In Background, Glenn Michalchuk, Latin America and the Caribbean, Sanctions, Venezuela

Inside Venezuela’s military academy. Photo:New Cold War

Venezuela’s forthcoming elections mark a critical moment. A violent and disruptive opposition has compounded serious economic difficulties, following twelve years of social progress achieved by taking control of the country’s oil revenues. Economic sanctions imposed by the US and its allies, with the clear goal of effecting regime change, are superimposed on the problems facing a country at the forefront of the challenge presented by the ‘pink tide’ of Latin American radicalism. Venezuela is once again at the centre of the continent’s long-standing battle with its pugilistic northern neighbour. This presentation to Winnipeg’s Venezuela Peace Committee, summarises the background

Glenn Michalchuck, 23 April 2018


Venezuela’s forthcomig election on May 20th is one of several to take place in Latin America in 2018. It will be decisive in determining whether the revolutionary process continues. In Latin America and the Caribbean Cuba is the only country which has sustained the revolutionary process since its revolution in 1959.

Unlike Cuba which has almost 60 years of revolutionary experience Venezuela’s experience is exceedingly short. In the coming election the popular forces in Venezuela aim to maintain the transformation of the Venezuelan economy from capitalism to socialism and, alongside this, developing new forms and organization of democratic power. To do so the revolutionary forces in Venezuela must win this election facing internal and external pressures that have created maximum disruption in the Venezuelan economy and destabilized the normal social and political life of the country.

The external pressures on Venezuela continue to mount. On March 28th Switzerland, noted for international neutrality, imposed sanctions against leading Venezuelan officials and on the export of goods and military equipment.

In announcing the sanctions Switzerland adopted the rhetoric of other western nations noting it was

[framed_box width=””]”…seriously concerned by the repeated violations of individual freedoms in Venezuela, where the principle of the separation of powers is severely undermined and the process in view of the forthcoming elections suffers from a serious lack of legitimacy.”[/framed_box]

The actions of Switzerland have added significance beyond the mounting economic pressure on Venezuela. It adds to a growing concern as to the state of international relations. The spread of misinformation and disinformation has long been the practice of the corporate media to influence opinion but it now governs international relations as well. This has been the method used in the case of Venezuela and the recent allegations of Russian use of chemical weapons in Britain. What we are witnessing is a sharpening of contradictions unprecedented since the height of the cold war. On one side U.S. imperialism and its allies supported by NATO and on the other Russia, China and Iran along with a host of other countries not fully under the political domination of the U.S./ Western alliance.

What makes Venezuela stick in throat of the neo-liberal West?

It is a country that threatens its values though not in the sense the media would like people to believe.

One threat posed by Venezuela is the development of a popular nationalism that targets the interference of  U.S. imperialism both internally and throughout Latin America. Another is its economic orientation under Chavez and continued by Maduro and the PSUV. Oil revenue has been the backbone of Venezuela’s economy through its modern history. During the presidency of Hugo Chavez the price of oil reached the historic high of $111a barrel in 2014. But unlike other periods and governments under Chavez the money earned from oil exports was not used to enrich a relatively small strata of Venezuelan society. The enormous revenues this generated for the state were redistributed and used to lift the conditions of the poorest sections. Oil revenues sustained the huge advance in social programs and supports for the Venezuelan people and the reduction in the cost of everyday items.

Falling oil revenues began the internal economic crisis.

The fall of oil prices began in 2014 reaching a low of $27 a barrel in 2016. This meant the internal economy was increasingly hard pressed to maintain the system of subsidies and price controls and social supports based largely or solely on oil revenue. Externally, the fall in oil prices meant Venezuela would have difficulty paying its international debt. According to the Central Bank of Venezuela the country had $10.4 billion in foreign reserves in late 2017.

Effect of sanctions.

In 2017 Venezuela’s export revenues rose from $28 to $32 billion due to the rise in world oil prices. Under such conditions a rise in a country’s exports would leave it with more resources to pay for its imports. But in Venezuela’s case imports fell by 31 percent during the same year. The reason is that the country has lost access to financial markets because of sanctions. Consequently, Venezuela was unable to refinance its debt. As a result of this the government was forced to build up huge external surpluses to continue servicing the debt in an attempt to avoid default. Internationally, creditors threatened to seize the Venezuelan government’s revenue sources such as refineries located abroad and payments for oil shipments if the country defaulted.

U.S sanctions have stopped Venezuela from issuing new debt and blocked attempts to restructure its existing debt obligations. Major financial institutions have delayed the processing of all financial transfers from Venezuelan companies significantly hampering the ability of Venezuelan companies to do business in the U.S. For example, Citigo, a Venezuelan based subsidy that owns 4 per cent of U.S. refining capacity, has not been able to get financial institutions to issue routine trade credit because of sanctions.

The situation imposed by sanctions has forced Venezuela to develop a response.

In February 2018 the Government introduced two significant measures to stabilize the economy: 1) fighting corruption and profit taking on currency exchanges 2) improve international transactions in the face of sanctions and embargo.

