Translated from GegenStandpunkt 2-2018

Venezuela:
The decline of “Bolivarian socialism” and its reasons

Venezuela is going to the dogs. The phenomena of this country’s all-around decline are described in varying degrees of detail in the local press: an ailing economy that is more engaged with black market transactions and smuggling into neighboring Colombia than with supplying the country with the necessities of life; a currency with the highest rate of devaluation in the world; immense international debts that the state is no longer able to service; and finally, an open struggle for state power in which the opposition-controlled parliament and the government deny each other’s legitimacy, waged through street battles, murder, and mayhem, among other things. The effects of this national decline on the population are described with particular sympathy: a starving people whose daily lives are a constant struggle for survival, from which those who can are fleeing to neighboring countries.

At the same time, public commentary suggests that this is not a typical case of a Third World country that has been incorporated into global capitalism and subsequently ruined: this is an “actually rich” oil state – which initially makes the desolate state of the economy and public finances, as well as the increasing impoverishment of the majority of the population, seem rather paradoxical. Above all, however, what is failing here is a program that was supposed to use oil revenues to free the people and the nation from precisely such miserable conditions,[1] and which nevertheless – no, precisely because of this! – is being blamed for the extensively described decline, thus sufficiently explaining the alleged paradox. It goes something like this:

“The collapse of oil prices revealed just how dependent the late President Hugo Chávez had been on oil. His system only worked as long as oil brought enough dollars into the country. Chávez used these dollars to give gifts to the people, expanding social programs and even paying for food imports. Since Chávez's death in 2013, his successor Nicolás Maduro continued this practice until it was no longer possible. Now the dollars are gone, the gifts have stopped, and the state-owned Petroleós de Venezuela (PDVSA), the heart of the country, is on the verge of bankruptcy, just like the entire nation... One of the ironclad laws of the oil industry is that money has to be constantly invested to keep production levels stable. During periods of high prices, corporations and governments worldwide invested vast sums to develop new fields and to produce at least as much from existing ones. This was a major reason for the oversupply and provides part of the explanation for the rapid rise of the shale oil industry in the USA. PDVSA, however, transferred the majority of its profits to the state and invested far too little... Venezuela now produces only half as much oil as before Chávez came to power in 1999... Moreover, Venezuela receives no payment for a significant portion of its oil. China has lent the Maduro government more than 50 billion dollars – and is having the debt repaid in oil for years to come. The state is left with less than one million barrels a day for the paid-for exports.” (Süddeutsche Zeitung, April 22, 2017)

To start with, a blatant lie: the country’s dependence on oil – Chávez’s doing! The SZ columnist is of course aware that Venezuela was nothing more than an oil state in the years before Chávez, that its internal affairs and international status all depended on its functionality for the global energy market – he is getting at the accusation that the Chávez government based a program on this source of wealth that violates the objective necessities that are supposed to result from the status of an oil-producing country in capitalism. Anyone who is so unreasonable as to use their wealth for “social programs” and “food imports” for its people has only themselves to blame if they fail: they simply didn’t understand what oil revenues are for. This is how the bourgeois press calmly declares capitalist wealth to be incompatible with a poverty reduction program, while at the same time insisting that this undoubtedly speaks in favor of this economic system and its global triumph and against any practical objection to its effects on the people and the nation.

The SZ’s plea for the only sensible use of state oil revenues reveals the kind of “reason” that prevails on the global energy market, which an oil state should submit to in its own rightly understood self-interest: “vast sums” must be invested during “periods of high prices” with the effect of an “oversupply” that brings down prices. And then there are the beauties of competition on the global oil market, where demand from the capitalist metropoles and their economic cycles are the decisive factors that determine the true value of “oil wealth” and create the tensions between supplier countries vying to exploit these economic cycles. All of this shows how contradictory the position of an oil state is within global capitalism – and that it is a mockery to lay out the demanded submission of national ambitions to their functionality for the global energy market as not only the sole thing, but also the best thing that can happen to such a country.

The only truth in all this is that Chávez and his political allies actually wanted to do something different with the nation’s oil revenues than the governments before them and than what the SZ writer considers the only sensible thing to do – and that they failed in this endeavor.

1. An oil state with a large surplus population, integrated into the imperialist world – and what the Chavista project intended to make of it

Venezuela, which Chávez and his comrades-in-arms set out to radically transform, is integrated into the global energy market as a raw materials country and lives off it. The country's wealth is based on the coincidence that a considerable amount of oil lies on or under its territory: demand for this commodity from the centers of global capitalism gives the Venezuelan sovereign access to vast amounts of global currency in its most solid form, the US dollar, because the international oil market is organized as a dollar market. The state thus possesses a source that constantly generates wealth for it, quite independently of the reproductive output of its society – a type of wealth that is not the result of national productivity, nor even dependent on a high-performing national economy, but rather flows into the country through transactions between the state and foreign countries that are separate from national economic life.

The oil dollar wealth devalues and displaces many of the business sectors there that previously made up Venezuela’s economy,[2] while also fueling an import economy that uses the dollars earned to purchase everything that is needed but not produced domestically. This applies to the consumption needs of an elite who has amassed considerable wealth as beneficiaries of the world money flowing into the country, as well as to those of a minority of the population employed as workers in the oil industry or as domestic servants to the newly rich bourgeoisie, and also to the need for means of production that directly or indirectly serve oil extraction.[3] Venezuela has become an “oil country” whose economy is based entirely on dollar revenues from oil sales.

The fact that the state and business community have tapped into a different, far more lucrative source of wealth – the oil demand of capitalist metropoles – than the exploitation of their own people, enables them to live considerably “beyond their national means”: The dollar wealth they acquire and spend far exceeds what the domestic economy is capable of earning in international competition. The vast majority of the population is not needed for the creation of this kind of state wealth and is therefore excluded from any regular reproduction. It congregates in the sprawling slums of the big cities, separated from this type of national wealth, to which the people contribute nothing and from which they derive no benefit.

Chávez and his comrades-in-arms considered this state of the nation and its people intolerable – and a scandal, especially given the country’s oil wealth. The result of the country’s participation in global capitalism – the dollar wealth flowing into rhe country, which is appropriated by the national bourgeoisie and ruling elite on the one hand, and on the other, the nation’s masses who are excluded from the country’s economic life by this wealth and its distribution and relegated to the status of a useless burden – is treated by the Chavistas as two previously separate, misappropriated, or untapped resources for their national development goals, which simply need to be brought together properly. In this vein, they reduce the country’s economic condition to policies that serve purely special interests, rather than the advancement of the people and the nation. They intended to correct this: Dollar revenues should be used for the development of the people and the construction of a national economy that includes the masses, thereby making the country’s wealth and the people’s productivity mutually beneficial for each other, and thus for the nation under the direction of a nationally-conscious political leadership. In this way, the nation was given a new raison d'être under the banner of “Bolivarian socialism”: Externally, it should shed its status as a country subordinate to the US-dominated world market and the USA’s backyard and become the leading force in the political emancipation of all Latin America from US “neo-colonialism.”[4] Internally, the two national problems – the nationally unproductive appropriation and use of oil dollars and the unproductive impoverishment of the masses – were to be eliminated, thereby finally enabling the people to become the political foundation of the state.

