Economic policy of the Hugo Chávez government
Encyclopedia
Since his election in 1998, the administration of Venezuela
n president Hugo Chávez
has proposed and enacted democratic socialist economic policies. Domestic policies have included redistribution of wealth, land reform, and democratization of economic activity via workplace self-management and creation of worker-owned cooperatives. Internationally the Chávez administration has attempted to increase autonomy from U.S. and European governments by increasing control over domestic oil production and promoting economic and political integration with other Latin American nations. One of the policy objectives has been to diversify the economy of Venezuela
away from its dependence on oil.
The economist Mark Weisbrot
, in an analysis of the Chavez administration, said: "The current economic expansion began when the government got control over the national oil company in the first quarter of 2003. Since then, real (inflation adjusted) GDP has nearly doubled, growing by 94.7 percent in 5.25 years, or 13.5 percent annually." Additionally, real GDP measurements use "price deflators", which do not take into account the 660% increase in the price of oil from 1998 to 2008, and instead only take into account the quantity of oil produced, which has slightly decreased due to the administration's decision to cut production to increase earnings by raising prices.
In response to the low oil prices at the end of the 1990s, Chavez played a leading role within the Organization of the Petroleum Exporting Countries (OPEC) to reinvigorate that organisation and obtain members' adherence to lower production quotas designed to drive up the oil price. Venezuelan oil minister Alí Rodríguez Araque's announcement in 1999 that his country would respect OPEC production quotas marked "a historic turnaround from the nation's traditional pro-US oil policy."
On 13 November 2001, under the enabling law authorized by the National Assembly
, President Chávez enacted the Hydrocarbons Law, which came into effect in January 2002. The new Hydrocarbons Law required that a minimum of 51% of PDVSA be owned by the Venezuelan government, and increased royalties paid by foreign corporations from 16.6% to 30% in an attempt to repatriate more petroleum funds to Venezuela.
Chávez has redirected the focus of PDVSA by bringing it more closely under the direction of the Ministry of Energy and Petroleum. In 2004, $1.5 billion of the $15 billion budget of PDVSA was directed to be used for funding social programs, and later this was raised to $4 billion per year.
Chávez has also explored the liquidation of some or all of the assets belonging to PDVSA's US-based subsidiary, Citgo
, which has received criticism amongst the Venezuelan public due to corruption, and links to the U.S.
According to finance minister Nelson Merentes, the Venezuelan 2006 budget would get more income from taxation than from the petroleum industry, unlike formerly.
During the December 2002-February 2003 lock-out where managers and skilled highly paid technicians of PDVSA locked out
PDVSA and sabotaged the industry, petroleum production and refining by PDVSA almost ceased. This sabotage was politically motivated; at the same time, many business owners across Venezuela closed down their stores in order to create instability within Venezuela. Despite the lock-out, these activities eventually were substantially restarted when the rank-and-file oil workers restarted PDVSA without the managers. Out of a total of 45,000 PDVSA management and workers, 19,000 were subsequently dismissed, many of which were managers and highly paid technicians.
Additionally, several thousand "Communal Councils" (Consejos Communales) have been created. In these Communal councils, citizens form assemblies to determine what will be done with government funds in their local area. Groups are made up of 150-200 or more families in urban areas, and starting at around 15-20 families in rural areas, and their decisions are binding to local government officials. 21,000 of these groups were created in 2007, and 30,179 by 2009. As of 2007, about 30% of state funds were directly controlled by communal councils, with a goal of eventually having them control 50%.
As of 2007, 300 communal banks had been established, and had received $70 million in government funding, to be used for local micro-loans. With these funds, the councils have implemented thousands of community projects, such as paving streets, creating sports fields, building medical centers, and constructing sewage and water systems. Some leaders have proposed that the councils replace city and state governments entirely, or work parallel to them. By 2008, there were more than 3,500 such banks, which received $140 million in funding in 2008, and were budgeted to receive $1.6 billion in 2009.
As of February 2010, the Venezuelan state had given technical and financial assistance to almost 200 worker-owned communes. A total of $23 million in government funding was provided to these communes. The communes have their own "productive gardens” that grow their own vegetables as a method of self-supply
. A spokesperson from one of the Communal Councils, Morelbis Aguiar, explained that a commune, which is often made up of several communal councils, is local self-government “where we, the people, we are the ones who decide what our community wants and what the improvements are that we want to work on in our area. It’s not the state that comes and decides; it's us who decides which street we need, where to locate the university or high school… We decide what we’re going to do with the financing and resources that the revolutionary government gives us."
is by wealth redistribution, primarily via land reform, and social programs. The Chávez government has pursued a series of Bolivarian Missions
aimed at providing public services (such as food, healthcare, and education) to improve economic, cultural, and social conditions. In 2003, the Venezuelan government created Mission Mercal
-- a chain of state-owned grocery stores, selling staple foods at 39% below market value, and which tries to buy 40% of all of its products from small or medium sized domestic producers. As of 2005, there were 13,392 Mercals and 102 warehouses, in addition to 31 recently built Supermercals, 12,500 Mercalitos (small Mercals), and several hundred cooperatives and other entities that work in conjunction with Mercal. Additionally, the government has created 6,000 mobile soup kitchens, which together with Mercal, comprise 22% of national food distribution.
The government has created an extensive micro-credit program, targeted towards the poor, with a goal of enabling them to start their own small businesses. Several micro-credit banks have been created, including Banco del Pueblo (People's Bank), Banco de la Mujer (Women's Bank), and the Fondo de Desarollo Microfinanciero (Fund for Micro-Finance Development, "Fondemi"). Additionally, banking laws passed in 2001 require that all banks set aside at least 3% of their capital for micro-loans.
As part of its "Miracle Mission" program, the Venezuela and Cuban governments have collaborated together to perform free eye care to over 1,139,798 people with an average of 5,000 operations occurring on a weekly basis in 74 medical centers around Venezuela, as of July 2010. Several thousand people from other Latin American nations—including Argentina, Bolivia, Brazil, Costa Rica, Chile, the Dominican Republic, Ecuador, Guatemala, Nicaragua, Paraguay, Peru, and Uruguay—have also been given free treatment under the program.
Since 2003, the Venezuelan government has set price controls
on around 400 basic foods in an effort according to the Washington Post, to "counter inflation and protect the poor", and in March 2009, they set minimum production quotas for 12 basic foods that were subject to price controls, including white rice, cooking oil, coffee, sugar, powdered milk, cheese, and tomato sauce. Some food processing companies claimed that regulated prices had not kept pace with inflation, hurting their profits. These price ceilings have motivated food producers to start hoarding foods, so that they can either sell it on the black market or smuggle it out of the country for a higher price, causing sporadic shortages for some basic food items.
