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VENEZUELA’S CHAVEZ AND LATIN AMERICAN OIL

VENEZUELA, CHAVEZ & LATIN-AMERICAN OIL ON THE WORLD STAGE
by Sheila Newman 3rd Edition [1] Copyright Sheila Newman 2007

“In 1998, or 168 years after independence, a tiny wealthy elite was separated by a vast chasm from the rest of the people, of whom one quarter were unemployed. This seems disgusting when you realize that Venezuela was then the second biggest exporter in the world and had received around 300 billion dollars in oil sales – or the equivalent of 20 Marshall Plans - over the preceding 25 years. It was in this context that Hugo Chavez and his social plan won the elections of 6 December 1998 with 56.24% of the votes.” [2] (Nicolas Lehoucq, Paris Institute for International Studies).

President Hugo Chavez, is a social revolutionary with a giant budget. In 2006 the EIA ranked Venezuela nineth in World Oil producers and sixth in World Oil Exporters. [3] For many of his countrymen Chavez appears to be seen as a towering figure of hope for rescue from a nightmare which began in 1498. But his anglo critics portray him as an ogre treading clumsily over political alliances and destroying Venezuela’s oil-assets.

Clearly Venezuela is pursuing a different political paradigm from that of the North American led Anglophone countries. The Chavez government endorses a Christian socialist philosophy directly opposite to the Protestant capitalist one of a wealthy elite divinely elected on earth. In the Chavez philosophy, Christ was the first socialist, sharing wealth among the poor; a rich man might only enter heaven by giving away his possessions to the poor; a good leader should give everything to his country. [4]

One political explanation for this difference is that Latin America ‘missed out’ on the progress model which dominates North America because, colonized by medieval Catholics, it was isolated from the development of Protestantism. [5]
Sociologist, Max Weber, theorized in The Protestant Ethic and the Spirit of Capitalism (1906) that Calvinism was the midwife of capitalism, delivering to the world the concepts of the ‘work ethic’ and of election to earthly prosperity as a reflection of God’s grace.

The work of Australian engineer and social analyst, Sharon Beder, supports a contrary view that the work ethic plus the progress model are driving the world over a cliff [6] and this is pretty much Chavez’s expressed view. Chavez also apparently shares a similar perspective to Al Gore’s on global warming, but that is where the similarities end.

From the 15th C the indigenous long-term stable clan and tribal populations of Chavez’s people were ravaged by invasion, immigration, disease, dispossession and slavery. The original peoples nearly died out, then, completely disorganized, ballooned in circumstances where child labor was the only source of additional income for low-wage landless people. [7] What is now called Venezuela contained a stable population estimated at around 400,000 Amerindians in 1498. [8] (Now the population is around 27 million.) In the early 16th C King Charles Martel V granted Welsers German banking firm rights to exploit the people and resources of Venezuela in payment of a debt. The colony returned to the Spanish Crown within 20 years and hereditary land grants were made to conquistadores for a time, but later declared illegal. Meanwhile the Amerindians fought back until smallpox overwhelmed most of them in 1580. [9] Not until 1821 did Simón Bolívar win the long indigenous struggle for independence. [10]

In 1921 the discovery of oil permitted agricultural and industrial development. At the start of the Second World War Venezuela’s oil production was only exceeded by that of the United States. Much of the oil concession development involved attracted US, British, and Dutch companies. Venezuela became a democracy in 1958 and founded OPEC in 1960. [11]