To this end, comprehensive government support for the people in the areas of education, health, housing, etc. were put in place – this was intended to create the fundamental prerequisites for including them in the national political and economic reconstruction program. Land reform, the promotion of cooperatives, and wage subsidies were also intended to enable them to contribute to the national economy and at the same time secure a livelihood – whether through small-scale agricultural production, in cooperatives, or as wage laborers. Furthermore, the country’s dollar revenues were to be used to establish and expand national production in order to reduce its total dependence on oil revenues and the imports financed with them, and to transform Venezuela into an “economic power” that can rely not only on its oil industry but also on national agricultural and industrial production.[5]

For the national reconstruction program, the business of private companies in the country was to be promoted, as was the expansion of state-owned enterprises and the establishment of newly created cooperatives: All existing and newly established economic entities were to make their respective contributions to production and supply, thus functioning as equal elements of a productive national system emerging in this way. The fact that they were to pursue very disparate and conflicting goals – the companies compete for the profitable sale of their products, the employed workforce is a cost factor that must be kept to an absolute minimum for profit-oriented entrepreneurs, while at the same time their participation in economic development was supposed to pay off in adequate wages and employee participation in the wealth created, etc. – was of no concern to the government. In its “third way”[6], it saw itself as possessing the means necessary to realize its ideal: First, it had command power over its society; second, it had immense state wealth in the form of the world money flowing into it and thus state financial power with which new enterprises could be created, existing ones expanded, subsidized, and made profitable; and third, it had a capable population that simply needed the opportunity to get involved. In this way, an economic life was supposed to flourish in which the people find work and businesses become productive for themselves, for each other, and for the state.

The state-owned oil company (PDVSA) was intended to serve as the decisive lever and driving force behind this economic development and reconstruction program: its billions of dollars would be used to fill development and social funds which would finance the national project.[7] The program thus aimed at breaking down the separation between oil wealth and social reproduction, between global revenues and the people, and to make the wealth generated abroad productive for the flourishing of a national economy based on precisely the kind of wealth that arises and exists separately from the nation’s economic life.[8] Chávez, with his “third way” committed to the nation’s progress and independence, intended to eliminate the ruinous effects that the financial wealth flowing into the state had on the society it managed and on the people who were useless for its accumulation – and for this alternative program, he was dependent on precisely the foreign wealth from which he wanted to make the country more independent. This is the contradiction that this progress program subsequently had to contend with.

2. The nation’s new era – the government takes advantage of the freedom afforded by its oil wealth

Even for previous governments, it was a matter of course to convert Venezuela’s oil wealth into the form of dollars to obtain additional funds through the international credit market: The fact that the financial world did not hesitate to buy up the dollar-denominated bonds of the resource-rich country “with the world’s largest oil reserves”[9] was also readily exploited by the champions of a new national path in order to give their reform program additional financial freedoms, independent of the current flow of dollar revenues.[10]

Based on this doubly sound world money potential, the national currency also gained in quality: It derived its value and trustworthiness entirely from the wealth that flowed to the state, the issuer of the bolívar, from abroad. The state’s ample dollar supply was the economic basis for its freedom to exercise its national monetary sovereignty. The economic quality of the Venezuelan money thus depended entirely on whether and how much dollar revenues were flowing to the state from the oil business and, based on this, on international credit; in other words, on the extent to which it could access undeniably valuable but foreign currency – primarily the dollar, whose issuer and guarantor is the American state and whose economic quality lies in its use by international capital in capitalist centers outside Venezuela.

The Chávez government understood and treated the fact that this money did not derive its economic viability from, nor was dependent on, the competitiveness of its domestic economy whose profitable use procures national labor, but was only valuable because it was based on the state’s access to a reliable source of world money, solely from the positive perspective: as a good condition for making extensive use of the dollar-backed national monetary sovereignty for a comprehensive management of the people by giving its business world a bolívar with which to earn a money whose value and economic viability were beyond doubt – precisely because it was not dependent on the globally competitive performance of a national economy which was being built up in the country with state funding.

To underscore the reliability of its own currency, the new government guaranteed in the first few years that the bolívar could be exchanged for dollars at any time at a state-guaranteed rate. This effectively linked the bolívar to the state’s dollar reserves as its basis and guarantee, which should lead to it being accepted as good as the dollar. Therefore, exchanging the currency would be unnecessary, and holding earned bolívars and using them for business purposes would be considered sufficiently justified. On this basis, capitalists in the country were expected to conduct business in and with the national currency, thereby validating its economic viability.

Trusting in the quality of the national credit guaranteed by the dollar inflows to the state and its promise to fork them over when needed, the organizers of “Bolivarian socialism” made extensive use of their freedom to increase the money they created through state intervention under their own authority, to incur debt from their society according to their own needs, and to finance the immense growth in domestic spending associated with their development program.[11] This is how infrastructure projects were pushed forward, the state apparatus and military were expanded in terms of personnel, the social programs known as “misiones” were implemented, etc., which resulted, on the one hand, in in a substantial internal government debt and, on the other, in a rapid increase in the purchasing power created by it.

3. The business world accepts the offer and makes its own calculations with the new state program

With the proclamation of a new raison d'état and the resulting fundamental changes to business conditions, the government encountered fierce resistance from some of the former beneficiaries of the old order. Many private entrepreneurs immediately moved their capital abroad because they could infer from the coming to power of the Chavista program that there was no longer any place for their interests in this country. Others who had previously held positions of power and had profited from the old order, particularly those directly involved in the oil industry, carried out their equally bitter animosity within the country, instigating strikes and a veritable coup in conjunction with the former ruling elite who had been forced into political opposition – and after its suppression, they too moved their assets out of the country.

For a large number of private companies, however, the government’s call to participate actively in the development of the Bolivarian nation was primarily welcomed as good news: there was plenty of good money to be made in Venezuela. On the one hand, the state directly turned itself and its solvency into a source of business by allowing national, but especially international, construction and infrastructure companies to profit from its development program by paying them for the construction of housing, roads, and airports – in dollars: foreign companies[12] directly, and domestic ones indirectly, since almost everything they needed to construct the means of production for such large-scale projects had to be purchased on the world market.

On the other hand, the segment of the private sector that really feasted on the national reconstruction effort was the one that made its business from the government’s interest in improving the supply of goods to the population. Since the nation’s food production was far from sufficient for this, trading companies in particular seized the opportunity presented by the significantly expanded purchasing power resulting from the new government’s social programs: they imported the necessary foodstuffs and thus dipped into the state-provided purchasing power now falling into the hands of the population.

