Tuesday, September 20, 2005
UPDATE: 9/23/05: From Bernardo Delgado of Venezuelanalysis.com: President Chavez announced on Tuesday that Venezuela would no longer provide private, national, or foreign mining concessions. “There will no longer be mining concessions. We have to make a big turnaround,” said Chavez. Chavez made the announcement during a ceremony marking the creation of 125 Social Production Companies that are part of Venezuela’s complex of state-owned mining and metal production and processing, the Venezuelan Corporation of Guyana (CVG). . . Instead of providing mining concessions to foreign or domestic companies, Venezuela plans to create a national state-owned mining company that would take charge of all mining activities in the country. . . Since late last year the Chavez government has been engaging in an effort to get transnational companies doing business in Venezuela to pay more taxes and royalties on their oil production activity. Also, it is forcing companies to enter into joint ventures with Venezuela’s state-owned oil company PDVSA, where foreign companies would hold a maximum 49% ownership. Venezuela’s Ministry of Energy and Petroleum says foreign companies owe as much as $3 billion to the Venezuelan state in back taxes.
ORIGINAL POST: 9/20/05: People familiar with the intense conflicts associated with the neoliberal globalization process may find this lengthy post tiresome, but it is not possible to properly understand the economic ambitions of the Bolivarian Revolution without recognizing the alternatives that it has rejected. Much has been written about the economic collapse of Venezuela since the oil boom of the 1970s, and the emergence of Chavez as conditions worsened. But it is also important to understand why the preservation of state control over the aluminum and oil industries, though CVG Alcasa, CVG Venalum and PDVSA, is a marked departure from the discredited form of global economic development implemented around the world by the United States, Japan and Western Europe.
Mexico, China and "Economic Processing Zones"
One need only look to Mexico for a plausible Venezuelan alter ego. Like much of Central and South America, it has traveled down a road similar to Venezuela's, but, unlike Venezuela, perhaps because of its close proximity to the United States, it has not abandoned the neoliberal model. In 1964, Mexico launched the maquiladora program, a program centered around the creation of facilities in the northern border regions to manufacture goods for export in return for foreign exchange, with the intention of relying upon braceros who could no longer work legally within the US. Participation of foreign investors in the Mexican economy expanded through the following decades as a result of an accumulated foreign debt that could not be serviced by a domestic economy that relied upon import substitution.
Mexico acknowledged the primacy of international finance capital over Mexican living standards through the implementation of NAFTA in 1994, an act that ignited the Zapatista revolt in Chiapas. According to Naomi Klein, citing figures provided by the WTO and the Maquila Solidarity Network, maquiladoras increased from 789 in 1985 to 3,509 in 1997, employing 900,000 workers. Corporations associated with Germany, Japan, South Korea and Taiwan invest in these facilities in addition ones identified as American.
As recently documented by David Bacon, in his compelling book, The Children of NAFTA, maquiladora workers toil under brutal conditions and live in appalling squalor, yet still seek to improve their lives through political action. More broadly, as in Venezuela, Mexicans have been forced out of agricultural and manufacturing work into "the unregulated informal economy", an economy in which people work under unpredictable, challenging conditions for low pay and no benefits, such as pensions and health insurance. Increasing social polarization and income inequality is almost universally acknowledged, with neoliberals meekly defending it as the necessary cost of "reform".
Mexico may well be a more benign example, possibly more benign because it is a relatively early manifestation of the phenomenon, of what are bureaucratically described as "export processing zones" or EPZs. Klein describes these zones as social netherworlds, outside any government control, except when police and military are required to suppress labor unrest. Workers live in shantytowns, devoid of public services, such as clean water, roads, education and medical care, as foreign investors frequently live nearby in upscale, planned communities. Investors are often excused from the obligation to pay taxes and import/export duties, and exploit the legally useful fiction of relying upon subcontractors to manage the actual manufacturing process.