One measure was to do away with a two tiered exchange rate introduced in 2010 – highly regulated by the government in an effort to control prices. Under this system one tier was a heavily subsidized exchange rate for the import of  “essential goods” while the other rate was relatively fluid and set by the Central Bank in response the market but still utilizing a cap on the exchange rate.

One abuse this led to was profit taking by buying “essential goods” at the heavily subsidized rate and then selling these goods at highly inflated prices. An anti-corruption operation initiated last year by then newly appointed Attorney General Tarek William Saab has uncovered numerous cases in which national and transnational companies resold subsidized dollars intended for imports on the blackmarket for huge profits. According to Saab the public treasury was looted of millions of dollars through such transactions.

The new unified exchange rate will be regulated by the state through “auctions” in conjunction with transnational foreign exchange centres and suppliers.

Under this new system:

  • to access foreign currency individuals and business owners will have to register with the government website handling transactions;
  • individuals and business owners will have a limit on the total amount of foreign currency that individuals or company directors can purchase. 1680euros for an individuals/ 340,000 euros monthly or 30% of declared net monthly profits for business owners and directors of corporations businesses and individuals to repatriate their savings and assets and as a mechanism for Venezuelan migrants to send remittances back to their families (the hope of the government is implementing this reform);
  • foreign exchange centres within Venezuela will be able to sell foreign currency to private buyers.

The other significant action the Venezuela government initiated in February was the launch of its petro currency which is one of the new forms of crypto currencies. It is backed by Venezuela’s oil reserves and gold bullion. Its aim is to circumvent U.S. economic sanctions. In making the announcement of the petro currency activation Maduro said: “The Petro will be…used as a platform for the growth of a more just and favourable financial system for national development. Currency will be transferred securely and directly in order to avoid blockades and embargoes”. In response the U.S government warned that any financial institutions found to be dealing in the Petro will be considered to have violated the Trump administration’s sanctions on Venezuela.

Alongside this China and Russia play an important role in supporting the Venezuelan economy through loans and credits. Internationally, they are now the main financial supporters of the Venezuelan government.

Another measure that took place last year and directed at all working people was the increase in the minimum wage by 65%.

The coming elections – the West clamors for “democracy”

Who has provoked political crisis in Venezuela? Maduro and the PSUV?  That is certainly the spin in the major Canadian and western media. The media lays the political crisis in Venezuela at the feet of Maduro and the PSUV though it never explains this. What it asserts over and over is some simple phrases about Maduro – the dictator against an opposition fighting for democracy.

In the context of the coming elections it describes the date for presidential elections as “Maduro calling a snap election”. The basis for this assertion is in the past the election of President is held in December of the election year. But these are hardly normal times in Venezuela.

It is really the opposition parties that have played fast and lose with the democratic process using it to effect change that suits their agenda. While elements of the political opposition are suggesting Maduro is manipulating the presidential election the facts tell a different story.

It was the “democratic” opposition that tried the tactic of “snap election”. In 2016 the opposition political parties under the umbrella of an organization called the Democratic Unity Roundtable (MUD) took control in the National Assembly. What did they do? Did they advance a legislative agenda to deal with crisis in Venezuela? No, MUD set about effecting regime change.

The MUD dominated National Assembly sensed it had momentum from the elections and decided the time was right to oust President Maduro and the PSUV. The “democratic opposition” took various provocative actions. One was to swear in several deputies who had been elected to the National Assembly but barred by the Supreme Court from taking their seat due to findings of election fraud. The seating of these deputies would help ensure their majority in the National Assembly.  Next, self-declaring that the election of a majority of MUD delegates was authority to oust Maduro the MUD used their majority in the National Assembly to begin a campaign to recall the President.

However, the National Assembly was blocked when the courts declared these actions illegal and placed it in contempt. It was then further blocked by the convening of a Constituent Assembly. MUD decided to boycott elections to the Constituent Assembly putting all its political eggs in the basket of the National Assembly. In so doing, MUD sidelined itself from the political process as the Constituent Assembly elections resulted in the election of delegates not associated with the extremism of MUD. MUD suffered further setbacks in regional elections losing in almost all areas of the country. It suffered another setback when several of the elected regional governors who belonged to the MUD alliance swore allegiance to Constituent Assembly despite orders by MUD leadership that to do so would result in expulsion from the alliance.

So where does that leave the opposition in the present election — the decision of the election date actually comes as a result of a of negotiations between the PSUV and parties other than those in MUD or who have abandoned MUD for a variety of reasons. The setting of the May 20th election date comes with the signing of document governing the conduct of the elections by all those parties participating. The document outlines measures to ensure a fair election, including international observance — one of the key requests of the international community. Among the many other things it covers is the registration of Venezuelan voters living abroad, access to all forms of media including state media and so on.