The main advantage for business in these conditions was that they were able to set generous prices for goods and services in demand. In particular, the faction of the business world which based its business on the people’s ability to pay enjoyed a level of security unusual in capitalist states in that the government would respond to price increases in such a way that it was constantly injecting additional funds by increasing wage and social benefits to compensate for their impact on the population. As a result, an inflation rate of 18 to 25 percent became a permanent feature of Venezuela’s economic life. That was the price paid for the Chavista state’s extensive use of its freedom to create a level of purchasing power that grew independently of any real economic growth in the country, one from which the business world enriched itself – utilizing the state’s economic power and political agenda to further its own interest in maximizing its profit margins.

The sector that experienced by far the greatest upswing in this “consumption boom”[13] was the import industry: On the one hand, it supplied domestic production facilities with the necessary means of production; on the other hand, and more importantly, it purchased food, medicine, clothing, electrical appliances, mopeds, etc., abroad, primarily in the USA, using dollars, in order to sell them for bolívars, which were then exchanged back into dollars to finance the next import transaction. The expansion of the society’s purchasing power by the state thus ensured a constant demand for dollars on the part of import companies, which turned to the state and claimed its global currency revenues for their business. The companies involved in this business, which made up a significant part of the economy, did indeed use the national currency for their transactions, but not by investing it productively in Venezuela, but rather by converting it into dollars. In this way, the private business world accumulated its profits without these business successes reducing the dependence of the national economy on the use of the state’s foreign exchange – rather, they were based on its use, thus not only perpetuating the dependence on state oil revenues, but continuously increasing it.

So for years the national and international business world understood how to do business with this state and its alternative program, despite the accompanying complaints about “socialist mismanagement” while generating high inflation rates and a growing demand for dollars domestically, and thus basing their businesses entirely on the state’s international solvency. Consequently, the state was and remained the true subject of the national economy: it constantly injected its dollar revenues into society, thereby putting to practical use its externally provided monetary power and thus reproducing the dependence of the Venezuelan economy and the national currency on its foundation: the whole thing would stand or fall with the state’s secure access to dollars.

4. The people seize the new opportunities – with mixed success for their state advocates

The transformation of the people’s living conditions was also achieved through the use of the state’s wealth – and the people were given plenty to do: The financially endowed comunas in the city districts organized garbage collection, electricity supplies, bus services, etc., renovated houses or brought them up to a habitable standard; the health centers staffed by Cuban doctors in the cities and throughout the country were heavily used, vaccinations were administered, etc.; schools and other educational institutions were built and eagerly attended, even elderly people were learning to read and write, so that the state established secondary schools and technical colleges alongside the otherwise exclusively private and expensive universities; new radio and television stations were built, etc.

While the people, who were materially better off, certainly engaged in a great deal of social activism, the true national purpose of this public support, which went beyond the mere satisfaction of basic needs, was not achieved: The substantial sums the government spent on poverty reduction, improved medical care, housing, education, and so on, was ultimately intended to pay off by enabling this upgraded population to become the leading component of the economic reconstruction program. The cooperatives, in which some members of the people made themselves useful, were encouraged by their state sponsor to generate a profit in addition to producing goods, but they generally fell far short of their state-prescribed goals. As a result, they remained state-subsidized enterprises that, despite their “progressive” form of ownership, struggled to compete for profitability against cheaper imported goods and otherwise, whenever they proved unsuccessful, continued to rely on state support.

The privately operated production sector in the country was also not growing, or at least not sufficiently, so the development of national production independent of government subsidies did not advance – with the result that the planned involvement of the people in a flourishing national economy failed to materialize due to a lack of opportunity. The people received improvements in their living conditions from the state, but remained the dependent variable of the state’s control over dollars and the debt economy it based on them.

So while in pre-Chávez Venezuela a minority benefited from a wealth not based on national productivity, the state of “Bolivarian socialism” now empowered its entire society and its people to “live beyond their means” – as long as the externally acquired wealth permitted. At least a majority of the population showed its gratitude by discovering, for the first time, material reasons for a positive patriotic connection to their nation and remained loyal to their government in the ongoing national power struggle. This part of the national transformation program was thus advanced: The grateful populace was successfully politicized, with a majority becoming involved in one of the numerous mass organizations and, when necessary, mobilizing en masse to defend their “socialist achievements” whenever the government deemed it necessary. It was also clear, however, that the political support of the majority of the population for Chávez, Maduro, and Co. depended on them seeing good reasons for doing so – and these reasons depended on the state’s willingness and ability to provide for its people with dollar-backed support.

5. The government imposes the purpose of its invitation on the business community, thereby exacerbating tensions between business and the state

The government was forced to face the fact that the business practices of the private sector, which was supposed to participate in the reconstruction program, run counter to its program for the nation.

The freedom that companies take in setting their prices undermined the government’s efforts to improve supply: the constant price increases were draining people’s money faster than it could be replenished. The government therefore countered this freedom by imposing price caps, thus obligating its business world to charge socially acceptable prices. In addition to these restrictions on their business on the price front, the private companies operating in the country, for whom nothing is more self-evident than to employ their workers at rock-bottom wages under the given circumstances and to take every entrepreneurial freedom in terms of performance requirements, were being prescribed rules on how they treat their workers in a way that directly contradicted their profitability: labor laws stipulating the length of the working day and rest breaks, as well as a statutory minimum wage which was adjusted for inflation every few months by decrees issued by the old and new heads of government themselves, were intended to ensure that wage laborers could somehow still support themselves and their families.

The government therefore insisted that the invitation to the business world to profit from the nation’s development was contingent on the entrepreneurs’ pursuit of profit being functional to the state’s vision of a productive population that was provided with the necessities in life. By imposing business-restrictive regulations on the one hand and by granting loans and access to foreign currency on the other, the government was grappling with the contradiction it had created: that the realization of its program depended on the performance of Venezuelan capitalists, while at the same it did not leave them to their business calculations which create the permanent need for state regulations and funding – the alignment of private companies’ profit interests with the service to the nation demanded of them was to be enforced through coercion and financial means.

Such state intervention in the free accumulation of commercially invested property directly contradicted the purpose that entrepreneurs pursue with their “service”: Capped prices, combined with minimum wages and occupational safety regulations, represent an unacceptable impediment, even prevention, of profit-making for manufacturing companies. Consequently, they ceased production en masse due to this systematic damage to their business. Domestic and foreign housing construction companies, for example, took one major conclusion from the government’s requirement that new housing units had to be so inexpensive that the public could afford them: Under these profit-hostile conditions, investments in construction made no capitalistic sense, indeed, no sense at all, and were therefore halted on a massive scale – the foreign companies took their hard-earned dollars and ran. Where the private sector failed to fulfill its obligations, the state itself took over businesses when it deemed their continued operation important, or preempted their threatened closure with expropriation, for which compensation was paid from the state treasury.[14] This meant that the deficit of these now state-run or cooperatively operated enterprises had to be financed with its own resources. In other cases, it took over the import of goods that it deemed important for supply,[15] which was then used to stock the network of state-subsidized discount stores.