A 2010 OAS report criticizing Venezuela's human rights standards indicated achievements in addressing illiteracy, healthcare and poverty, and economic and social advances.
by increasing domestic agricultural production in Venezuela
and reducing agricultural imports, and to more equitably redistribute unused agricultural lands. Before Chavez was elected 75% of the agricultural land in Venezuela was owned by 5% of landowners and the smallest 75% landowners controlled only 6% of the land. Much of the land held by large landholders, was held in extremely large "latifundios", and was idle and unproductive. The "Law of the Land" passed by the Chávez administration, declared such landholdings to be illegal, and mandated that it be given to families who needed land to grow food. As of January 2009, the Venezuelan government had redistributed nearly 2.7 million hectares of idle land (6.6 million acres—nearly 1/3 of the latifundio land existing prior to 1998) to 180,000 landless peasant families. Additionally, reforms to Venezuela's Penal Code de-criminalized the occupation of idle private lands by landless peasants, and has started an initiative known as Mision Zamora to assist small and medium scale producers gain title to land. Although the Venezuelan government allows small farmers to work the land, it does not always give them title to the land, and they are sometimes required to work as part of a collective.
Agricultural credit has also increased dramatically, from approximately $164 million in 1998 to nearly $7.6 billion in 2008, with many of the credit decisions being made by local communal councils, rather than government bureaucrats. Additionally, in 2008, several laws were passed to provide financial assistance to struggling small farmers, such as debt relief programs and crop-failure insurance.
The Venezuelan government, under the Chávez administration, also began offering free technical assistance and education to farmers, through its National Agriculture Research Institute (INIA), which performs agricultural research and projects with small farmers.
The government is also trying to introduce large-scale urban agriculture
to the populace, to increase local self-reliance. In Caracas
, the government has launched Organoponico Bolivar I, a pilot program to bring organopónicos
to Venezuela. Urban agriculture has not been embraced in Caracas as it has in Cuba. Unlike Cuba, where organopónicos arose from the bottom-up out of necessity, the Venezuelan organopónicos are clearly a top-down initiative based on Cuba's success. Another problem for urban agriculture in Venezuelan is the high amounts of pollution
in major Venezuelan urban areas. At the Organoponico Bolivar I, a technician comes every 15 days to take a reading from the small pollution meter in the middle of the garden.
program in 2000 by the opposition Justice First
, influenced by the Peruvian economist Hernando de Soto Polar, President Hugo Chavez
issued Presidential Decree 1666 in February 2002, providing a legal basis for Urban Land Committees
(Comités de Tierras Urbanas, CTUs) to be formed. These develop land titling
in urban areas. Under the February 2002 decree, local committees (representing 100-200 families) may apply to a government office for the local "barrio
" residents to be given property title
for state-owned land they have informally occupied on a long-term basis. The committees operate on the principle of participatory democracy
, and create maps of the local area, on the basis of which (after official verification) land titles are drawn up. By mid 2005, there were around 5000 CTUs, representing around 5m Venezuelans, and the government had issued over 84,000 titles to 126,000 families, benefiting about 630,000 inhabitants (out of a total urban poor population of around 10m). By October 2006 the government said that over 200,000 titles had been assigned, benefiting about 1m inhabitants.
several industries in 2007 and 2008, as part of its policy of wealth redistribution and reducing the influence of multinational corporations.
A January 3, 2007 article in the International Herald Tribune
reported that price controls were causing shortages of materials used in the construction industry. According to an April 4, 2008 article from CBS News
, Chavez ordered the nationalization of the cement industry, in response to the fact that the industry was exporting its products in order to receive prices above those which it was allowed to obtain within the country.
Chavez has nationalized Venezuela's largest telephone companies and electric utilities. In 2008 he ordered the halting of the construction of a shopping mall, and said the land would be nationalized and turned into a hospital or university.
The nation's largest private electricity producer, 82-percent owned by US-based AES Corp, was obtained by paying $740 million to AES for its share – fair compensation according to financial analysts cited by Reuters.
In 2007 the main telephone company, CANTV
, was nationalised by buying US-based Verizon Communications
' 28.5 percent share for $572 million – again, fair compensation according to analysts cited by Reuters.
In 2008 the Venezuelan government nationalized the leading steel company, Argentine-controlled Sidor
, following months of strikes and labour-management disputes.
In 2008, cement production was largely nationalised, with Venezuelan-located plants belonging to Mexico's Cemex
, Switzerland's Holcim
, and France's Lafarge
being bought by the government. Compensations of $552 million for Holcim and $267 million for Lafarge were agreed upon, with both of those companies agreeing to stay on as minority partners and retaining 10 to 15 percent shares; the takeover from Cemex was less friendly and compensation had not been agreed on as of March 2009. According to Chávez, the cement plants were exporting cement that was needed in Venezuela, because they could obtain higher prices outside Venezuela.
In 2008 Chávez ordered the halting of the construction of a mega-shopping mall, in downtown Caracas by Sambil, saying that it was inappropriate development in an already overcrowded, over-trafficked area. He suggested the land would be nationalized and turned into a hospital or university.
A food plant owned by US giant Cargill
was nationalised in early 2009.
On February 28, 2009 Chavez ordered the military to temporarily seize control of all the rice processing plants in the country and force them to produce at full capacity, which he claimed they had been avoiding in response to the price caps. The country's largest food processor, Empresas Polar
, said that the regulated price of plain rice was well below the cost of production, and as a result 90% of its rice output was flavoured rice not subject to price controls. It also said that its plant
was operating at 50% capacity due to raw material shortages; the government however claimed to have found 2 months' worth of raw rice in storage at the plant.
In mid-2009 the Venezuelan government took temporary control of Fama de America and Cafe Madrid coffee plants, accusing the manufacturers, which together have 70% of the Venezuelan market, of hoarding and of smuggling coffee to Colombia.
Banco de Venezuela
was nationalized in 2009; Banco Bicentenario
was created in late 2009 from nationalized banks taken over in the course of the Venezuelan banking crisis of 2009-2010
.
From November 2007 until the end of 2007, all bank transactions between businesses had a 1.5% tax extracted, as a means of controlling inflation by soaking up excess liquidity.
In 2007, the Venezuelan government had reduced sales tax
on basic items from 14% to 9%, saying that the measure was a regressive tax on the poor, and expressed plans to ultimately remove them altogether.. From march 2009 VAT tax rate was raised to 12% to cover for oil price reduction
In October 2009, SENIAT, the Venezuelan tax collection agency announced that it would tax cigarettes and alcohol, in order to reduce their consumption.
is currently working on several lines, hopefully connecting most of Venezuela via railway by 2020, which, if achieved, would lead to a significant improvement in the countries' transport infrastructure.
At the beginning of August 2008, Chávez announced that Venezuela would partner with Argentina and Brazil to build a train that would connect Venezuela's capital (Caracas) with Argentina's (Buenos Aires), and cities in between .
The Chavez government has launched a National Railway Development Plan designed to create 15 railway lines across the country, with 8500 miles (13,679.4 km) of track by 2030. The network is being built in cooperation with China Railways, which is also cooperating with Venezuela to create factories for tracks, railway cars and eventually locomotives.
, somewhat analogous to the Euro), regional credit/financial institutions such as Bancosur (to remove dependence on the IMF/World Bank), and trade pacts (such as ALBA
, Petrosur, or bartering oil for doctors with Cuba).
