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Venezuela’s Vision

Venezuela_AmbassadorVenezuela’s Ambassador, Dr Samuel Moncada, explains how his country is on the path to development and independence

Venezuela’s liberator, Simon Bolivar, once dreamt of regional integration. It is therefore a tremendous privilege for Caracas to have recently hosted the inaugural summit of the Community of Latin American and Caribbean States. Known as CELAC in Spanish, this new organisation comprises all 33 independent nations in South America, Central America and the Caribbean.

The twenty-first century will witness a greater distribution of economic and political power than the last century, with the rise of the BRICS perhaps the clearest illustration to date. CELAC can play an important role both in helping to create this multi-polar world and in ensuring it is one where Latin America has a voice worthy of the fact that one tenth of the world’s population lives in the region.

For Venezuela, hosting such an event, in the bicentenary of our liberation from colonialism, provides an insight into how we are also moving on from twentieth century relations; in our case decades dominated by a bilateral relationship with the US, principally based on oil.

Deeper continental collaboration is central to our pursuit of independence. Venezuela is also looking to strengthen its relationships with other growing parts of the world. Never before has Venezuela had so many embassies, (18 have been opened in Africa alone in recent years), a sign of our commitment to constructive engagement with countries across the globe. Our commercial relations are also increasingly diversifying with China-Venezuela trade alone reaching US$18 billion in 2011, up 50-fold since the turn of the century.

Of course, independence takes many forms – the cultural, economic and political – but for Venezuela it can never be separated from the central question of control of our vast natural resources, most notably our oil, which makes up the largest reserves in the world.

Future historians will see the defeat of the coup-d’état to overthrow President Chávez that took place almost exactly a decade ago, followed by the failed attempt to oust him through the sabotage of the oil industry in 2002-03, as a turning point in our struggle for independence. As a result, the state was able to recover control of its most important economic resource, the oil industry.

Today, multinational investment in Venezuela is of course welcome. More than 20 foreign companies are partners in Venezuela’s oil industry and many more in other industries. However, in the oil industry today there is a different balance of power within the relationship. Previously only one per cent was paid in royalties and zero income tax on the exports of Venezuelan oil. Today, royalties are 33 per cent and the companies invest through minority stakes in partnerships with the state oil company PDVSA.

Due to this process, Venezuela has undergone perhaps the greatest economic expansion in its history.  Once the state recovered control over its oil company, Venezuelan GDP expanded nearly twice as fast as global GDP, growing from US$123 billion in 2001 to US$387 billion in 2010. This huge increase in actual purchasing power in the world market is especially important given that one of the consequences of the so-called ‘Dutch disease’ is Venezuela’s import dependency.

In regaining control of its oil wealth, in 2004 Venezuela began to reverse the 25 year fall in real income per head that had led to such suffering amongst the population. When President Chávez was first elected in 1998, real income per head was lower than in 1960! This decline is an important but little discussed phenomenon lying behind much of the violence and political turbulence that Venezuela experienced through the 1980’s and 1990’s as the country experimented with the unbridled free-market policies that some have come to regret in recent years.

The greater role for the Venezuelan state in its economy is also facilitating a shift away from oil dependency. Our oil wealth is being used to improve the productive capacity in other sectors, and such policies are now bearing fruit. Venezuela’s 4 per cent growth in 2011 was based on the non-oil sector GDP expanding 4.3 per cent and the oil sector GDP by 0.6 per cent.

Similarly, the government’s increasing role in the economy facilitates a virtuous circle whereby an expanding economy can benefit both the private and public sectors. Both grew by around 4 per cent last year. For example, construction expanded by 3.4 per cent in 2011 as a result of the government’s priority to build millions of homes, addressing the country’s chronic shortage. Washington-based economist Mark Weisbrot has explained that this is no one off, as prior to the global crisis the private sector grew faster than the public sector during the Chávez years.

This active use of the government’s minority share in the wider economy has similarities to the policies advocated by pre-eminent economists, most notably Nobel Prize winners Joseph Stiglitz and Paul Krugman, as a response to the global crisis. Such stimulus policies certainly help to explain Venezuela’s return to growth after being hit by this slowdown.

The path of independence that Venezuela is travelling on, however, goes much deeper than being free to control our own resources. Genuine independence has to create a population whose individuals are free to progress in their lives, not shackled by a lack of education, inadequate health provision, or mired in deep poverty. To this end, Venezuela’s National Development Fund has invested over US$400 billion in a vast array of social programmes ranging from healthcare to proper access to food, used by over 72 per cent of Venezuelan households.

Bolivar once wrote that ‘an ignorant people is a blind instrument of its own destruction.’ Accordingly, education has been at the forefront of our social investment policies and UNESCO has even recognised that Venezuela has eradicated illiteracy.  As a former Minister of Higher Education, I am proud of the fact UNESCO recently noted that today, Venezuela has the second highest proportion of university students in Latin America and fifth in the world.

General poverty has been reduced from 43.9 per cent in 1998 to 26.7 per cent in 2011, while extreme poverty has seen a decrease from 17.1 per cent to 7 per cent in the same period. The UN Economic Commission for Latin America and the Caribbean recognised Venezuela as having the lowest levels of inequality based on the Gini coefficient.

In the past three years, this kind of social investment has averaged US$60 billion, allowing the global economic recession to have less of an impact on Venezuelan unemployment and poverty rates. Such investment reflects the historic task of trying to modernise Venezuela’s social and physical infrastructure. Tremendous improvements have been made in many areas and deep challenges remain in others, for example, crime and housing are the current priorities for the government.

All countries contain good and bad examples of both private and state companies. Today, Venezuela is accommodating its own public/private balance to defend the country from the negative impacts of the financial crisis, and to create economic growth and social justice.

We do not pretend to be a model for others, but we are encouraged by the people’s verdict so far. In October, the Venezuelan people will once again have their say in our Presidential election, Venezuela’s sixteenth electoral process in the past 14 years – more than the total held in the proceding half century. With recent polls showing that over 60 per cent view President Chávez’s government favourably, there are strong indications that our people want to see Venezuela continue along its path to development and independence.

Gervase@aumitpartners.co.uk

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