As a result, the intended reduction in the demand for imports through the expansion of domestic production not only failed to materialize – the production sector actually shrank, a situation that was exacerbated by the simultaneous increase in imports. Commodities produced abroad, primarily in the USA, with the superior productivity of globally competitive capital and therefore at lower prices, outperformed domestic products – which the domestic companies were unable to compensate for with rock-bottom wages due to the government-imposed minimum wage and other regulations. The favorable exchange rate set by the government for imports in the food and pharmaceutical sectors, which were particularly crucial to its program, acted as an additional productivity advantage for foreign producers; protective tariffs were not even considered, as they directly contradicted the goal of affordable supplies. The import business, originally intended by the government as a stimulus and supplier for expanding the domestic production sector, was increasingly becoming its substitute, an obstacle, and ultimately the cause of its steady demise.

This decline in domestic production and the accompanying boom in the import sector put ever greater demands on public finances – and became an additional source of persistent and escalating tensions between the state and the business community. The contradiction that the state tied the use of its dollar reserves to its political objectives, while simultaneously tried to achieve these goals by relying on a business world that calculates on the basis of its own profit margins, formed the foundation for a constant back-and-forth between the state’s “generosity” toward the foreign currency demands of its entrepreneurs – after all, they were supposed to procure the necessary imports – and a tightening of controls and restrictions – after all, it had to ensure that its foreign currency was used in accordance with its wishes. Thus, with every decision made in favor of one side, the state was simultaneously confronted with the other side of this contradiction.

But from the very beginning the dollar was the central reference point for all private economic activity in the country, not only for importers, but for the entire business community: it was ultimately the decisive measure of the value of their own business activities and its results, which were calculated in bolívars. This included the interest and the claim to realize the generated profits in dollars, to secure them and, if necessary, make them abroad. This interest, which ran counter to the state’s interest in utilizing its world money revenues for national development, was tolerated by the government in the early years, and it permitted the unrestricted exchange of the national currency for dollars. After the failed coup of 2003 and the subsequent capital flight, this freedom was curtailed when the government imposed restrictions on the free exchange of bolívars for dollars – it simply could no longer afford to hand over its world money so that the business community could transfer it out of the country unchecked.

Whether and to what extent an entrepreneur received foreign currency for his business has since depended on the approval of the foreign exchange control authority,[16] which decides according to political criteria whether a business’s import requirement also constitutes a state-desired societal need for which foreign currency should be spent. To stimulate imports that are particularly desired by the state, the government also set different bolívar-dollar exchange rates depending on the goods for which its import companies apply for foreign currency: the more the imports correspond to the interest in national supplies (medicines, food, etc.), the more dollars the company receives for its bolívars. As a result, different exchange rates sometimes existed side-by-side. Profits generated within the country upon allocation could only be converted back into a foreign currency and exported up to the respective limits set by the state.[17] Such business-damaging regulations spurred entrepreneurs to circumvent them with all sorts of cunning maneuvers. Where allocations for promising goods were not granted or where foreign currency was needed to secure profits, they obtained dollars on the black market, which rapidly boomed as a result of the state’s currency controls: Although more bolivars had to be paid there than the official exchange rate for the coveted dollar, at least they were available at all.[18]

The permanent and continuously increasing outflow of government dollars led to a situation in which the inflow of dollars and the demand for dollars turned into a dollar crunch for the government, which was already becoming noticeable when oil prices were still relatively high – its still existing creditworthiness helped mitigate this for a while, but strained it accordingly.[19] The government reacted to the decline in its foreign exchange reserves by increasingly restricting the allocation of dollars to the import sector – with the result that the black market increasingly became the barometer of the business world’s growing distrust in the world money potential of its state and thus in the commercial viability of the national currency: It accounted daily for the progressive depreciation of the bolívar, so that the government-fixed exchange rate was constantly and increasingly being discredited. The government attempted to counteract the devaluation of its currency with support purchases – sacrificing its now depleted foreign exchange reserves to prop up an exchange rate that the business world had long considered “artificial,” i.e., exploiting its harm to the state as much as possible – and with gradual rounds of devaluation. In doing so, it was constantly playing catch-up with the devaluation, simultaneously validating it with its countermeasures and further fueling the rampant distrust of the bolívar.[20] On the one hand, all of this documented the state’s efforts to influence corporate business decisions in such a way that their profit interests were reconciled with the political interests of the state’s dollar administrator. On the other hand, however, and above all, the incompatibility of these two positions demonstrated that there was no exchange rate at which the bolívar was truly equivalent to the dollar, namely, one that was suitable as a means of profitable production on an international, dollar-dominated scale.

A segment of the import sector compensated for this by reversing the relationship between the import business and the foreign currency required for it: companies applied for dollars for an import that, after they were allocated, never actually took place. Here the dollars were earned without the detour of an import transaction, thus directly and completely contrary to any intention the state had in licensing imports: the dollars were hoarded as soon as they were obtained, sold on the black market, or simply smuggled abroad.[21] This substitution of import transactions for pure foreign currency hunting might have formed the basis of the difficulty for the businesspeople involved of earning and increasing dollars through legal transactions. Overall, they put into practice the political-economic judgment that Venezuela’s economy was not suited to the profitable use of the dollar, which they used in every aspect of their business, but did not earn in a capitalistic way.

The increasing restriction on access to the dollar, coupled with the simultaneous depreciation of the national currency, posed a fundamental challenge to the business of the import sector, on whose supplies even those companies still in production depended.[22] For the business community as a whole, the very meaning and purpose of their activities in Venezuela, and especially in relation to the Venezuelan national currency, was thereby lost. As a result, further domestic business was abandoned, and the commodities still being produced or imported were no longer sold for the increasingly worthless national currency, and certainly not at the state-capped prices, but rather abroad or on the black market – a business model that the cooperatives were increasingly forced to adopt because they couldn’t survive economically otherwise. This made the supply of the population increasingly precarious[23] – and to the extent that the state, due to its dollar shortage, couldn’t adequately fill the gaps with its own imports, supplies for the masses collapsed. Faced with an increasingly dramatic supply shortage, a considerable portion of the population fled to neighboring countries – approximately two million have already left the country, primarily heading for Colombia and Brazil – while the rest try, wherever possible, to obtain the bare necessities across the border in neighboring countries.

Thus, the attempt to involve private business in supplying the country and its people, to constructively regulate it in this sense, and to use foreign exchange earnings to buy off the emerging contradictions and frictions, came to a catastrophic end for the affected population: The dollar, the basis and elementary substance of the national economy, had a destructive effect on it, in that the business world turned the standards of capitalist profitability embodied in it against an economy that wasn’t up to these demands, but has instead lived entirely on the will and ability of the state to inject foreign-earned world money into it.

6. Finance capital is carrying out the ruin of “Bolivarian socialism”

The whole situation becomes utterly untenable due to the significant decline in state revenues from oil sales. On one hand, the acute shortage of foreign currency has put the need to maintain and service oil production facilities – which the state itself is unable to guarantee, thus requiring foreign capital and costing foreign currency – in stark contrast to the use of global currency for national purposes. This need has competed with the government’s financing of its ambitious development program since the inception of the Chavista project. On the other hand, the collapse of oil prices from mid-2014 to a third of the state’s foreign currency reserves was the final straw: the oil company can no longer even maintain the oil wells, resulting in a drastic decline in their exploitation and a massive drop in oil exports. The relationship between oil wealth and the state program was reversed: foreign exchange earnings from the oil business were supposed to provide the funds for the Chavista project; now, it is no longer oil sales that sustain the state and its development program; instead, the state must subsidize its oil company by further reducing its dollar reserves so that this sole source of real money does not dry up completely. The fall in the price of oil devastatingly reveals that the state’s freedom to build a sovereign nation based on oil dollars is entirely dependent on the economic cycles and actors of the world market[24] – it destroys the national balance sheet once and for all.