The historic inequities of colonial land distribution [12] guaranteed a large population of impoverished rural labourers. As oil prices waxed and waned productive agricultural holdings were neglected and waves of poor people left the country regions to look for work in the city, creating the slum of Caracas. Between 1959 and 1964 the government redistributed rural land to 150,000 families but many resold the land to speculators, it is said, because they had little education about farming and no ready market for their product. [13] Other wealth redistribution and educative policies were carried out but these programs failed to establish themselves against a background of depressed commodity prices and political schism. The then Democratic Action (DA) government was aligned with the USA but many Venezuelans were sympathetic to the Castro regime in Cuba, which was charged with supplying arms to guerrillas in 1963. [14] The state became increasingly repressive in the context of continued political unrest. In 1968 the Social Christians (SC) won government and remained in power until 1973. [15]
In the wave of nationalizations following the first oil-shock, the DA Government created the State-run oil and natural gas company, Petroleos de Venezuela SA (PdVSA) in 1975-1976. PdVSA is Venezuela’s largest employer and provides 80 per cent of export earnings but, reflecting later trends to privatization, government revenue declined from 70.6 per cent in 1981 to 38 per cent in 2000. [16]
The oil countershock of 1979 culminated in currency devaluation by one third and a change to an SC government, which remained in power until 1983, when AD was returned under Jaime Lusinchi. Despite promises to diversify the economy and deliver on housing, public health and education, the situation continued to deteriorate. In 1988 another AD president, Carlos Andrés Pérez, introduced an austerity regime, removing subsidies on gasoline as well as on a number of important consumables, culminating in hunger riots in Caracas, with a death toll of thousands.
Two attempted military coups took place against a background of continued repression in1992 and Hugo Chavez led one of them. President Perez later went to prison for 28 months with the government limping along under another recycled leader, Caldera, whose foreign policy was very USA friendly. In 1995 103 % inflation hit the Venezuelan middle class. In 1997 doctors, university professors, and national telephone company workers went on strike. In December 1998 Hugo Chavez won the Presidency.
On 30 December 1999 Venezuela’s 26th constitution was approved by 71% of votes. The Senate was replaced by a single chamber National Assembly, and the Bolivarian Republic of Venezuela came into being, named after the National hero. Presidential terms increased from five to six years and limitations on presidents serving a second consecutive term were lifted, but it became possible for the public to sack a president through a publicly initiated referendum. Privatisation of the oil industry, social security, health care and other major state-owned sectors was outlawed. [17]
According to the EIA, “Nearly one-half of PdVSA’s employees walked off the job on December 2, 2002 in protest against the rule of President Chavez.” [18] But another report says that they were prevented from working in a ‘bosses lock-out’ where “a small group of managers, directors, supervisors and technicians organised the sabotage of production and brought the industry almost to a halt,” and Georgetown Politics Professor commented that “The opposition (…) has also been extremely irresponsible in trying to demand [Chavez’s] resignation rather than trying to seek an electoral solution” [19] If we assume that PdVSA management was responsible for the declining returns to the State by PdVSA over the decades, then the view that this was a ‘lock-out’ to preserve an undemocratic status-quo by discrediting the Chavez Government, seems persuasive. Chavez had provoked US insecurity about oil supply by criticizing the Free Trade of the Americas Act (FTAA) and US foreign policy. The Chavez government had sacked some directors of PdVSA who were in political disagreement with the Venezuelan executive. These people then led calls for a general strike along with a variety of opposition parties and the Fedcamaras (Venezuelan Chamber of Commerce), who are supported by the US National Endowment for Democracy. A group marched on the Presidential palace demanding Chavez’s resignation, which the President refused. He was arrested and imprisoned. Pedro Carmona, President of the Venezuelan Chamber of Commerce, which receives funding from the US National Endowment for Democracy, was installed as Venezuela President on the 11th of April. On the 12th of April, the US President’s spokesman, Ari Fleischer, endorsed the Carmona government. But, on the 13th of April the Presidential guard and the army arrested Carmona. Next the opposition collected signatures from 20% of the electorate required under Chavez’s constitution to initiate a referendum to sack the president, but Chavez won the referendum. [20]
The distribution of PDVSA income had been increasingly diverted to private concerns, with returns to the State falling from 70.6% in 1981 to 38.6% in 2000. Despite permanent damage to production from sabotage in the industrial disputes of December 2002, Chavez’s intervention had returned this proportion to 50% by 2004. [21]
Venezuela has for some time been a food importer, due to the country’s very poor system of land management, which Chavez has begun a major scheme to rectify. He seems to be seeking regional self-sufficiency, with protection for local production. He is opposed to overconsumption, openly warning about oil depletion. He is highly critical of US human rights abuses, at home and abroad, and opposes free-marketism.
Obviously Chavez’s regime threatens many established interests in a seething international struggle for resource hegemony. The economy is still in recession and maintenance and consolidation of the section of the population which supports Chavez will surely require that he carry out his promises. Perhaps Chavez’s friendship with Castro will be a source of survival skills. So will his policy of strengthening regional hispanic alliances.
There are a number of likely candidates, including Mexico, which has begun to import food from the US under the American ‘free trade’ agreement. Brazil, sensibly seeking independence from petroleum, was apparently counseled to drop its independence policies in exchange for leniency on international debt. [22]
Chavez actively seeks more diversification in petroleum trading, initiating a ‘South-South diplomacy’ with sidelined and emerging polities in controversial and political oil-trade accords with Cuba, Argentina, Uruguay, Brazil, Spain, Iran, Libya, Nigeria, Qatar, India, China and Russia. [23] An agreement in October 2004 means that Russian oil sales to the US are actually honoured by Venezuelan oil and Venezuelan sales to Europe are supplied by Russian oil. The Chavez government has paid off $538 m of Argentinian debt and has agreed to provide contracts worth $500 m to Argentina.

