russia, Ecuador, and Bolivia even though Chavez cherishes an Anti-American approach.
Chavez took special efforts to build strategic and diplomatic relations with Cuba and several other Central American countries. Cuba, in particular, is in favor of Chavez as it “receives Venezuelan oil at below-market prices, in exchange for assistance in healthcare, education, agriculture and other areas.” (Sojo 2005). Venezuela makes use of the services of a large number of Cuban doctors and the services rendered by Cubans in the fields of Venezuelan health care and education, are remarkable.
Similarly, Chavez acknowledges Venezuela’s good relations with the Russian, Spanish and the Chinese Governments. Chavez sees his international tie ups with these nations as a possible solution to fight against the US imperialism and its domination over the other world nations. As Cleto A. Sojo rightly quotes Chavez: “Today’s Russia is not Yeltsin’s… there is new Russian nationalism, and I have seen it in the streets of Moscow… there is a good president, Mr. Putin, at the wheel.” He also praised China’s fast economic growth, and highlighted the new Spanish socialist government, “which no longer bends its knees in front of U.S. imperialism.” (Sojo, The South also Exists, 2005).
Venezuela’s relationship with the Moscow regiment has wider implications as the latter has offered nuclear assistance to the Chavez’s less socialist Government. Thus the literature reviewed emphasize that Chavez’s relationship with these nations have international far-reaching consequences as one comes across an international division among the US led capitalistic Governments and the Russia led Communist or Socialistic governments.
The oil industry in the nation has been the major source of income for Venezuela. Venezuela is regarded as one of the leading exporters of both conventional and non-conventional forms of oil. The nation derives much of its income from the oil industry. The shortage and the growing demand of oils and the radical reforms that Chavez brought about in the oil industry have been instrumental in the economic stability of the nation.
Most of the radical reforms of Chavez were aimed at increasing the State’s control over the oil industry, which was formerly controlled by the US, Britain, France, and Norway led companies. As Fred Weston states the State had only a minority share in the oil trade of the nation and therefore Chavez’s aim was to ensure the majority of the share to the state, “thus strengthening the state’s control over these important projects which account for 18% of the country’s oil production”(Weston 2007). Another strategy of Chavez was to promote oil trade with other nations like Cuba and China whereby he could ensure more international support and cooperation from these nations. Both Venezuela and China had their own strategic priorities in their oil deal: “Venezuela is seeking a strategic geopolitical alliance, China a steady supply of energy”. (Chavez, China Cooperate on Oil, but for Different Reasons. 2008).
This recent tie up between both the nations has alarmed USA as the agreement is strategically and politically significant. As per the provisions of the trade relation, China has to “pay $4 billion into a $6 billion fund to develop Venezuela’s oil industry, in return for the rights to explore for oil in Venezuela’s Orinoco region, potentially among the world’s richest deposits” (Chavez, China Cooperate on Oil, but for Different Reasons. 2008).
There have been many radical reforms undertaken with a view to foster the oil industry of the nation. For instance, it was the Hydrocarbons Act of 1943 that made provisions by which “the foreign companies could not make greater profits from oil than they paid to the Venezuelan state. The continually increasing oil income led to an ever-increasing reliance of the state on this source of income in lieu of individual income taxes.” (Wilpert 2006).
Thus, it can be concluded that the growing international need for oil resources and the subsequent rise in the price of oils have been the major factors that saw the country through economic prosperity and it was Chavez, who explored this potentiality of the nation’s asset to the best. The history of Venezuela has been as chequered as it has been volatile. Political instability was relatively unknown in Venezuela, which enjoyed good relations with the USA, until a self proclaimed socialist regime under Hugo Chavez Fria came into power in 1998 and upset major political calculations.
In an article named ‘Venezuela’s Bolivarian Revolution at a turning point,’ the author, Gregory Wilpert says that since Hugo Chavez’s ascendancy to power, he had initiated certain measures in what he termed as bid to bring about socialism into Venezuelan politics, by “shortening the power of the Central bank of the country, banning the privatization of the oil industry in the country, instituting land reforms , announcing that the working hours would be reduced from 44 to 36 hours/per week and the initiation of social and collective property rights for the Venezuelan people.” (Wilpert, Venezuela’s Bolivarian Revolution at a Turning Point, 2008).