Enforcing this is reserved for international finance capital. This plays the ultimately decisive role in both the rise and fall of the Chavista project: its verdict on the sustainability of national debt ultimately determines whether the country possesses real money or whether it is economically ruined. The dollar-denominated loans, which were granted extensively not only at the beginning but also during times that were already tight and continually expanded by the government, provided the government, on the one hand, with the financial freedom to launch and pursue its ambitious program. On the other hand, the resulting obligation to continuously service the loans put an ever increasing strain on the equally steadily dwindling foreign exchange reserves – the use of the borrowing capacity which was bestowed on the oil-rich nation by international finance capitalists because it was a lucrative business for them, came at a price: the parties involved in this business asserted their absolutely valid claims securitized by the US creator and guarantor of the precious dollar and thus of all credit transactions denominated in it. The credit industry initially profited handsomely from the decline by increasing the cost of new loans, which put the state in ever greater financial distress, so that it had fewer and fewer dollars to spend as it saw fit – and ultimately put an end to its creditworthiness.[25]

While the Venezuelan state no longer sees itself in a position to settle outstanding debts with foreign suppliers, airlines, etc., which is why they suspend deliveries and services or insist on prepayment, it complies as best it can with the demands of finance capital, using a large portion of its already meager oil revenues for this purpose: The struggle to maintain a semblance of international creditworthiness has become the all-consuming objective to which a large part of its foreign exchange and gold reserves is sacrificed.[26] The fact that Venezuela is entirely dependent on international finance capital and its willingness to restructure old debts and grant new loans in this emergency situation has given the USA, the decisive power of international finance capital, an excellent lever to finally ruin the hated government. Since the end of 2017, the USA has effectively thwarted Venezuela’s efforts to refinance its outstanding debt by prohibiting its banks and any institutions with branches in the USA – that is, all those that are significant in this field – from conducting financial transactions with Venezuela.[27] In this way, the US government is forcing finance capital to end Venezuela's creditworthiness – ultimately, only countries like China and Russia are still willing to provide loan guarantees and bridging loans, which they secure by pledging oil exports and the development of untapped oil reserves.[28]

Because the dollar is the only currency of unquestionable value that the state has at its disposal, the national currency has lost its credibility and its character as a means of business: its dollar guarantee was lost for good as soon as the state no longer had any foreign currency to exchange for bolivars. After losing its dollar base, the national currency retains the quality of a state-issued certificate of purchasing power that now only represents the political monetary sovereignty of the state, which has lost its economic foundation following its collapse as a world money guarantor. The “hyperinflation” of up to 1000 percent per year indicates that the bolivar with its dollar backing has lost its quality as a capitalistic means of exchange, while at the same time the state is continuously increasing its supply through its sovereignty. For the majority of the population, this means they cannot afford the ever-increasing prices for basic necessities, assuming the corresponding goods are even available.

Hence, the people, whom the government wanted to integrate as a leading element in its project and for whom it provided state funding, are literally fighting for survival – as mere appendages to the state’s struggle for creditworthiness. With a portion of its remaining foreign currency reserves, the state maintains a meager supply of imported goods, which is not enough for survival, and entrusts its distribution to the military in exchange for ration cards. The double dependence of the people on the state and the state on its creditworthiness is made brutally evident to the masses: the people are impoverished because the state program is running out of funds and because the state has lost its rating in the international financial world.

So the people are now reaping the consequences of having been elevated to the status of a national resource and equipped with all sorts of prerequisites and skills that were never put to use in a way that would have justified the large sums of dollars that the state spent on them; in other words, of having been integrated into a state economy that allowed them to live “beyond their means” in terms of their capitalistic usefulness. Once again, by all the standards in force, this does not speak against these conditions, but against an economically unjustifiable standard of living for the people. This political-economic defeat is being carried out by finance capital, which is withdrawing funds from a program that has proven ruinous according to the applicable capitalist standards of success.

This marks the end of the Chavistas’ experiment in repurposing the country’s “immense oil wealth” and the creditworthiness based on it for their “Bolivarian socialism”: The program failed because of the very type of “wealth” it had at its disposal. What ultimately manifests as a lack of state revenue from its participation in the world market is in reality the economic and political power relations inherent in the imperialistic nature of the political-economic category of “oil wealth,” to which Venezuela, as an “oil country,” is subject: Its national lifeblood is sovereign control over a raw material that is only turned into wealth by international capital, for whose provision they pay the political ruler over this source a price that depends purely on their calculations and the competition they determine; whose financial freedoms and limits are determined by finance capital, which speculates on the national revenues thus generated, makes the country dependent on itself and the power of its capital, and withdraws credit from the state if it no longer meets its demands; whose political rule, with its means and limitations, is therefore dependent on the global interest of the imperialist states in controlling the basic means of capitalist wealth that is created within their borders and from which they derive the means of power with which they keep the countries that supply raw materials under control and suppress any movements directed against the established power and usage relations.

Our media takes the partisan view that this brings the “Bolivarian Revolution” to its well-deserved end, and that its failure clearly speaks against its program and in favor of the only sensible adjustment of the Venezuelan “sovereign’s” political demands to the status that is simply intended for an oil-producing country in a capitalist world – but this “fair defeat” still needs to be politically enforced. This is the responsibility of the domestic opposition, which the media fervently supports in its struggle for power – and of the USA, which has fought the Chávez “regime” from the beginning and has provided more than just moral support to its political opponents within the country.

7. The bitter power struggle to eliminate “Chavismo”

The demonstrations by political opponents and their supporters against the government and vice versa, the associated street battles with fatalities on both sides, the democratic maneuvers to legitimize or deny the legitimacy of their respective claims to power, the efforts of the government and the opposition to win over the military, the constant calls to the people to refuse allegiance to the criminals on the other side and to actively participate in the fight against them – all this proves to the media in Germany what it already knew anyway: The regime of Chávez, Maduro and Co. has come to its just end, and only their ever-present lust for power and the military’s loyalty, which can only be explained by bribery, are preventing the long overdue abdication of a politics that brings only chaos and misery to its country and people.