Cuba
, Nicaragua
, Honduras
, Bolivia
, and the Dominican Republic
have joined Venezuela as members of ALBA. For example, in exchange for discounted Venezuelan oil (which Cuba needs due to the U.S. embargo), Cuba (which has a relatively well-developed system of medical care) has provided Venezuela with thousands of doctors and teachers, who provide healthcare and education to Venezuela's poor. Chávez describes ALBA as "a flexible model for the integration of Latin America that places social concerns in the forefront." and advocates "socially-oriented" forms of trade instead of those "strictly based on the logic of deregulated profit maximization".
The SUCRE
is a proposed regional currency to be used in commercial exchanges between members of ALBA. The SUCRE is intended to replace the U.S. dollar as a reserve currency
, in order to decrease U.S. control of Latin American economies and to increase stability of regional markets.
Eudomar Tovar, president of the Unified System of Regional Compensation (SUCRE) said:
and World Bank after paying back all his country's debts to both institutions; he charged them with being an imperial tool that aims to exploit poor countries, news sources reported. But as of March 2008, Venezuela is still a member of both institutions.
In 2005, the Venezuelan government partnered with Argentina, and Brazil to negotiate their foreign debt as a collective bloc. Chávez has also suggested that at least 10% of all Latin American foreign debt be paid into an "International Humanitarian Fund", that would be used to fund social programs without having neo-liberal structural adjustment
requirements attached.
In January 2008, Hugo Chávez stated that Latin America
n countries needed to begin their withdrawal of foreign currency reserves from United States-based banks.
and the People's Republic of China
. Sino-Venezuelan trade was less than $500m per year before 1999, and reached $7.5bn in 2009, making China Venezuela's second-largest trade partner, and Venezuela China's biggest investment destination in Latin America. Various bilateral deals have seen China invest billions in Venezuela, and Venezuela increase exports of oil and other resources to China.
Some economists argue that this subsidized growth could stop if oil prices decline, but the government argues its budget is dependent only on oil being above US$29 a barrel, whilst its 60 billion dollars in reserves can be deployed as a cushion against any sudden and sustained drop in oil revenues.
Datos reports real income grew by 137% between 2003 and Q1 2006. Official poverty figures dropped by 10%. The World Bank
calculated a 10% drop in poverty.
Some social scientists and economist
s claim that the government's reported income poverty figures have not fallen in proportion to the country's vast petroleum revenues in the last two years, much of which has been directed to social spending to decrease the cost of living.
Venezuela's infant mortality rate fell by 18.2% between 1998 and 2006.
dropped from 29.9% in 1998 to 14.4% in 2005. During 2005, imported goods were cheaper than commodities made in Venezuela; variability in the price of goods was linked to import performance and exchange stability. In the second quarter of 2006, gross fixed investment
was the highest ever recorded by the Banco Central de Venezuela since it started tracking the statistic in 1997.
In June 2007, the Bank for International Settlements
forecast an economic growth of 7% and a 18.9% inflation
rate for Venezuela.
For 2009 the Venezuelan government set a targeted annual inflation rate of 15% but the year ended with an annual rate of 27.1%.
In July 2010 it was reported that the annual Venezuelan inflation rate was "the highest in the region and one of the highest in the world." The annual rate stood at 30% through July and the rate for the first seven months of the year was 18% reflecting a "trend toward slower inflation".
Per capita food consumption in Venezuela grew from 370 pounds per year in 1998 to 415 pounds per year in 2009. The recommended amount of food that each person should consume per year is about 440 pounds per year. Average caloric intake has risen from 91.0% of the recommended levels in 1998 to 101.6% in 2007. Malnutrition related mortality fell by more than 50% -- from 4.9 to 2.3 deaths per 100,000 in population between 1998 and 2006.
Since the main agricultural measures of the Chávez administration took effect, however, food imports have risen dramatically, and such agricultural mainstays as beef, rice, and milk have seen drops in production. With declining oil revenues, food shortages have become more widespread.
Spending on education as a percentage of GDP (which has grown dramatically since 1998) stood at 5.1% in 2006, as opposed to 3.4% in the last year of the Caldera government. Spending on health has increased from 1.6% of GDP in 2000 to 7.71% in 2006. Spending on housing "receives low public support", increasing only "from 1% in GDP to 1.6% in 2006". Housing has become the "top priority" of the Chavez administration following the torrential rains of 2010 that swept the country and exacerbated the housing issue through destruction of property. The shortage of housing is estimated at 1.5 million, with the administration working with its foreign partners such as China
, Iran
and Belarus
to construct "low-cost, high quality homes for those in need".
Teresa A. Meade, writes that Chávez's popularity "rests squarely on the lower classes who have benefited from these health initiatives and similar policies".
Venezuela's public debt, as a percentage of GDP, is "significantly lower" than that of the United States.
wrote that jobs are much less scarce now than when Chávez took office, with unemployment at 8% in 2009 compared with 15% in 1999. He also stated that the number of front line doctors have increased 10 fold in the public sector
and that enrolment in higher education
has doubled, noting that these statistics are backed up by the UN and the World Bank
.
According to government figures, unemployment
has dropped by 7.7% since the start of Chávez's presidency. It dropped to 10% in February 2006, from the 20% high in 2003 during a two-month strike and business lockout that shut down the country's oil industry. According to the government, an unemployed person is a citizen above the age of 15 who has been seeking employment for more than one week.
. As measured by prices on local stock exchanges, foreign investors were willing to pay on average 16.3 years worth of earnings to invest in Colombia
n companies, 15.9 in Chile
, 11.1 in Mexico, and 10.7 in Brazil
, but only 5.8 in Venezuela. The World Economic Forum
ranked Venezuela as 82 out of 102 countries on a measure of how favorable investment was for financial institutions. In Venezuela, a foreign investor needed an average of 119 days and had to complete 14 different applications to organize a business, while the average in OECD countries was 30 days and six applications.
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
n president Hugo Chávez
Hugo Chávez
Hugo Rafael Chávez Frías is the 56th and current President of Venezuela, having held that position since 1999. He was formerly the leader of the Fifth Republic Movement political party from its foundation in 1997 until 2007, when he became the leader of the United Socialist Party of Venezuela...
has proposed and enacted democratic socialist economic policies. Domestic policies have included redistribution of wealth, land reform, and democratization of economic activity via workplace self-management and creation of worker-owned cooperatives. Internationally the Chávez administration has attempted to increase autonomy from U.S. and European governments by increasing control over domestic oil production and promoting economic and political integration with other Latin American nations. One of the policy objectives has been to diversify the economy of Venezuela
Economy of Venezuela
The economy of Venezuela is largely based on the petroleum sector and manufacturing. Revenue from petroleum exports accounts for about 18% of the country's GDP and roughly 95% of total exports. Venezuela is the fifth largest member of OPEC by oil production. From the 1950s to the early 1980s the...
away from its dependence on oil.