Although his objective in achieving socialism for his people have been commendable and praiseworthy, it would not be wrong to state that the means adopted by President Chavez alienated himself from his people with the result that his party lost the referendum and controlling powers in Venezuela. This could be attributed more to the capability of the Opposition to muster strong support rather than any inherent drawbacks in the policies pursued by the ruling Chavez regime. The sweeping powers that President sought for himself was seen as an attempt to introduce Cuban communism in Venezuela and the desire to seek and retain power for himself rather than the plebiscite.
The proposed reforms in the Articles included, inter alia, supporting neoliberal economic development and reinforcing the powers of the Central government. The President also sought to enhance his “own presidential term in office from 6 to 7 years, empower him to create Special Economic Zones, extend municipal jurisdiction at his choice and allow himself the privilege of promoting military personnel and even assume emergency powers by throttling power of information.” (Wilpert, Venezuela’s Bolivarian Revolution at a Turning Point, 2008).
The public felt that the reforms package rushed through by the administration was aimed at usurping private properties; many rumored that the state would assume powers to seize private lands and the junta would be dispossessed. The Opposition took this opportunity to castigate the ruling powers, sometimes even unreasonably and ruthlessly. However, their allegations were, to a certain extent, also true. Over time, it was seen that the administration became lax and inefficient, fuelled by Opposition criticism and public indifference.
The President’s attitude touched a raw nerve even with his staunchest supporters, who did not seem to share his views on many vital issues of management. This led to the loss of many of his supporters who were with him for some time and yet did not see eye-to-eye on many matters. Moreover, Chavez’s uncompromising attitude did not help the situation and a constitutional crisis seemed imminent.
Moreover, his detractors are out for him and maybe successful in their attempts to dethrone him with the active financial and moral support of the United States of America. The ball now is squarely in the President’s court, and he needs to use all his political sagacity, experience, and personal charisma to outwit his challengers and remain consolidated in power.It is seen that the history of Venezuela has been an eventful one; the earliest rulers were military junta, it was deposed and several dictatorships reigned during the 20th Century, including a brief fling with communism of the kind practiced in leftist minded Cuba, under the leadership of Fidel Castro.
However the plebiscite of Venezuela got tired of self defeating and narrow views held by leftist leaders, most of who were interested in self aggrandizement, while indulging in grandiose and pretentious public demonstration of national interests and concern for public interests. Next, President Chavez stepped into power in 1998 under the mantle of a socialist reformist cum ruler and has clutched on to power, despite vociferous demands for his ouster from opposition leaders.
He was also successful in getting a second term in office during 2006, certifying his popularity among the masses. However, in his concern to turn Venezuela socialist, he alienated his country with the USA, and earned their wrath. His distancing with the US has been viewed by many political pundits as not being in the best long term interests of Venezuela, or their economic progress over a period of time, especially in a dynamic globalize environment where countries cannot live in isolation and need to integrate them into the world order. The literature review has felt that capitalistic systems need to be applied in the current Venezuelan context in order to ascertain whether it is indeed a capitalistic or socialistic one.
It could be said that the first aspect, preponderance of private capital with lowered levels of state participation, are one of the hallmarks of such societies. In the Venezuelan context, according to Gregory Wilbert in “The Meaning of 21st Century Socialism for Venezuela, it is seen that private ownerships exist in Venezuela along with state ownerships. This article speaks about capitalistic tendencies in the economy and how it could be used for the betterment of the state and the people.
However, not all Chavez’s policies may be convincing; the writer is of opinion that the literature review fails to address the specific areas in which socialistic pattern of society could be build, unless it is an agrarian economy which Venezuela does not lay claims to be , being dependent on fossil fuels and natural gas as major revenue earners. The article fails to address the areas in which, although oil-rich, sufficient inroads could be made by President Chavez to control mounting dislike for his government and its policies.It claims that since the country is oil-rich, its “government is far freer to pursue policies that are independent of the powerful private interests that normally shape government policy in capitalist countries.” (Wilper 2006).
It is necessary that future literature review needs to address to various political, cultural, and economic reasons with greater insight and depth in order to reach a decisive answer about this propel being currently perceived in Venezuela.
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