EPZs have proliferated all over East and South Asia, even though they constitute the abandonment of post-World War II economic development policies that enabled Japan, South Korea, Singapore and Taiwan to spark the creation of new manufacturing sectors and the reinvigoration of old ones, through tariffs, import restrictions, privileged access to investment and public sector expenditures. As Chalmers Johnson has observed, the economic transformation of East Asia in the decades after World War II resulted from a conscious rejection of prevailing IMF/World Bank dogma.
Perhaps, the most extreme instance of this development model, an instance of the Frankenstein monster escaping the control of his creator, is China. Even if one discounts the xenophobia of recent condemnations of China and its economic system, there is no doubt that it is autocratic and oppressive. Isabel Hilton, in an article recently published in Granta, quotes one man as stating, "In China, it is a death sentence to be a worker." Suffering from a lung disease, silicosis, he, like many of his associates, faces a premature death after having been perpetually exposed to mineral dust in a gem cutting plant.
In Guangdong province, transnational corporations and entrepreneurs collude with local Communist party officials to manufacture an incredible amount of the world's clothing and electronic goods at a tremendous cost to people and the environment. Struck by the perverse juxtaposition of Guangdong's mesmerizing productive energy alongside a grotesque disregard for decent living conditions, Hilton recalls Friedrich Engels' description of Manchester in the 1840s.
Financing Economic Development through State Control of Resources
Chavez, like many in South America, comprehends this globalization process as the lastest incarnation of colonial exploitation. In a world that celebrates the service sector, he is emphasizing industrialization as a means of charting an independent economic course. Here in the United States, there is a tendency to address Venezuela solely in terms of oil and natural gas revenue, but this obscures the actual economic development goals of the Bolivarian Revolution. Resources such as oil, natural gas, alumina, iron ore, bauxite and hydroelectric power are means, not ends. Tariq Ali has frequently insisted upon the urgency of developing an economic alternative to neoliberalism, and Chavez seeks to exploit these resources as a means of doing so. Failure is, quite literally, not an option, as it is estimated that between 50-56% of Venezuelans earn a living, such as it is, in the informal sector, and, in the absence of an effective economic plan, this percentage can only grow given demographic trends.
Aluminum is an interesting case study that enables one to address the issues more clearly, without the static and feedback that is associated with any discussion of oil and natural gas. As a point of departure, it is important to note that much of Venezuela’s oil revenue in the 1970s was wasted on grandiose, export oriented industrial and public sector projects. It is not uncommon to encounter housing complexes and roads built into hillsides that have collapsed from heavy rains, as I did in Caracas, and abandoned processing facilities, like the abandoned coffee plant that now serves as one of the government’s education Misions near Sanare. In response to the implementation of export oriented policies within the aluminum industry that nearly resulted in its privatization, La Causa R, the radical political movement within Bolivar state, advocated the creation of downstream production concentrating on lesser manufacturing activities that would transform raw materials within Venezuela.
Such a perspective strongly colors the current economic development plan within the aluminum industry. CVG, Corporacion Venezolana de Guayana, and its aluminum production arms, CVG Alcasa and CVG Venalum, expect to play an integral role in the social and economic transformation of Venezuela. As described by Elio Sayago and Antonio Guzman of CVG Alcasa, the aluminum industry will assist in the creation of cooperatives that transform the plentiful raw materials of Bolivar state into goods and services. For example, it is believed that cooperatives can successfully manufacture value added products from aluminum such as kitchen wares and specialized parts for production and transportation. Across the decades, we hear the echo of the old Venezuelan dream of an automotive industry, downsized into something more realistic. Ultimately, it is anticipated that the development of this region, especially if the export expectations of the aluminum industry are also realized, will result in the intensification of the shift in population from north to south, and hence, the economic center of gravity as well, thus shattering what a number of Venezuelans described to me as the country’s colonial legacy.
Cooperatives are already being formed to provide services to CVG. They are replacing independent contractors compensated through commissions and rebates. A compelling example of this endeavor can be found in the salvage yards of CVG Venalum. For many years, a variety of indigenous people, like the Warao from the Rio Orinoco delta, and immigrants, from places like neighboring Guyana, crossed a lake and entered the CVG Venalum salvage yard to collect scrap metals created and discarded during the aluminum production process. Much as homeless people in the United States collect aluminum cans, they sort out the scrap metal and sell it for money.