Petroleum and natural resources
Venezuela is a major producer of oil products which remain the keystone of the Venezuelan economy. Venezuela's crude oil production was 3.12 million barrels a day when Chávez took office in 1999, and in 2007 was 2.949 million barrels a day, while oil prices increased 660% from 1998 to 2008, leading to a significant increase in earnings. The state income from oil revenue has "increas[ed] from 51% of total income in 2000 to 56% 2006"; oil exports "have grown from 77% in 1997 [...] to 89% in 2006"; and some economists view "this dependence on oil is one of the chief problems facing the Chávez government".The economist Mark Weisbrot
Mark Weisbrot
Mark Weisbrot is an American economist, columnist and co-director, with Dean Baker, of the Center for Economic and Policy Research in Washington, D.C. As a commentator, he contributes to publications such as New York Times, the UK's The Guardian, and Brazil's largest newspaper, Folha de S...
, in an analysis of the Chavez administration, said: "The current economic expansion began when the government got control over the national oil company in the first quarter of 2003. Since then, real (inflation adjusted) GDP has nearly doubled, growing by 94.7 percent in 5.25 years, or 13.5 percent annually." Additionally, real GDP measurements use "price deflators", which do not take into account the 660% increase in the price of oil from 1998 to 2008, and instead only take into account the quantity of oil produced, which has slightly decreased due to the administration's decision to cut production to increase earnings by raising prices.
In response to the low oil prices at the end of the 1990s, Chavez played a leading role within the Organization of the Petroleum Exporting Countries (OPEC) to reinvigorate that organisation and obtain members' adherence to lower production quotas designed to drive up the oil price. Venezuelan oil minister Alí Rodríguez Araque's announcement in 1999 that his country would respect OPEC production quotas marked "a historic turnaround from the nation's traditional pro-US oil policy."
On 13 November 2001, under the enabling law authorized by the National Assembly
National Assembly of Venezuela
The National Assembly is the legislative branch of the Venezuelan government. It is a unicameral body made up of a variable number of members, who are elected by "universal, direct, personal, and secret" vote partly by direct election in state-based voting districts, and partly on a state-based...
, President Chávez enacted the Hydrocarbons Law, which came into effect in January 2002. The new Hydrocarbons Law required that a minimum of 51% of PDVSA be owned by the Venezuelan government, and increased royalties paid by foreign corporations from 16.6% to 30% in an attempt to repatriate more petroleum funds to Venezuela.
Chávez has redirected the focus of PDVSA by bringing it more closely under the direction of the Ministry of Energy and Petroleum. In 2004, $1.5 billion of the $15 billion budget of PDVSA was directed to be used for funding social programs, and later this was raised to $4 billion per year.
Chávez has also explored the liquidation of some or all of the assets belonging to PDVSA's US-based subsidiary, Citgo
Citgo
CITGO Petroleum Corporation is a United States-incorporated, Venezuela-owned refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. The company is owned by PDV America, Inc., an indirect wholly owned subsidiary of Petróleos de...
, which has received criticism amongst the Venezuelan public due to corruption, and links to the U.S.
According to finance minister Nelson Merentes, the Venezuelan 2006 budget would get more income from taxation than from the petroleum industry, unlike formerly.
During the December 2002-February 2003 lock-out where managers and skilled highly paid technicians of PDVSA locked out
Lockout
Lockout may refer to:* Lockout , a type of work stoppage* Lockout * Lockout chip, a computer chip in a video game system to prevent use of unauthorized software* Lock-out device, part of a signaling system used on game shows...
PDVSA and sabotaged the industry, petroleum production and refining by PDVSA almost ceased. This sabotage was politically motivated; at the same time, many business owners across Venezuela closed down their stores in order to create instability within Venezuela. Despite the lock-out, these activities eventually were substantially restarted when the rank-and-file oil workers restarted PDVSA without the managers. Out of a total of 45,000 PDVSA management and workers, 19,000 were subsequently dismissed, many of which were managers and highly paid technicians.
Cooperatives and economic democratization
Since Chávez was elected in 1998, over 100,000 worker-owned cooperatives—representing approximately 1.5 million people—have been formed with the assistance of government start-up credit, technical training, and by giving preferential treatment to cooperatives in state purchases of goods and equipment. As of 2005, approximately 16% of Venezuela's formally employed citizens were employed in a cooperative. However, a 2006 census showed that as many as 50% of the cooperatives were either functioning improperly, or were fraudulently created to gain access to public funds.Additionally, several thousand "Communal Councils" (Consejos Communales) have been created. In these Communal councils, citizens form assemblies to determine what will be done with government funds in their local area. Groups are made up of 150-200 or more families in urban areas, and starting at around 15-20 families in rural areas, and their decisions are binding to local government officials. 21,000 of these groups were created in 2007, and 30,179 by 2009. As of 2007, about 30% of state funds were directly controlled by communal councils, with a goal of eventually having them control 50%.
As of 2007, 300 communal banks had been established, and had received $70 million in government funding, to be used for local micro-loans. With these funds, the councils have implemented thousands of community projects, such as paving streets, creating sports fields, building medical centers, and constructing sewage and water systems. Some leaders have proposed that the councils replace city and state governments entirely, or work parallel to them. By 2008, there were more than 3,500 such banks, which received $140 million in funding in 2008, and were budgeted to receive $1.6 billion in 2009.
As of February 2010, the Venezuelan state had given technical and financial assistance to almost 200 worker-owned communes. A total of $23 million in government funding was provided to these communes. The communes have their own "productive gardens” that grow their own vegetables as a method of self-supply
Autarky
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
. A spokesperson from one of the Communal Councils, Morelbis Aguiar, explained that a commune, which is often made up of several communal councils, is local self-government “where we, the people, we are the ones who decide what our community wants and what the improvements are that we want to work on in our area. It’s not the state that comes and decides; it's us who decides which street we need, where to locate the university or high school… We decide what we’re going to do with the financing and resources that the revolutionary government gives us."
Poverty reduction programs and social spending
One of the primary ways that the Chávez administration is attempting to fix the problem of economic inequalityEconomic inequality
Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...
is by wealth redistribution, primarily via land reform, and social programs. The Chávez government has pursued a series of Bolivarian Missions
Bolivarian Missions
The Bolivarian Missions are a series of social justice, social welfare, anti-poverty, educational, electoral and military recruiting programs implemented under the administration of the current Venezuelan president Hugo Chávez...
aimed at providing public services (such as food, healthcare, and education) to improve economic, cultural, and social conditions. In 2003, the Venezuelan government created Mission Mercal
Mission Mercal
Mission Mercal is a Bolivarian Mission established in Venezuela under the government of Hugo Chávez. The Mission involves a state-run company called Mercados de Alimentos, C.A. , which provides subsidised food and basic goods through a nationwide chain of stores...
