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Venezuela

Battle for Control of Economy Continues

Stuart Munckton, Green Left Weekly (radical newspaper), New South Wales, Australia, May 18, 2007

Venezuelan President Hugo Chavez (left) raises his fist in salutation on May 1 as energy minister and president of state-owned oil company PDVSA Rafael Ramirez speaks during a ceremony at an industrial complex in Barcelona following nationalizations of oil projects in the Orinoco Belt. (Photo: Juan Barreto / AFP-Getty Images)

Venezuela's socialist President Hugo Chavez threatened a round of new nationalizations when he announced fresh plans on May 3 to develop Venezuela's economy along pro-people lines. This followed the May 1 nationalizations of oil projects in the Orinoco Belt, believed to be home to the world's largest oil reserves, which gave the state-owned oil company PDVSA at least 60 percent controlling share of existing ventures owned by five oil multinationals, worth $17 billion.

According to a May 5 Associated Press report, Chavez threatened on May 3 to nationalize private banks and the steel company Sidor, unless they were willing to put their resources at the service of the Venezuelan people. The A.P. article claimed, "The warning was yet another sign that Chavez is serious about deepening his socialist revolution." A.P. reported that Chavez invoked Simon Bolivar, who liberated much of South America in the 19th century, to argue that Venezuela was moving toward a classless society: "Bolivar said that one day in Venezuela there will be one single class. That's where we're headed … equality, justice."

The Chavez government has forced private banks to allocate a significant portion of their funds to provide low-cost credit to assist cooperatives, as well as small and medium-sized businesses, as part of the government's attempt to build up Venezuela's industry to overcome dependency on oil revenue. According to A.P., Chavez said: "Private banks have to give priority to financing the industrial sectors of Venezuela at low cost. If banks don't agree with this, it's better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits."

Sidor was privatized before Chavez was elected in 1998 and its work force has been massively reduced from 11,600 employees to 5,700. According to Venezuelanalysis.com on May 4, Chavez slammed Sidor, which has a monopoly over the steel industry, for exporting steel rather than providing it to Venezuelan industry, which means Venezuelan state companies are forced to import the same product from overseas. He threatened to nationalize the company unless this practice ceased.

Venezuelanalysis.com reported on May 9 that Sidor workers, who have long demanded nationalization, marched to call on Chavez to carry his threat out. However according to the report, the Chavez government appears to have come to at least a temporary agreement with Sidor, whereby the company will switch production toward serving the Venezuelan market; sell its produce at a 15-20 percent discount to Venezuelan industry; and pay a higher price for the iron it purchases from a state-owned company, which was previously subsidized.

The May 4 Venezuelanalysis.com article reported that Chavez announced a push to expand industry with the formation of 49 new "productive companies," as part of the government-run "Inside the Factory" program. The new companies will operate as "social production enterprises," which Chavez has referred to as units to help construct socialism, operating according to the needs of society rather than profit. Any private monopoly that did not assist the construction of the new industries would be nationalized, Chavez said, speaking at the inauguration of Invetubos, a pipe-making factory, which had been idle since 1995.

Chavez announced the granting of $600 million to help restart idle factories as units of social production. Venezuelanalysis.com reports that Inside the Factory has so far received $233 million in financing and has created 110,000 new jobs. The program aims to "break the foreign economic dependence of the country by building domestic industrial productive capacity."

According to Venezuelan law, all companies that are nationalized must be compensated at market value, which the government has complied with in all cases. While most of the oil corporations operating in the Orinoco Belt have come to an agreement with PDVSA to allow them to stay in Venezuela as minority shareholders in their old ventures, A.P. reports that Houston-based Conoco-Philips was still holding out on agreeing to such an arrangement. A.P. reported that energy minister Rafael Ramirez insisted Conoco-Philips would be expelled from the country and barred from staying on as a minority partner in a state-run joint venture if it continues to resist the state takeover.

Last year, the Jusepin oil field was seized by the government after the corporations controlling it, Total and BP, failed to come to an agreement to hand PDVSA majority control. Venezuelanalysis.com reported on March 9 that the government had agreed to pay $250 million in compensation for the seizure and BP has been allowed to remain as a minority shareholder in the venture. In 2006, the government resigned 32 oil ventures owned by private corporations, giving PDVSA majority control.

By moving private-owned ventures onto joint ventures under PDVSA's control, the Venezuelan state is able to utilize the technology, capital and expertise of the private corporations, while ensuring that control rests with the Venezuelan government, which will get the lion's share of the revenue. In this way, Venezuela is best able to advance its goal of winning economic sovereignty, with the aim of putting the economy to the service of the Venezuelan people to overcome poverty and underdevelopment.

The government's moves to nationalize oil ventures in the Orinoco Belt, against the corporation's opposition if necessary, are backed by the oil workers. According to a Jan. 29 Reuters report, a statement by five oil worker unions threatened they would seize oilfields if the corporations operating in the Orinoco Belt didn't agree. In particular, workers targeted Exxon-Mobil (which since came to an agreement to hand over the majority of shares in its Orinoco Belt operations to PDVSA) claiming the company was attempting to sabotage negotiations. The union statement claimed: "We are on maximum alert and if necessary will take control of these operations and management of this company to put it truly at the service of the revolution and society."

The recent moves are a further indication of the intention of Chavez, who was re-elected with the largest number of votes in Venezuelan history on an explicitly socialist platform, to struggle to make "socialism of the 21st century" a reality. The battle for Venezuela's economy—between the large corporations that have traditionally dominated it and drained the nation's wealth, and the popular, pro-worker government that is seeking to utilize Venezuela's wealth at the service of the people—continues. A.P. quoted Chavez as saying "I'm not deceiving anyone … All of those who voted for me backed socialism, and that is where we are heading."

From Green Left Weekly.

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