Most importantly the advance of the election date to May will create certainty for Venezuela. The economic changes being pursued in Venezuela signal that there is an economic strategy to deal with the U.S. led sanctions. To do this and other things in the economy Venezuela needs political stability. The method of the opposition has been to destabilize Venezuela — through violent protests, alignment with foreign powers and its refusal to engage in political dialogue.  One of the reasons for MUD’s opposition to the coming elections is that it is fractured as a political coalition united around regime change.  One of the main tools U.S. imperialism was using to cause political havoc and effect regime change has come undone.

The May election will further push the MUD section of the “opposition” to the fringe of Venezuelan politics if Maduro is successful. Certainty and stability in governance will undoubtedly open space for taking further measures to address the economic problems.

The elections, the people and unity on the left – a unity borne of necessity

As recently as municipal elections in December 2017 the Venezuelan Communist Part (PCV) and  Homeland for All (PPT) supported candidates to the left of the PSUV.

However, the election for President really puts the fate of the Venezuelan revolution on the agenda. In February both left parties agreed to support Maduro as the presidential candidate of the PSUV.

On February 26 the Venezuelan Communist Party (PCV) and the United Socialist Party of Venezuela (PSUV) entered into an agreement concerning the May 20th presidential election. In exchange for the PCV endorsement of Maduro’s candidacy the PSUV and PCV entered into an agreement on a social, economic and political program for Venezuela. The program includes demands for workers’ rights and collective leadership of the revolutionary process.

On February 21 the Homeland for All (PPT) agreed to support Maduro’s candidacy. It too reached a co-responsibility agreement with the PSUV.

The unity of left forces reflects the fact that Venezuela has only two options: face the difficulties and continue down the road of independence, economic and political sovereignty in the interests of the majority of the people or step back from this path as advocated by the main challenger Henri Falcon.

Henri Falcon’s programme is outlined in a NewYork Times op-ed piece he wrote on March 6. Falcon broke with MUD to be a candidate and in the Times op-ed presents his credentials to U.S. imperialism. He is the candidate who will impose neo-liberalism and open Venezuela to the west.  Unlike the unity platforms of the PCV, PSUV and PPT he writes not one word against the damage caused by U.S. sanctions. He lays the blame on Maduro, reduces the question of democracy to asserting platitudes, economic recovery to opening the country to “bi-lateral and multilateral agencies” and political rights to “freeing political prisoners”.

Venezuelans oppose foreign interference and manipulation of the internal situation.  For example, 56% of Venezuelans oppose U.S. sanctions and 71% believe there should be dialogue between the government and those opposed to it, and such dialogue should focus on seeking solutions to the country’s economic problems. The right in Venezuela point to 2002 as an example of how the people reject economic pressure as a tool of the opposition.  A massive strike in the country’s oil sector was organized by opponents of then President Hugo Chavez to bring pressure on him to resign.  The strike brought oil production to a standstill and caused double digit inflation but backfired in terms of turning people against Chavez. Two years later Venezuelan voters answered by resoundingly backing Chavez in a recall referendum.

This election will be a test of the revolutionary forces in Venezuela and their links with the masses of the people. It will determine the social and economic course of Venezuela. A victory for Maduro may be the trigger for bigger schemes being planned by U.S. imperialism. The new director of the CIA made a visit to several countries in Latin America that could be used for military intervention.

For our work here we should be ready.

References

TeleSur English. Switzerland Imposes Sanctions on Venezuela. 29 March, 2018

Rachael Boothroyd-Rojas Venezuela unifies tiered exchange rate. 1 February, 2018, Venezuela Analysis

Rachael Boothroyd-Rojas. Leftist Parties Back Maduro as Opposition’s Henri Falcon Confirms Presidential Candidacy. 27 February, 2018, Venezuela Analysis

Steven Chovanec. In Venezuela, It’s ‘Democracy’ if US-Backed Candidates Are Empowered, ‘Tyranny’ if They Are Not. 27 May, 2018, Truthout

Communist Party of Venezuela. Venezuelan Communists Urge Radical Solutions to Current Crisis. 10 January, 2018, Venezuela Analysis

Venezuela Analysis video. Understanding Venezuela’s Political Crisis. 27 April, 2017

Danielle Renwick. Venezuela in Crisis. March 23, 2018, Council on Foreign Relations

Deutchsche Welle. Venezuela opposition MUD fractures after Constituent Assembly loyalty oaths. 25 October 2017,

Chase Winter. Who makes up Venezuela’s political opposition? 14 September 2017. Deutsche Welle.

Henri Falcon, Why I Am Running for President of Venezuela. 6 March, 2018, New York Times

Paul Dobson, Venezuela: Presidential Elections Moved to May, Falcon & Maduro Agree to Electoral Guarantees March 2, 2018, Venezuela Analysis

Text of election agreement

Geoff Ramsey. Venezuela Postpones Elections to May 20. March 2, 2018. WOLA

Francisco Rodríquez, Why More Sanctions Won’t Help Venezuela. 12 January, 2018, Foreign Policy

Roberto Lovato. The Making of Leopoldo López. 27 July, 2015, Foreign Policy

Wikipedia. Democratic Unity Roundtable

 

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