-- a chain of state-owned grocery stores, selling staple foods at 39% below market value, and which tries to buy 40% of all of its products from small or medium sized domestic producers. As of 2005, there were 13,392 Mercals and 102 warehouses, in addition to 31 recently built Supermercals, 12,500 Mercalitos (small Mercals), and several hundred cooperatives and other entities that work in conjunction with Mercal. Additionally, the government has created 6,000 mobile soup kitchens, which together with Mercal, comprise 22% of national food distribution.
The government has created an extensive micro-credit program, targeted towards the poor, with a goal of enabling them to start their own small businesses. Several micro-credit banks have been created, including Banco del Pueblo (People's Bank), Banco de la Mujer (Women's Bank), and the Fondo de Desarollo Microfinanciero (Fund for Micro-Finance Development, "Fondemi"). Additionally, banking laws passed in 2001 require that all banks set aside at least 3% of their capital for micro-loans.
As part of its "Miracle Mission" program, the Venezuela and Cuban governments have collaborated together to perform free eye care to over 1,139,798 people with an average of 5,000 operations occurring on a weekly basis in 74 medical centers around Venezuela, as of July 2010. Several thousand people from other Latin American nations—including Argentina, Bolivia, Brazil, Costa Rica, Chile, the Dominican Republic, Ecuador, Guatemala, Nicaragua, Paraguay, Peru, and Uruguay—have also been given free treatment under the program.
Since 2003, the Venezuelan government has set price controls
Price ceiling
A price ceiling is a government-imposed limit on the price charged for a product. Governments intend price ceilings to protect consumers from conditions that could make necessary commodities unattainable. However, a price ceiling can cause problems if imposed for a long period without controlled...
on around 400 basic foods in an effort according to the Washington Post, to "counter inflation and protect the poor", and in March 2009, they set minimum production quotas for 12 basic foods that were subject to price controls, including white rice, cooking oil, coffee, sugar, powdered milk, cheese, and tomato sauce. Some food processing companies claimed that regulated prices had not kept pace with inflation, hurting their profits. These price ceilings have motivated food producers to start hoarding foods, so that they can either sell it on the black market or smuggle it out of the country for a higher price, causing sporadic shortages for some basic food items.
A 2010 OAS report criticizing Venezuela's human rights standards indicated achievements in addressing illiteracy, healthcare and poverty, and economic and social advances.
Agriculture and land reform
The Chávez government has passed several laws designed to support food sovereigntyFood sovereignty
"Food sovereignty" is a term coined by members of Via Campesina in 1996 to refer to a policy framework advocated by a number of farmers, peasants, pastoralists, fisherfolk, indigenous peoples, women, rural youth and environmental organizations, namely the claimed "right" of peoples to define their...
by increasing domestic agricultural production in Venezuela
Agriculture in Venezuela
Agriculture in Venezuela has a much smaller share of the economy than in any other Latin American country. From the discovery of oil in Venezuela in the early twentieth century to the 1940s, the importance of agriculture declined rapidly, and with the beginning of large-scale industrial development...
and reducing agricultural imports, and to more equitably redistribute unused agricultural lands. Before Chavez was elected 75% of the agricultural land in Venezuela was owned by 5% of landowners and the smallest 75% landowners controlled only 6% of the land. Much of the land held by large landholders, was held in extremely large "latifundios", and was idle and unproductive. The "Law of the Land" passed by the Chávez administration, declared such landholdings to be illegal, and mandated that it be given to families who needed land to grow food. As of January 2009, the Venezuelan government had redistributed nearly 2.7 million hectares of idle land (6.6 million acres—nearly 1/3 of the latifundio land existing prior to 1998) to 180,000 landless peasant families. Additionally, reforms to Venezuela's Penal Code de-criminalized the occupation of idle private lands by landless peasants, and has started an initiative known as Mision Zamora to assist small and medium scale producers gain title to land. Although the Venezuelan government allows small farmers to work the land, it does not always give them title to the land, and they are sometimes required to work as part of a collective.
Agricultural credit has also increased dramatically, from approximately $164 million in 1998 to nearly $7.6 billion in 2008, with many of the credit decisions being made by local communal councils, rather than government bureaucrats. Additionally, in 2008, several laws were passed to provide financial assistance to struggling small farmers, such as debt relief programs and crop-failure insurance.
The Venezuelan government, under the Chávez administration, also began offering free technical assistance and education to farmers, through its National Agriculture Research Institute (INIA), which performs agricultural research and projects with small farmers.
The government is also trying to introduce large-scale urban agriculture
Urban agriculture
Urban agriculture is the practice of cultivating, processing and distributing food in, or around, a village, town or city. Urban agriculture in addition can also involve animal husbandry, aquaculture, agro-forestry and horticulture...
to the populace, to increase local self-reliance. In Caracas
Caracas
Caracas , officially Santiago de León de Caracas, is the capital and largest city of Venezuela; natives or residents are known as Caraquenians in English . It is located in the northern part of the country, following the contours of the narrow Caracas Valley on the Venezuelan coastal mountain range...
, the government has launched Organoponico Bolivar I, a pilot program to bring organopónicos
Organopónicos
Organopónicos are a system of urban organic gardens in Cuba. They often consist of low-level concrete walls filled with organic matter and soil, with lines of drip irrigation laid on the surface of the growing media...
to Venezuela. Urban agriculture has not been embraced in Caracas as it has in Cuba. Unlike Cuba, where organopónicos arose from the bottom-up out of necessity, the Venezuelan organopónicos are clearly a top-down initiative based on Cuba's success. Another problem for urban agriculture in Venezuelan is the high amounts of pollution
Pollution
Pollution is the introduction of contaminants into a natural environment that causes instability, disorder, harm or discomfort to the ecosystem i.e. physical systems or living organisms. Pollution can take the form of chemical substances or energy, such as noise, heat or light...
in major Venezuelan urban areas. At the Organoponico Bolivar I, a technician comes every 15 days to take a reading from the small pollution meter in the middle of the garden.
Urban land titling program
Following an initial proposal for a land titlingLand titling
Land titling is a form of land reform in which private individuals and families are given formal property rights for land which they have previously occupied informally or used on the basis of customary land tenure...
program in 2000 by the opposition Justice First
Justice First
Justice First Movement is a centrist political party in Venezuela.-History:Primero Justicia was created in 1992 as a Civil Association by a group of university students who were concerned about what they saw as a deterioration of judicial power in the country and joined their efforts to...
, influenced by the Peruvian economist Hernando de Soto Polar, President Hugo Chavez
Hugo Chávez
Hugo Rafael Chávez Frías is the 56th and current President of Venezuela, having held that position since 1999. He was formerly the leader of the Fifth Republic Movement political party from its foundation in 1997 until 2007, when he became the leader of the United Socialist Party of Venezuela...
issued Presidential Decree 1666 in February 2002, providing a legal basis for Urban Land Committees
Urban Land Committees
Urban Land Committees are Venezuelan local neighbourhood committees which, in conjunction with Venezuelan Communal Councils, develop land titling in urban areas. CTUs are organised and set up by local communities , in a contiguous area defined by the community...