Leaving aside the fact that power-hungry politicians in Venezuela could have found far more convenient ways to achieve their goals than by creating numerous enemies at home and abroad with a “Bolivarian socialism”; and aside from the fact that it is easy to discern an interest in retaining or acquiring power in a power struggle, a criticism that is leveled at only one side – the truth is that the political program has largely been reduced to asserting the power that was gained supposedly to ensure its implementation against domestic and foreign opponents who have been hostile to this program from the outset, who fight it with all their might, and who see the worsening hardships faced by the country and its people as a good opportunity to finally get rid of the hated regime. Hence, they are contributing to this worsening. The business community is radicalizing its refusal to serve the socialist program, resorting entirely to illegal activities and smuggling. Those who benefit politically from the catastrophic situation are already setting fire to warehouses and food transports to exacerbate the suffering in the country as much as possible, so that the people will finally reach their breaking point, abandon their former majority support for the socialist government, and pave the way for the opposition to seize power. To this end, the opposition is not limiting itself to parliamentary wrangling, obstruction, and institutional infighting to seize power from the government. It is also sending its own supporters into the streets as star witnesses to the intolerable state of affairs and as stormtroopers for the overdue overthrow of the Chavista government.

On the one hand, the government is countering this with its state apparatus of force in the form of the police, military, and judiciary. On the other hand, it is competing with the opposition for popular support by blaming the opposition in mirror-like fashion, claiming that its “economic war” is the real cause of the crisis. Its militant slogans no longer focus so much on the benefits it claims to be bringing to the people, but primarily on condemning the opposition as traitors to the fatherland who are subservient to the USA, and calling on its supporters to heroically defend “revolutionary achievements” that have long since ceased to exist. The masses are urged to become active participants in the power struggle and, in particular, to ensure the government’s legitimacy by casting their votes correctly. This should not only be done, as is usually the case in an election, by marking the ballot in the right place, but also by participating in government organized election events which are tantamount to a pledge of allegiance – to a constituent assembly whose primary task is to replace and thus disempower the majority opposition in parliament; to the local elections boycotted by the opposition; to an early presidential election, etc. – and by not participating in the referendum to remove the president from office and other maneuvers initiated by the opposition.

Internally, a struggle is underway over the continuation or termination of a “socialist” project that now primarily consists of keeping the political team that once sought to put it in power in Venezuela, while their enemies seek to force its formal abdication. The formal continuation of the Chavista project therefore depends on whether the people turn their suffering from the increasingly catastrophic shortages against the government or credit it for the meager food rations distributed by the military. At least as crucial is the second “factor” in the internal Venezuelan power struggle, courted by both the government and the opposition: the military. The power that the Maduro government can assert over the people and the opposition stands or falls with its decision to remain loyal to the government and suppress the more or less violent attempts to destabilize the government or to heed the opposition’s call and switch sides.

Despite all the domestic political maneuvering that constitutes the power struggle in the country, it is clear that Venezuela’s fate has long been determined by foreign powers, namely the major imperialist actors and their political calculations – above all, by the USA, which has never made a secret of its fundamental hostility toward the Chavista rebellion on its doorstep. Through a policy of sanctions, diplomatic isolation, contestation of the Venezuelan government’s legitimacy, and active support for the opposition, it has consistently contributed to its obstruction; now it is proceeding to transform the country’s decline into a final solution to this disruption. The imperialist instruments that the US government ultimately chooses to employ and at what level of escalation – from the recently decreed tightening of sanctions in the form of preventing the refinancing of Venezuela’s debt, to Trump’s publicly discussed termination of business relationships that are vital to Venezuela’s survival, to the military option that is receiving equal consideration – this is entirely subject to its calculations, not least in light of the competition that is encroaching on its backyard. Russia and China in particular are (still) supporting Venezuela in its struggle for survival, thereby pursuing their own economic and political objectives: in exchange for new loans or the restructuring of existing debts, they are seizing the country’s sources of wealth as collateral, acquiring the rights to exploit oil fields, and so on. Furthermore, Russia is reaffirming its long-standing military cooperation with the Venezuelan government through naval bases and supplies of military equipment.

From the perspective of Russia, China, and the USA, it is clear: starving this country into bankruptcy or maintaining it as a debtor is tantamount to securing control over it – economically and politically. The Chavista project of shaking off Venezuela’s status as a dependent variable of the US-dominated global energy market and transforming it into a co-determining subject in the competition for political dominance in Latin America has thus reached a point where the country stands entirely as the object of imperialist competition, which calculates not only in economic but also strategic categories such as access to energy sources and political-military spheres of influence.

Footnotes

[1][1] The program of “Bolivarian socialism,” its goals, means, contradictions and opponents are presented in detail in GegenStandpunkt 1-07: “’Left Turn’ in Latin America – Venezuela's uprising in the USA's backyard.”

[2] “As recently as the 1920s, petroleum played no significant role. The main export products were coffee, cocoa, cattle, sugar, tobacco, and leather. By 1929, Venezuela was the second-largest oil producer after the USA and the world’s largest oil exporter. With spectacular industrial development, the petroleum sector soon dominated all other economic sectors in the country. With the expansion of oil exploration, agriculture was largely abandoned. From the 1950s to the early 1980s, the Venezuelan economy experienced constant growth, which attracted many immigrants [who speculated that they could participate in the ‘oil bonanza’ as labor power]. In the 1970s, Venezuela profited from high oil prices, and the surpluses led the government to incur foreign debt. Falling oil prices... debts becoming unpayable... ‘Black Friday’... neoliberal IMF demands... During the fall in oil prices in the 1980s, the economy contracted and inflation exploded, peaking at 84% in 1989 and 99% in 1996, three years before Hugo Chávez became president.” (freely translated from Wikipedia, Economía de Venezuela)

[3] Since the exploitation of oil resources for the state budget (the petroleum industry was nationalized as early as 1976, while foreign multinationals retained their stakes in oil fields), the productive output of the Venezuelan economy, aside from the usual large landownership (primarily cattle farming), has depended almost entirely on the influx of oil dollars. Some companies made their money as suppliers to oil production or as processors (e.g., valve factories, refineries), while many others profited from the influx of purchasing power: through food production largely based on imports from the USA (including brands like Kellogg’s, Heinz, Parmalat, Coca-Cola, and McDonald’s), as well as international and domestic trading capital. The Venezuelan market was so lucrative for General Motors and Toyota that they built their own plants there. This oil-fueled economy was further boosted by the presence of almost all major international banks in Venezuela’s major cities. In the 1980s, the national oil company PDVSA acquired the US firm Citgo, thereby gaining access to refineries and one of the largest gas station networks in the United States. Foreign and domestic capital also profited from the exploitation of other mineral resources (including bauxite and gold) and energy-intensive raw material processing (including steel and aluminum). Through state subsidies, Venezuela developed some internationally competitive companies – for example, the country boasted SIDOR, the largest steel plant in Latin America. Overall, however, these are subsidized entities, directly or indirectly dependent on the oil business and state oil revenues. Around all of this, a powerful media landscape emerged, dedicated to entertaining the masses and providing a “correct” interpretation of national events, particularly before the regularly scheduled elections, in which the two only relevant parties, both comprised of members of the ruling class, alternately emerged victorious.

[4] This immediately earned Venezuela the increasingly fierce hostility of the USA in particular. The US, previously Benezuela’s main supplier, immediately imposed a comprehensive arms embargo on the country, which Spanish aircraft manufacturers and Russian arms and military equipment manufacturers readily seized as an opportunity to combine lucrative dollar deals with political influence in the USA’s backyard.