Private companies wanted the profit from recycling the scrap metal, and fought a conflict lasting over 20 years with the scrap collectors who entered the yard. There were seven deaths during this period, with one of them “disappeared” in the lake. In the late 1990s, the Guardia Civil attacked them at the behest of the companies. The termination of the privatization plans for CVG Venalum also apparently ended the violent conflict in the scrap yard. CVG Venalum created seven cooperatives with 110 people, and supplied them with a vehicle to transport scrap as well as gloves, boots and clothes.
In the yard, I personally observed an unusual public relations event that would be incomprehensible in the US. Jose Seguea, the President of CVG Venalum, arrived around noon to give out some clothing and other materials to the scrap collectors. During a subsequent interview, Sequea enthusiastically acknowledged his inspiration by Che Guevara, and his Venezuelan proteges, Douglas Bravo, Francisco Prada and Julio Escalona, by showing me photographs of them. Bravo, paradoxically, repudiated Chavez in 1992, yet this has clearly not cast a shadow over Seguea's opportunities in the industry.
Sequea mingled freely about the collectors, accompanied only by a photographer and some white collar staff, with little or no security. Hector Louis, a longtime collector whose brother had been shot during the conflict, talked amicably with the Sequea and his entourage, an entourage that included my indispensable political guide, David Hernandez. Another collector walks by on crutches, and Hernandez tells me that he lost his leg during the struggle. He points towards another collector being sent to Cuba for surgery because of an organ problem. I begin to recognize that, masterfully interwoven here somewhere, is the outline of a fable about how bonds of family and community, as handed down by indigenous people of Africa and South America over the centuries, have fused with the class solidarity of European Marxism to create a vibrant social world apart from the ruthless individuality of American capitalism. But, being a gringo, I can only faintly perceive it.
Of course, if you are a Marxist, you are already grasping for the contradiction. It is this: Chavez is financing the creation of a socialist Venezuela, and possibly, ultimately, a socialist South America, from the export earnings generated by the sale of oil, natural gas and aluminum. Much like the oil company PDVSA, CVG Alcasa and CVG Venalum are implementing an export strategy based the development of markets in the Global South, in places like India, China, Iran and the rest of South America. Foreign investment is desired if it brings new production technologies capable of being improved for domestic use, and assists in the training of workers. Italy, Spain and Germany have already provided such investment through joint ventures where Venezuela holds a 51% interest. I heard complaints implying that the US was engaging in a virtual capital strike against the country, but this was disproven by the recent revelation that foreign investment has increased 210% over last year, with 60% of this investment from the US.
Fortuitiously benefitting from an era of high commodity prices and supply uncertainty, Chavez is breeding a Griffin that may actually fly, at least long enough for him to construct a new, independent Venezuela with a more diverse economy. Through the imposition of structural adjustment plans upon many commodity producing countries incapable of paying their debt in the 1990s, when prices were historically low, the US achieved its ambition of privatizing the resources necessary to educate their people and economically compete globally, most disasterously in Africa. Chavez understands, however, that this era has passed. This is the true significance of his remarks on Democracy Now! to the effect that the failure of the April 2002 coup forced the US to forcibly obtain its oil elsewhere by launching the war in Iraq.
Unlike Trotsky in Russia in the 1920s, Chavez is freed from the frightening prospect of trying to build socialism in an impoverished society decimated by war, freed from pondering how to induce the masses to sacrifice to permit the primitive socialist accumulation required to construct his utopia. As the US, Mexico and China evolve in a symbiotic economic relationship bound by a brutal discipine imposed upon peasants and industrial workers, the money is falling out of a hole in the bottom of the bag into the hands of the Venezuelan people. Selling the rope to hang yourself, indeed. No wonder Chavez is convinced that the US will destroy him and the Bolivarian Revolution by any means necessary.