In a fascinating avoidance of petrodollars, Chavez supplies 80,000 barrels of oil to Cuba a day, at a friendly price, with 20% of payment in the form of the supply of 150,000 Cuban doctors to Venezuelan health. [24]

Most importantly, Chavez hopes to create a Latin American petroleum company, “Petrosur”, which would unite the public companies of Argentina, Bolivia, Brazil, Uruguay, Equator and Venezuela.
Mostly anglo-analysts have intimated that anglo-oil companies won’t touch Venezuela because of Chavez, and that the bitumus deposits of the Orinoco won’t get developed through lack of experts. But this is beginning to look like sour grapes as plenty of the non-anglo oil companies – Russian Lukoil, China’s CNPC, Indian ONGC and Brazil’s Petrobas – don’t seem to be put off.
Writing for ASPO-USA, Dave Cohen reports, “Chávez gleefully announced that ‘the United States as a power is on the way down, China is on the way up. China is the market of the future’ after his meeting with CNPC President Jiang Jiemin.”
And concludes, “ The bummer for the OECD nations is that El Presidente just might be right. The gold rush is on, but now excludes greater participation by Western international oil companies.” [25]
Chavez has also not neglected regional diplomacy among the underworld of arms trade and revolutionary militia. [26] And, since an attempted putsch in 2002, Chavez relies on Cuban Intelligence for personal protection. Not surprisingly the US Government disapproves.

On December 4, 2006, Chavez won his third six year term as president.

In the light of Venezuelan social and economic performance in the decades preceding Chavez it would be hard for him to do worse than his predecessors and he seems to be doing considerably better. Land redistribution is the basis of revolution and of social equity. [27] Venezuela recently signed an accord to give effective rights to its indigenous peoples. [28] Chavez has already begun allocating public land to the landless in a program accompanied by massive agricultural education. He has not as yet allocated any private land but there is the intention to repossess land which is being held for purely speculative purposes. [29]

And the Chavez government has better green credentials than any other petroleum producer. With an active commitment to mitigate the impacts of climate change and peak oil, it has initiated new public transport, has instituted organic farming as an important part of secondary school education, has facilitated a huge organic farm in the centre of Caracas, and has plans for massive reforestation with the collection of 30 tonnes of seeds, and the planting of 100 million plants. [30]

The overwhelming positive signs of Chavez's example seems to be what we need for the 21st century. If this is really what Chavez is teaching and doing, then we can only hope that the whole world will unexpectedly come to its senses and follow.

ENDNOTES
[1] Various documents named beneath, many of which have also referred to Venezuelan President Hugo Chavez’s speech at the 60th General Assembly of the United Nations in New York, on 15 September 2005.
[2] Lehoucq. (Translated here by S.M. Newman.)
[3] (All hydrocarbon liquids) http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.htm
[4] Lehoucq.
[5] In The Pan-American Dream, US conservative writer, Lawrence Harrison, attempts to explain the differences in economy, government, human rights and standard of living in American Hispanic societies according to Weberian theory.
[6] Articles by Sharon Beder on the Work Ethic, http://homepage.mac.com/herinst/sbeder/home.html#work.

[7] UNICEF estimated that 9.9 percent of children ages 5 to 14 years in Venezuela were working in the year 2000. Government of Venezuela, Multiple Indicator Cluster Survey (MICS): Standard Tables for Venezuela and Annex I: Indicators for Monitoring Progress at End-Decade, UNICEF, 2000, www.childinfo.org/MICS2/newreports/venezuela/venezuela.htm and http://www.childinfo.org/MICS2/EDind/exdanx1.pdf.
Doepke hypothesised that fertility falls where policies, such as education subsidies and restrictions on child labour affect the opportunity cost of education. The populations of South Korea and Brazil had begun to grow rapidly around the same time, but South Korea had an effective public education system, and strongly enforced child-labour restrictions, whereas Brazil had a weak public education system and poorly enforced anti-child-labour laws. Doepke, M. (2000). Growth and Fertility in the Long Run, Mimeo, University of Chicago, available in reduced form in Doepke, M. "Accounting for Fertility Decline During the Transition to Growth", Journal of Economic Growth, 9(3), 347-383, September 2004.
[8] http://www.nationsencyclopedia.com/Americas/Venezuela-HISTORY.html

[9] Ibid.

[10] Ibid
[11] http://news.bbc.co.uk/2/hi/business/2549589.stm
[13] www.forestpeoples.org/documents/conservation/Ven10c_jan04_ch6_eng.pdf
[14] Seth DeLong, “Venezuela's Agrarian Land Reform: More like Lincoln than Lenin”, COHA, February 25th 2005, http://www.venezuelanalysis.com/analysis/963

[15] http://www.nationsencyclopedia.com/Americas/Venezuela-HISTORY.html

[16] Ibid.