[5] This vision can still be found in speeches by Chávez's successor, Maduro, at a time when it has long since shrunk to an unrealistic ideal: the goal is “to achieve an industrialized ‘socialist production model’. ‘We understand very well what this means, and it will be hard work for us to transform the Venezuelan economy into a sustainable force in promoting jobs, increasing the diversity of our production efforts, adding value to our goods, and socializing our means of production,’ Maduro said in his speech. He continued: ‘It’s about building a Venezuelan economic power as an energy, agricultural, and industrial power, now and for the future.’” (amerika21.de, February 25, 2014)

[6] The alliance around President Hugo Chávez wanted “to establish a heterodox economic model in which it would be profitable for Venezuelans to produce rather than import. Besides the manufacturing sector, which massively supported the campaign of the then political outsider Chávez, the constitution adopted in 1999 stipulated that democratic business organizations, such as cooperatives, should form the basis of a new attempt at import-substituting development for the country. Chávez spoke of a ‘third way’...” (amerika21.de, 12.6.13)

[7] Over 16 years, PDVSA will pay $178 billion into earmarked funds for social programs and $86 billion for major infrastructure programs, energy sector, etc.

[8] The sharp rise in oil prices in the following years proved to be a particular stroke of luck for the government: with the increasing oil revenues, it initially had growing funds available for the alternative aims that the Chavistas pursued with them.

[9] As recently as 2013, the financial world gleefully reported that “Chávez could afford to meet his payment obligations, thanks in no small part to rising oil prices. The price of a barrel of crude oil skyrocketed from $12 in 1998 to around $97 today. The government will earn approximately $81 billion from oil exports this year – ten times the amount of bond interest and repayments due, according to figures from Citigroup Inc. Net national debt, at 22 percent of GDP, is significantly lower than the median level of comparable countries, which stands at 36 percent, according to Standard & Poor's. While Chávez described bonds as a tool used by the US to exploit Venezuela, he consistently fulfilled his obligations. This continued even when a strike in 2003 crippled the oil industry for three months and caused the economy to contract by 7.6 percent that year.” (format.at, 1.31.13)

Although the country’s creditworthiness is not based on its economy’s ability to generate global currency, but rather “the world's largest oil reserves,” offers international finance capital seeking investment opportunities an interesting combination of comparatively high interest rates – which factor in political reservations as well as comparisons with the economic power of the world's monetary nations – and a relative security based on state oil revenues that other emerging or developing countries cannot offer in the same way:

“In recent years, investors have lent increasing amounts of money to developing countries due to high liquidity in international financial markets and low interest rates in industrialized nations. Venezuela, in particular, has long been considered a stable debtor. The country possesses the world’s largest oil reserves and has always repaid its debts.” (NZZ, April 11, 2017)

[10] This enabled the Venezuelan government to implement its alternative program without relying on, and therefore without interference from, the international supervisory institutions of the IMF and the World Bank.

[11] The majority of government bonds are denominated in bolivars, have short maturities (usually three months), offer interest rates that already account for inflation, and are therefore quite attractive investments that the government has little trouble selling. A small portion, approximately ten percent, of its national debt is made particularly appealing by the government: these bonds can be purchased with bolivars but grant the right to receive payment in dollars at maturity – a particularly welcome investment for businesses and individuals alike, and for many one of the few legal ways to acquire dollars. Consequently, demand regularly far exceeds supply. For the government, however, this is a double-edged sword, as it demonstrates its dollar strength, the foundation for the trustworthiness of its currency and debts, while simultaneously representing claims on its global currency revenues that it must be able to afford.

[12] In particular, the Brazilian construction company Odebrecht and the Chinese state are undertaking Venezuelan infrastructure projects on a large scale and being paid for them in dollars, which they advance as loans, or, in China’s case, in shares in the source of the global currency, oil production. “One of these major investments is the construction of two subway lines in Venezuela’s capital, Caracas, by the Brazilian company Odebrecht. Loans totaling $732 million are being discussed for this project.” (wirtschaftsblatt.at, May 27, 2009) “Strategic cooperation between Venezuela and China began in 2001 when Presidents Hugo Chávez and Jiang Zemin established a commission for political consultations and bilateral cooperation. Since then, over 300 agreements have been concluded in the areas of politics, economics, trade, and culture. Key milestones resulting from this cooperation included the commissioning of the two Venezuelan satellites, ‘Simón Bolívar’and ‘Miranda’, China’s participation in the ‘Gran Misión Vivienda Venezuela’ housing program, and the establishment of the Sino-Venezuelan Investment Fund (FCCV), which has financed over 200 projects in various economic sectors since 2009.” (amerika21.de, December 3, 2012)

[13] “While a massive expansion of government spending has enabled a consumption boom for the poor, it has also fueled inflation. Domestic production has fallen to a historic low; dependence on oil is greater than ever. Yet the state-owned oil company has become a welfare ministry, building housing and distributing subsidized food.” (tagesspiegel.de, April 12, 2013) When the poor finally get something to eat and a roof over their heads through government decree and public funds, the experts on truly sensible consumption immediately denounce it as a “consumer frenzy” and mismanagement: an “oil company” running a “welfare ministry” – crazy!

[14] “In the last ten years, 4,000 companies have ‘disappeared’ in the socialist-ruled country of Venezuela. This was announced on Wednesday by Jorge Roig, president of the Federation of Venezuelan Chambers of Commerce (Fedecamaras). According to him, the state has ‘nested’ itself in almost all sectors of the private economy, and the result is sobering: ‘These businesses are only operating at 50% of their total capacity. Ten of the 16 sugar mills in our country are state-owned and are only producing 48% of their former output.” (latina-press.com, November 29, 2013) The phrase “socialist rule” explains everything an economic leader needs to know about the disappearance of companies in the country.

[15] For example, the food fund of the state-owned oil company PDVSA has become the world’s largest importer of milk powder.

[16] In 2013, the Austrian Federal Economic Chamber informed its exporting companies on its website that “Venezuela has had strict foreign exchange controls in place since 2003. This means that Venezuelan importers must apply for the foreign currency needed to pay their foreign suppliers before shipping the goods. The Foreign Exchange Administration (CADIVI) is responsible for this process. After internal Venezuelan verification (based on insufficient or non-existent local production), CADIVI authorizes the allocation of foreign currency. Only after this authorization, and following the correct completion of the import procedure and the subsequent application process with CADIVI, can the importer purchase the foreign currency required to pay the supplier from the Venezuelan Central Bank (provided the importer has sufficient liquidity) and initiate the transfer to the foreign supplier. The Austrian Trade Commission in Caracas expressly points out to Austrian exporters that the application process with CADIVI can be subject to delays in the allocation of foreign currency, sometimes lasting for years, depending on numerous factors (trade policy priority of the imported goods, volume of total imports, current Venezuelan foreign exchange earnings, oil prices, procedural accuracy, etc.). During this time, Venezuelan importers have no way to settle their outstanding foreign debt with official foreign currency. Suppliers, importers, and diplomatic missions have little influence over these application processes. However, regular working meetings take place between the economic representatives of EU countries and the CADIVI leadership to discuss particularly difficult cases and to expedite or conclude the respective administrative procedures. Staff from the Austrian Trade Commission in Caracas regularly participate in these meetings as official representatives of Austrian businesses.” (Website of the Austrian Federal Economic Chamber, 2013)

[17] Since then, Spanish telephone companies, Japanese car manufacturers, and American retail chains have complained that they are not allowed to transfer the profits they earned from the Venezuelan development program to their parent companies, but instead have to hoard them in the constantly depreciating Bolívar Fuerte. They then invest these funds – as desired by the government – in high-interest, short-term government bonds; or – as both desired and prohibited by the government – they use the black market to obtain the coveted dollars.