(Comités de Tierras Urbanas, CTUs) to be formed. These develop land titling
Land titling
Land titling is a form of land reform in which private individuals and families are given formal property rights for land which they have previously occupied informally or used on the basis of customary land tenure...
in urban areas. Under the February 2002 decree, local committees (representing 100-200 families) may apply to a government office for the local "barrio
Barrio
Barrio is a Spanish word meaning district or neighborhood.-Usage:In its formal usage in English, barrios are generally considered cohesive places, sharing, for example, a church and traditions such as feast days...
" residents to be given property title
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
for state-owned land they have informally occupied on a long-term basis. The committees operate on the principle of participatory democracy
Participatory democracy
Participatory Democracy, also known as Deliberative Democracy, Direct Democracy and Real Democracy , is a process where political decisions are made directly by regular people...
, and create maps of the local area, on the basis of which (after official verification) land titles are drawn up. By mid 2005, there were around 5000 CTUs, representing around 5m Venezuelans, and the government had issued over 84,000 titles to 126,000 families, benefiting about 630,000 inhabitants (out of a total urban poor population of around 10m). By October 2006 the government said that over 200,000 titles had been assigned, benefiting about 1m inhabitants.
Nationalizations
The Chávez government nationalizedNationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
several industries in 2007 and 2008, as part of its policy of wealth redistribution and reducing the influence of multinational corporations.
A January 3, 2007 article in the International Herald Tribune
International Herald Tribune
The International Herald Tribune is a widely read English language international newspaper. It combines the resources of its own correspondents with those of The New York Times and is printed at 38 sites throughout the world, for sale in more than 160 countries and territories...
reported that price controls were causing shortages of materials used in the construction industry. According to an April 4, 2008 article from CBS News
CBS News
CBS News is the news division of American television and radio network CBS. The current chairman is Jeff Fager who is also the executive producer of 60 Minutes, while the current president of CBS News is David Rhodes. CBS News' flagship program is the CBS Evening News, hosted by the network's main...
, Chavez ordered the nationalization of the cement industry, in response to the fact that the industry was exporting its products in order to receive prices above those which it was allowed to obtain within the country.
Chavez has nationalized Venezuela's largest telephone companies and electric utilities. In 2008 he ordered the halting of the construction of a shopping mall, and said the land would be nationalized and turned into a hospital or university.
The nation's largest private electricity producer, 82-percent owned by US-based AES Corp, was obtained by paying $740 million to AES for its share – fair compensation according to financial analysts cited by Reuters.
In 2007 the main telephone company, CANTV
CANTV
CANTV is one of the first telephone service enterprises in Venezuela, founded in 1930. The company was re-nationalized in 2007.As of May 9, 2008, Cantv’s customer base numbered 10.1 million mobile subscribers, 5.2 million fixed telephony subscribers and 1,000,000 broadband subscribers.- Origins...
, was nationalised by buying US-based Verizon Communications
Verizon Communications
Verizon Communications Inc. is a global broadband and telecommunications company and a component of the Dow Jones Industrial Average...
' 28.5 percent share for $572 million – again, fair compensation according to analysts cited by Reuters.
In 2008 the Venezuelan government nationalized the leading steel company, Argentine-controlled Sidor
Sidor
Siderúrgica de Orinoco C.A. "Alfredo Maneiro" is the biggest Venezuelan steel corporation. The company is situated in an industrial zone in Ciudad Guayana, Bolívar State, near the Orinoco River. Major iron deposits were found in the area in 1926 and 1947...
, following months of strikes and labour-management disputes.
In 2008, cement production was largely nationalised, with Venezuelan-located plants belonging to Mexico's Cemex
Cemex
CEMEX is the world's largest building materials supplier and third largest cement producer. Founded in Mexico in 1906, the company is based in Monterrey, Mexico...
, Switzerland's Holcim
Holcim
Holcim is a Swiss-based global company supplying cement and aggregates . The company also supplies ready-mix concrete and asphalt including associated construction services.-Holcim Group:...
, and France's Lafarge
Lafarge
Lafarge is a French industrial company specialising in four major products: cement, construction aggregates, concrete and gypsum wallboard. In 2010 the company was the world's second-largest cement manufacturer by mass shipped behind Holcim.-History:...
being bought by the government. Compensations of $552 million for Holcim and $267 million for Lafarge were agreed upon, with both of those companies agreeing to stay on as minority partners and retaining 10 to 15 percent shares; the takeover from Cemex was less friendly and compensation had not been agreed on as of March 2009. According to Chávez, the cement plants were exporting cement that was needed in Venezuela, because they could obtain higher prices outside Venezuela.
In 2008 Chávez ordered the halting of the construction of a mega-shopping mall, in downtown Caracas by Sambil, saying that it was inappropriate development in an already overcrowded, over-trafficked area. He suggested the land would be nationalized and turned into a hospital or university.
A food plant owned by US giant Cargill
Cargill
Cargill, Incorporated is a privately held, multinational corporation based in Minnetonka, Minnesota. Founded in 1865, it is now the largest privately held corporation in the United States in terms of revenue. If it were a public company, it would rank, as of 2011, number 13 on the Fortune 500,...
was nationalised in early 2009.
On February 28, 2009 Chavez ordered the military to temporarily seize control of all the rice processing plants in the country and force them to produce at full capacity, which he claimed they had been avoiding in response to the price caps. The country's largest food processor, Empresas Polar
Empresas Polar
Empresas Polar is a Venezuelan corporation, that started as a brewery founded in 1941 by Lorenzo Alejandro Mendoza Fleury in Antímano, Caracas. It is the largest and best known brewery in Venezuela, but has since long diversified to an array of industries, mostly related to food processing and...
, said that the regulated price of plain rice was well below the cost of production, and as a result 90% of its rice output was flavoured rice not subject to price controls. It also said that its plant
Alimentos Polar, C.A.
Alimentos Polar, C.A. is an Empresas Polar subsidiary that operates in the foods and drinks area, manufacturing and sending deliveries to its clients.-Rice:...
was operating at 50% capacity due to raw material shortages; the government however claimed to have found 2 months' worth of raw rice in storage at the plant.
In mid-2009 the Venezuelan government took temporary control of Fama de America and Cafe Madrid coffee plants, accusing the manufacturers, which together have 70% of the Venezuelan market, of hoarding and of smuggling coffee to Colombia.
Banco de Venezuela
Banco de Venezuela
Banco de Venezuela is an international universal bank based in Caracas. It was the market leader in Venezuela until 2007, when it fell to third place, with an 11.3% market share for deposits; its major competitors are Banesco, Banco Mercantil and BBVA Banco Provincial...
was nationalized in 2009; Banco Bicentenario
Banco Bicentenario
Banco Bicentenario is a bank based in Caracas. It was created in late 2009 through the merger with the existing state-owned bank Banfoandes of three banks and after BaNorte Bank, nationalised as a result of the 2009 banking crisis. The new bank has around 20% of Venezuelan bank deposits....
was created in late 2009 from nationalized banks taken over in the course of the Venezuelan banking crisis of 2009-2010
Venezuelan banking crisis of 2009-2010
The 2009-2010 banking crisis occurred in Venezuela when a number of the banks of Venezuela were taken over by the government, after "the revelation that several banks owned by [Hugo Chavez] supporters were in financial trouble after engaging in questionable business practices...