[17] Ibid and Lehoucq, Nicolas, « La redéfinition du rôle géopolitique Vénézuelien », Institut d'étude des Relations Internationales Paris, www.memoireonline.com/11/06/287/m_redefinition-role-geopolitique-venezuelien0.html (accessed on 21/9/2007) and Doizy, Arnaud, « La politique étrangère des Etats-Unis au Venezuela, la période Chavez (1999- 2007)» Université Panthéon-Assas paris II, http://www.memoireonline.com/06/07/491/m_politique-etrangere-etats-unis-venezuela-periode-chavez2.html (Accessed 22/9/07)
[18] http://www.nationsencyclopedia.com/Americas/Venezuela-HISTORY.html
[19] “Nearly one-half of PdVSA’s employees walked off the job on December 2, 2002 in protest against the rule of President Chavez.” EIA Reports : www.eia.doe.gov/emeu/cabs/Venezuela/Oil.html Some other anti Chavez sources: http://marketplace.publicradio.org/display/web/2007/09/13/venezuelan_oil_expats_resurfacing/ Some comments on US stance:
Professor of Politics, Georgetown University, Arturo Valenzuela commented on the PBS Jim Lehrer Newshour, “Troubled Nation”, December 17, 2002, “…Unfortunately, the radicals on both sides are maintaining this conflict. The opposition, for example, in my view, has also been extremely irresponsible in trying to demand his resignation rather than trying to seek an electoral solution. In fact, the constitution as I said earlier does make it possible for Chavez to be submitted to a referendum in August of next year. It seems unreasonable not to focus on that. Chavez has said he would accept that as a possible outcome. The problem is that the opposition wants him out now. Chavez says I don't want to leave and the situation is getting worse day by day.” http://www.pbs.org/newshour/bb/latin_america/july-dec02/venezuela_12-17.htm
[20] Martin, Jorge, “Venezuela: Opposition "strike" or bosses lock out? An eyewitness account,” www.marxist.com/Latinam/venezuela_eyewitness0103.html. Some other sources: www.thirdworldtraveler.com/South_America/Venez_Coup_Countercoup.html
[21] Doizy, Arnaud, « La politique étrangère des Etats-Unis au Venezuela, la période Chavez (1999- 2007)» Université Panthéon-Assas paris II, http://www.memoireonline.com/06/07/491/m_politique-etrangere-etats-unis-venezuela-periode-chavez2.html
[22] Lehoucq
[23] It relies on uncompressed gas but also, unfortunately, on bio-fuels which will lead to tragic soil and forest destruction. Nicolas Lehoucq writes that Brasil had achieved a ‘quasi-independence from petroleum’ in the 1990s and has even developed cars which the driver can select to function by a simple switch from gasoline to non-liquefied gas to ethanol. “But this innovatory system was threatened by the World Bank. President Lula was attempting to obtain a partial cancellation of Brazil’s debt and the World Bank attempted to negotiate a deal whereby Brazil would cease its petroleum indendence program.” Lehoucq remarks that the World Bank is US dominated and wonders if the US uses petroleum as a means of control of third world countries. Lehoucq, op.cit.

[24] Lehoucq, op.cit.
[25] Lehoucq, op.cit
[26] Cohen, D., “Venezuela -- Aló Presidente!”, ASPO USA publication, 29 August 2007 http://www.aspo-usa.com/index.php?option=com_content&task=view&id=202&Itemid=91]
[27] Lehoucq
[28] A fact strangely overlooked in many studies of the French Revolution, where analysis of methods undertaken for the redistribution of land, affords a remarkable perspective.
[29] As with Australia’s terra nullius, no treaty had ever been undertaken with the indigenous people. Source: The Forest Peoples’ Program, “Protecting and encouraging customary use of biological resources: The Upper Caura, Venezuela,” www.forestpeoples.org/documents/conservation/Ven10c_jan04_ch6_eng.pdf

[30] Seth DeLong, “Venezuela's Agrarian Land Reform: More like Lincoln than Lenin,”
February 25th 2005, COHA, http://www.venezuelanalysis.com/analysis/963
[31] Derek Wall, “Viva Venezuela verde!” http://commentisfree.guardian.co.uk/derek_wall/2007/04/viva_verde_venezuela.html and Eva Golinger, “Venezuela’s Green Agenda: Chavez Should Be Named The ‘Environmental President’”, February 27th 2007, Venezuelanalysis.com http://www.venezuelanalysis.com/analysis/2244 (Accessed 22 Sept 2007)

Regarding the Chavez and Venezuela article- it would be really interesting to observe this leader's progress, and learn more about him. It's possible that Venezuela may in some aspects provide a role model for the future.