[18] For import companies, the black market serves another business model: Even companies that have acquired foreign currency at the significantly cheaper official rate still use the black market rate as the basis for pricing their goods sold domestically, demanding many times what they had to pay in bolívars for the import – a common practice that further fuels the general price increase.

[19] “Despite the enormous additional revenue from the current oil bonanza, Hugo Chávez’s government lacks sufficient resources and is increasingly forced to borrow to cover public expenses. ‘The bloated public spending is exploding, largely due to the government’s uncontrolled and disorganized growth. We are sitting on a time bomb. The state is committing a crime against this and future generations through its irresponsible borrowing,’ stated Leonardo Palacios, a Venezuelan expert on taxes and public finance. ‘The government is trying to project a positive image of economic stability abroad in order to gain political support from certain nations. Anything negative is attributed to the crisis of capitalism. In reality, there is a lack of genuine planning, and there is no longer any room to manage the rising expenditures,’ Palacios added.” (latina-press.com, April 7, 2011)

[20] Among the government’s helpless attempts to curb the black market’s destructive effects on its own currency is the criminalization of publishing black market exchange rates.

[21] The extent of this practice is evident in the complaints voiced by the government: “In a televised address on Sunday evening, Maduro again attacked the illegal practice of companies receiving foreign currency allocations from the state at the official exchange rate, only to then either sell them on the black market or sell the imported goods at inflated prices. ‘Only one sector acts this way: the parasitic bourgeoisie,’ the president said, announcing harsh penalties for those responsible.” (amerika21.de, December 4, 2014)

[22] “In April 2016, Polar had to temporarily halt beer production due to a shortage of barley. The government had refused to grant the company the necessary import permit. President Maduro, however, accused Polar of participating in what he claimed was a private sector economic war against the socialist government. Production was able to resume in early June thanks to a $35 million loan from the Spanish bank BBVA.” (Wikipedia, Empresas Polar)

[23] “The government implemented price controls, which provoked a shortage of basic products such as milk, rice, flour, oil, medicine, toilet paper, toothpaste, and car parts.” (El País, December 17, 2013) The reason the price controls are causing the lamented “shortage” is that companies are reacting by either ceasing to import or produce these essential “basic products” or by selling their goods where they are not subject to price limits.

[24] The following chronology illustrates the subjects, calculations, and conflicting interests upon which the decisive means of the Venezuelan state depends: “Between 2010 and 2014, shale oil production technology was successfully developed further in the USA. This led to a new oil boom in the USA and a saturation of the US oil market. Despite the oversupply of the oil market, OPEC did not decide on a production cut at its conference in November 2014. This triggered a price war led by Saudi Arabia. Oil prices fell from $100 to below $30 per barrel. Oil drilling and production companies in the USA ran into financial difficulties and halted many new oil drilling projects. However, all other oil-exporting countries also suffered from the ruinous price pressure, even most OPEC countries. Nevertheless, the OPEC leadership steadfastly adhered to this price war policy. 2015 was an exceptionally cheap year for oil. The average annual price plummeted to $52.30 per barrel. Such a sharp price drop within a single year was unprecedented. By the end of the year, a barrel of crude oil cost only around $35 – the lowest price level in 10 years. The following year, 2016, began even more disastrously for the oil industry. In January, oil prices suffered another collapse, reaching new 12-year lows. Brent and WTI fell below $30 per barrel, reaching price levels last seen in 2004. Furthermore, the oil embargo against Iran was lifted. The US also lifted its ban on oil exports at the end of 2015. This made WTI crude oil available and deliverable on the world market again, increasing its value against Brent. The OPEC cartel, which was otherwise divided, surprisingly decided at its September conference in Algiers to limit oil production to below 33 million barrels per day. After difficult negotiations, an agreement was reached at the end of November on production quotas, which were implemented in January. This relieved pressure on the oil market by 1.0 to 1.2 million barrels per day starting in January 2017. In addition, non-OPEC oil-exporting countries pledged a contribution of approximately 0.56 million barrels per day to reduce production. Together, these measures were intended to alleviate the oversupply in 2017. The average annual price for a barrel of crude oil in 2016 was $44.50.” (tecson.de)

[25] Even in such a national emergency, risk-tolerant investors can still profit: “Since last week, signs have been mounting that Venezuela could trigger the largest sovereign default in economic history. On Tuesday, the rating agency S&P downgraded the long-term creditworthiness of its foreign currency bonds to a partial default. In total, this involves bonds and interest payments of around $170 billion, which the country can no longer service because it is generating too little foreign currency. In Argentina's default 16 years ago, the figure was only $100 billion. But private investors are not deterred by this scenario. On the contrary, they have been buying up massive amounts of Venezuelan bonds and those of the state-owned oil company PDVSA in recent days.” (NZZ, November 15, 2017)

[26] “Venezuela’s opposition is warning Deutsche Bank against entering into a gold deal with the socialist government of the crisis-stricken country, which desperately needs fresh foreign currency. According to reports, so-called swap transactions, in which the central bank lends gold reserves to another bank for a specific period and receives foreign currency in return, were already taking place repeatedly in 2016. In a letter to Deutsche Bank CEO John Cryan, seen by dpa, National Assembly President Julio Borges demands that no such deal be entered into, as President Nicolás Maduro is establishing a dictatorship.” (n-tv, April 23, 2017)

[27] “Venezuela’s hands are tied. Following the blatantly rigged elections to the Constituent Assembly at the end of August, the US imposed sanctions. Since then, American banks have been prohibited from buying or trading new Venezuelan bonds. This also applies to funds or institutions with branches in the US. As a result, refinancing channels abroad have been blocked.” (NZZ, November 15, 2017)

[28] “Russia had previously signaled its willingness to grant Venezuela a payment deferral and could play a key role in the crisis. The semi-state-owned oil company Rosneft is involved in the development of oil fields in Venezuela. In October, Maduro requested further billions in aid from Rosneft, offering in return stakes in five additional oil fields.” (Spiegel Online, November 3, 2017)

In its desperate search for sources of foreign currency, the government is now pursuing the idea of ​​a cryptocurrency that would be “backed” by virtually estimated oil wealth – the “world's largest oil reserves” still slumbering in the ground – and would attract international investors.