.
Taxation
The Venezuelan government has instituted several new taxes on non-priority and luxury goods, aiming to shift the nation's tax burden from the poor to the wealthy, and to control inflation.From November 2007 until the end of 2007, all bank transactions between businesses had a 1.5% tax extracted, as a means of controlling inflation by soaking up excess liquidity.
In 2007, the Venezuelan government had reduced sales tax
Sales tax
A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....
on basic items from 14% to 9%, saying that the measure was a regressive tax on the poor, and expressed plans to ultimately remove them altogether.. From march 2009 VAT tax rate was raised to 12% to cover for oil price reduction
In October 2009, SENIAT, the Venezuelan tax collection agency announced that it would tax cigarettes and alcohol, in order to reduce their consumption.
Transportation
Rail transport in Venezuela has been practically non-existent since the 1950s (with only one line operating), but the IAFEInstituto Autónomo de Ferrocarriles del Estado
The Instituto de Ferrocariles del Estado is a state-run organization of Venezuela that manages the railway systems of the country...
is currently working on several lines, hopefully connecting most of Venezuela via railway by 2020, which, if achieved, would lead to a significant improvement in the countries' transport infrastructure.
At the beginning of August 2008, Chávez announced that Venezuela would partner with Argentina and Brazil to build a train that would connect Venezuela's capital (Caracas) with Argentina's (Buenos Aires), and cities in between .
The Chavez government has launched a National Railway Development Plan designed to create 15 railway lines across the country, with 8500 miles (13,679.4 km) of track by 2030. The network is being built in cooperation with China Railways, which is also cooperating with Venezuela to create factories for tracks, railway cars and eventually locomotives.
International economic policies
One of the Chávez administration's primary goals is to reduce the influence of foreign capitalists in Venezuela, as part of its overall push towards localized economic democratization. Towards this aim, it has strongly promoted various forms of Latin American economic and political integration—such as regional currencies (e.g. SUCRESucre
Sucre, also known historically as Charcas, La Plata and Chuquisaca is the constitutional capital of Bolivia and the capital of the department of Chuquisaca. Located in the south-central part of the country, Sucre lies at an elevation of 2750m...
, somewhat analogous to the Euro), regional credit/financial institutions such as Bancosur (to remove dependence on the IMF/World Bank), and trade pacts (such as ALBA
Alba
Alba is the Scottish Gaelic name for Scotland. It is cognate to Alba in Irish and Nalbin in Manx, the two other Goidelic Insular Celtic languages, as well as similar words in the Brythonic Insular Celtic languages of Cornish and Welsh also meaning Scotland.- Etymology :The term first appears in...
, Petrosur, or bartering oil for doctors with Cuba).
Regional integration
One of the Chávez administrations' key goals has been the creation of a regional trade/political bloc, the Bolivaran Alliance for the Americas (ALBA), which would act as an alternative to the Free Trade Agreement of the Americas (FTAA). The Venezuelan government claims that the FTAA's decision-making process is undemocratic, that it boosts the power of corporations at the expense of national sovereignty, and that privatization kills the poor.Cuba
Cuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
, Nicaragua
Nicaragua
Nicaragua is the largest country in the Central American American isthmus, bordered by Honduras to the north and Costa Rica to the south. The country is situated between 11 and 14 degrees north of the Equator in the Northern Hemisphere, which places it entirely within the tropics. The Pacific Ocean...
, Honduras
Honduras
Honduras is a republic in Central America. It was previously known as Spanish Honduras to differentiate it from British Honduras, which became the modern-day state of Belize...
, Bolivia
Bolivia
Bolivia officially known as Plurinational State of Bolivia , is a landlocked country in central South America. It is the poorest country in South America...
, and the Dominican Republic
Dominican Republic
The Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries...
have joined Venezuela as members of ALBA. For example, in exchange for discounted Venezuelan oil (which Cuba needs due to the U.S. embargo), Cuba (which has a relatively well-developed system of medical care) has provided Venezuela with thousands of doctors and teachers, who provide healthcare and education to Venezuela's poor. Chávez describes ALBA as "a flexible model for the integration of Latin America that places social concerns in the forefront." and advocates "socially-oriented" forms of trade instead of those "strictly based on the logic of deregulated profit maximization".
The SUCRE
Sucre
Sucre, also known historically as Charcas, La Plata and Chuquisaca is the constitutional capital of Bolivia and the capital of the department of Chuquisaca. Located in the south-central part of the country, Sucre lies at an elevation of 2750m...
is a proposed regional currency to be used in commercial exchanges between members of ALBA. The SUCRE is intended to replace the U.S. dollar as a reserve currency
Reserve currency
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...
, in order to decrease U.S. control of Latin American economies and to increase stability of regional markets.
Eudomar Tovar, president of the Unified System of Regional Compensation (SUCRE) said:
Foreign debt
Chávez announced Venezuela's withdrawal from the International Monetary FundInternational Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
and World Bank after paying back all his country's debts to both institutions; he charged them with being an imperial tool that aims to exploit poor countries, news sources reported. But as of March 2008, Venezuela is still a member of both institutions.
In 2005, the Venezuelan government partnered with Argentina, and Brazil to negotiate their foreign debt as a collective bloc. Chávez has also suggested that at least 10% of all Latin American foreign debt be paid into an "International Humanitarian Fund", that would be used to fund social programs without having neo-liberal structural adjustment
Structural adjustment
Structural adjustments are the policies implemented by the International Monetary Fund and the World Bank in developing countries. These policy changes are conditions for getting new loans from the International Monetary Fund or World Bank, or for obtaining lower interest rates on existing loans...
requirements attached.
Currency and foreign reserves
In order to prevent capital flight, and maintain the stability of the bolivar (Venezuela's currency), the Chávez administration enacted strict currency controls in January 2003, making it more difficult for investors to exchange bolivars for dollars. The controls forced many Venezuelan investors to seek out domestic investment opportunities, rather than foreign investments. It also resulted in a large increase in foreign currency reserves, which had reached $35 billion by 2006, which is as high as Canada's (which has a slightly higher population), and on a per capita basis is much larger than Germany's ($55 billion)In January 2008, Hugo Chávez stated that Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
n countries needed to begin their withdrawal of foreign currency reserves from United States-based banks.
Foreign trade
Since 1998 People's Republic of China-Venezuela relations have seen an increasing partnership between the government of the Venezuelan president Hugo ChávezHugo Chávez
Hugo Rafael Chávez Frías is the 56th and current President of Venezuela, having held that position since 1999. He was formerly the leader of the Fifth Republic Movement political party from its foundation in 1997 until 2007, when he became the leader of the United Socialist Party of Venezuela...
and the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
. Sino-Venezuelan trade was less than $500m per year before 1999, and reached $7.5bn in 2009, making China Venezuela's second-largest trade partner, and Venezuela China's biggest investment destination in Latin America. Various bilateral deals have seen China invest billions in Venezuela, and Venezuela increase exports of oil and other resources to China.
Economic Growth and Production
Since the government increased public control over the national oil company in the first quarter of 2003, real GDP has nearly doubled, growing by 94.7% in 5.25 years (average of 13.5% annually). GDP growth rates were 18% in 2004, 9% in 2005, and 9.6% in the first half of 2006, with the private sector growing at 10.3%. From 2004 to the first half of 2006, non-petroleum sectors of the economy showed growth rates greater than 10%.Some economists argue that this subsidized growth could stop if oil prices decline, but the government argues its budget is dependent only on oil being above US$29 a barrel, whilst its 60 billion dollars in reserves can be deployed as a cushion against any sudden and sustained drop in oil revenues.
Income and Poverty
During the past decade under Chavez, the income poverty rate in Venezuela has dropped by more than half, from 54% of households below poverty level in the first half of 2003, down to 26% at the end of 2008. "Extreme poverty" has fallen even more - by 72%. Further, "these poverty rates measure only cash income, and doesn't take into account increased access to health care or education."Datos reports real income grew by 137% between 2003 and Q1 2006. Official poverty figures dropped by 10%. The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
calculated a 10% drop in poverty.
Some social scientists and economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
s claim that the government's reported income poverty figures have not fallen in proportion to the country's vast petroleum revenues in the last two years, much of which has been directed to social spending to decrease the cost of living.
Venezuela's infant mortality rate fell by 18.2% between 1998 and 2006.
Consumer prices and inflation
According to the Banco Central de Venezuela, inflationInflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
dropped from 29.9% in 1998 to 14.4% in 2005. During 2005, imported goods were cheaper than commodities made in Venezuela; variability in the price of goods was linked to import performance and exchange stability. In the second quarter of 2006, gross fixed investment
Fixed investment
Fixed investment in economics refers to investment in fixed capital, i.e., tangible capital goods , or to the replacement of depreciated capital goods which have been scrapped....
was the highest ever recorded by the Banco Central de Venezuela since it started tracking the statistic in 1997.
In June 2007, the Bank for International Settlements
Bank for International Settlements
The Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...
forecast an economic growth of 7% and a 18.9% inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
rate for Venezuela.
For 2009 the Venezuelan government set a targeted annual inflation rate of 15% but the year ended with an annual rate of 27.1%.
In July 2010 it was reported that the annual Venezuelan inflation rate was "the highest in the region and one of the highest in the world." The annual rate stood at 30% through July and the rate for the first seven months of the year was 18% reflecting a "trend toward slower inflation".
Food and agriculture
By 2008, Venezuela was self-sufficient in its two most important grains, corn and rice, with production increases of 132% for corn and between 71-94% for rice since 1998. The country also achieved self-sufficiency in pork, representing an increase in production of nearly 77% since 1998. Furthermore, Venezuela is on its way to reaching self-sufficiency in a number of other important staple foods, including beef, chicken, and eggs, for which domestic production currently meets 70%, 85%, and 80% of national demand, respectively. Milk production has increased by 900% to 1.96 million tons, fulfilling 55 percent of national demand. Many other crops have seen significant increases over the past decade, including black beans (143%), root vegetables (115%), and sunflowers for cooking oil production (125 percent). This suggests a prioritization of culturally important crops and a focus on matching domestic agricultural production with national consumer demands.Per capita food consumption in Venezuela grew from 370 pounds per year in 1998 to 415 pounds per year in 2009. The recommended amount of food that each person should consume per year is about 440 pounds per year. Average caloric intake has risen from 91.0% of the recommended levels in 1998 to 101.6% in 2007. Malnutrition related mortality fell by more than 50% -- from 4.9 to 2.3 deaths per 100,000 in population between 1998 and 2006.
Since the main agricultural measures of the Chávez administration took effect, however, food imports have risen dramatically, and such agricultural mainstays as beef, rice, and milk have seen drops in production. With declining oil revenues, food shortages have become more widespread.
Government spending
Most areas of social spending have increased dramatically since Chávez was first elected in 1998.Spending on education as a percentage of GDP (which has grown dramatically since 1998) stood at 5.1% in 2006, as opposed to 3.4% in the last year of the Caldera government. Spending on health has increased from 1.6% of GDP in 2000 to 7.71% in 2006. Spending on housing "receives low public support", increasing only "from 1% in GDP to 1.6% in 2006". Housing has become the "top priority" of the Chavez administration following the torrential rains of 2010 that swept the country and exacerbated the housing issue through destruction of property. The shortage of housing is estimated at 1.5 million, with the administration working with its foreign partners such as China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
and Belarus
Belarus
Belarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...
to construct "low-cost, high quality homes for those in need".
Teresa A. Meade, writes that Chávez's popularity "rests squarely on the lower classes who have benefited from these health initiatives and similar policies".
Venezuela's public debt, as a percentage of GDP, is "significantly lower" than that of the United States.
Employment
In June 2010 Mark WeisbrotMark Weisbrot
Mark Weisbrot is an American economist, columnist and co-director, with Dean Baker, of the Center for Economic and Policy Research in Washington, D.C. As a commentator, he contributes to publications such as New York Times, the UK's The Guardian, and Brazil's largest newspaper, Folha de S...
wrote that jobs are much less scarce now than when Chávez took office, with unemployment at 8% in 2009 compared with 15% in 1999. He also stated that the number of front line doctors have increased 10 fold in the public sector
Public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
and that enrolment in higher education
Higher education
Higher, post-secondary, tertiary, or third level education refers to the stage of learning that occurs at universities, academies, colleges, seminaries, and institutes of technology...
has doubled, noting that these statistics are backed up by the UN and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
.
According to government figures, unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
has dropped by 7.7% since the start of Chávez's presidency. It dropped to 10% in February 2006, from the 20% high in 2003 during a two-month strike and business lockout that shut down the country's oil industry. According to the government, an unemployed person is a citizen above the age of 15 who has been seeking employment for more than one week.
Foreign Investment
In 2006, the business environment in Venezuela was listed as "risky and discouraged investment", by the opposition newspaper El UniversalEl Universal (Caracas)
El Universal is a major Venezuelan newspaper, headquartered in Caracas with an average daily circulation of about 150,000. The online version carries news, politics, sports, economy and more....
. As measured by prices on local stock exchanges, foreign investors were willing to pay on average 16.3 years worth of earnings to invest in Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
n companies, 15.9 in Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
, 11.1 in Mexico, and 10.7 in Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
, but only 5.8 in Venezuela. The World Economic Forum
World Economic Forum
The World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....
ranked Venezuela as 82 out of 102 countries on a measure of how favorable investment was for financial institutions. In Venezuela, a foreign investor needed an average of 119 days and had to complete 14 different applications to organize a business, while the average in OECD countries was 30 days and six applications.
Further reading
- Mark Weisbrot; Rebecca Ray "Update on the Venezuelan Economy", Center for Economic and Policy Research, September 2010