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  • A man burns a 100-bolivar bill during a protest in El Pinal, Venezuela.

    A man burns a 100-bolivar bill during a protest in El Pinal, Venezuela. | Photo: Reuters

This is thesis of Pasqualina Curcio Curcio, a leading Venezuelan academic who examines economic war waged against her country.

There has been a constant assault on the Venezuelan people over the past four years but it really started in 1999 when Hugo Chavez came to power.

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The very same strategy has been implemented in other countries such as Chile and Cuba, and can be understood as those mechanisms used by major capitalist powers as partners or allies of local political factors that are manipulated by the US. The US appears when it feels that the interests of the capitalist model are being threatened.

When a nation seeks to create an egalitarian society or moves towards socialism, economic actions are taken that usually do not occur in a vacuum. They are accompanied by a media war peppered with false economic facts that seek to divert attention and mislead as is currently happening today with the Venezuelan government.

The media campaign serves to create conditions for violence and to divert responsibility for it on to the government and away from capitalism and its local business partners. It creates the conditions for attacks and sabotage against the Venezuelan people, who at the same time suffer the stress of a psychological war. This is thesis of Pasqualina Curcio Curcio, a leading Venezuelan researcher and academic and a voice essential in understanding the process of the economic war being waged against Venezuela.

She is a graduate of the Faculty of Economics & Social Sciences of the Central University of Venezuela (UCV) in 1992; she holds a Master's degree in Public Policy gained at the Institute of Economics and Advanced Studies (IESA-Venezuela) in 1995 as well as a PhD in Political Sciences at the Universidad Simon Bolivar (USB-Venezuela) in 2003. She is currently Lecturer at the Department of Economic and Administrative Sciences of the Coordination of Postgraduate Political Science at the Universidad Simon Boli­var and a member of the Steering Council of the Foundational Institute of Advanced Studies (IDEA). Most of her research is related to the area of Social Policy and the Economics of Health.

Why an economic war?

She explains that Chavez himself, in what in Venezuela is known as the Plan of the Fatherland, warned that economic aggression was coming because the historical antecedents already existed against Salvador Allende. The researcher recalled that in 1973, Henry Kissinger said that they (the United States Government) had to be careful that other countries in Latin America did not realize that there was an economic war being waged against Chile. In reality, she points out, that it is more than an aggression against the economy as against the people because they distort the mechanisms of distribution and food production as a means of achieving a political objective. That is, aiming to have an impact on the political or voting preferences of Venezuelans.

This war began back in 1999 and "in 2002 we had a coup and sabotage of the oil industry as well as a lock-out by entrepreneurs that affected production levels and the economy as a whole. At that time the associations of entrepreneurs had no qualms about appearing on television. Now, however, they have changed tactics because they are doing so covertly and anonymously, taking care to say that there will be no corn flour, using a tactic very similar to that practiced in Chile, but different to the blockade of Cuba.”

The Venezuelan case can be understood from the three mechanisms put into practice since 2003. The first is to plan the shortages of basic commodities by scheduling and selecting them. The plan does not exclusively affect economic goods, therefore, it is different from what happens is a war rather than in a crisis. If it were the case of a war, it would be the failure of the model and as a result there would be shortages of other products.

We have seen how in Venezuela there are long lines to buy medicines, food and other imported and industrial products - but there have been no shortages of fruit or vegetables that farmers and smallholders produce with little capital investment. Therefore, when we speak of a crisis, the farmers would be the first to be affected by a tottering model without financial backing.

However, Curcio Curcio pointed out that the precooked flour, which is the main staple consumed by this nation, is produced by two large companies controlled by transnational capital, which in turn also sell rice, pasta, cooking oil, coffee and sugar. Such supplies have been missing because these companies have more than 60 percent of the market under their control, "and as monopolies decide when to deliver or remove products from the market, and thus cause shortages.

The economic war has yielded results because the monopolies control the products of very high consumer demand and which are found in every Venezuelan household. All of them are needed because they are associated with health and life and are difficult to replace culturally. Moreover, such capacity to control causes multiple effects and impacts on many levels.

Medicines

In Venezuela, 85% of food is produced locally and the rest is imported, but is concentrated in those monopolies mentioned above. This is not the case with medicines that are mainly imported by large pharmaceutical corporations. For example, a story that has dominated international media is a shortage of toilet paper, sanitary napkins, diapers for babies, among other products of high consumer demand. These are supplied by two companies, Procter & Gamble and Johnson & Johnson, which control 90% of the market.

This dependency makes us highly vulnerable. The shortage is scheduled, as is the case with flour, and these practices are intensified when elections are due, worsening the conditions for political conflict with violent actions seeking the resignation of the President."
Induced inflation

Curcio Curcio notes that the second aspect is the phenomenon of induced inflation that was artificially increased in 2013 because it is not a direct result of a fall in production. Although it has diminished due to the decline in the price of a barrel of oil, it is an integral part of the framework of this economic war. "Its effect is due to the manipulation of the value of the currency made by individuals, because the Venezuelan economy also depends on imports, and those who actually import are the big monopolies.”

The linchpin is the foreign exchange cost because 95% of foreign currency comes from oil exports and although this currency exchange has been controlled by the State since 2003, because as an economy living off oil income there was a risk that it might be appropriated by international capital. Almost immediately a parallel exchange rate market appeared which in the last four years has manipulated the illegal exchange rate to such an extent that it has damaged the economy and induced inflation.

This exchange rate exists in web portals where rates for the bolivar are quoted that do not correspond to the country's economic reality, but its fluctuations respond to political and not economic criteria, and the increases vary sharply whenever an election comes around.

What is the mechanism used with this parallel exchange rate?

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For example, if someone produces silver or any other product and has a truck that might need a spare part, this is imported by a private corporation which buys foreign currency from the State at 10 bolivars per dollar. The preferential exchange rate that the government grants for importing essentials such as the spares from abroad might be for 100 dollars, and therefore the spare should be sold based on the same exchange rate in bolivares plus tax and profit margin of approximately 1400 bolivares

This is what happens with virtually all supplies that are brought from abroad, because imports are set based on that preferential exchange rate. But the parallel rate is much higher and is constantly moving on the web portals that quote it and recently reached 25,000 bolivares/dollar. Thus, in the case of the spare that cost 100 dollars or basically 1000 bolivares to buy abroad, it could be sold for 250,000 bolivares by applying the parallel or black market exchange rate. This is a 17,750% speculative profit for the importer or distributor and it is this sort of practice that has fueled inflation in the last ten years.

Curcio Curcio explained that this not the real value of the currency and is an arbitrary value subject to non-state business interests, because it affects and inflates domestic prices in the economy. "That mechanism is not new because they did in Chile damaging the exchange value of the currency and then in Nicaragua, based on political rather than economic criteria which drove inflationary levels up to 10 thousand per cent. This is the format used by a floating dollar imperialism and has been proven to affect the economy as it was also applied in the Argentina of Cristina Kirchner."

The effects

The negative effect of these maneuvers hits 97% of Venezuelans who suffer from decreased wages and purchasing power; it damages the economy and also generates the problem of a shortage of banknotes and coins. It is a clear problem when there is limited cash, because with inflation so high you need much more cash to buy any product and therefore there are long queues to get bank notes. In the worst case scenario, people pay commissions to get cash, especially if they do not have bank account with debit card.

2013: The start of the economic blockade against Venezuela

In addition to this artificial control of the economy are financial constraints. "From 2013 and in a covert manner, we are being blockaded because pressure is exercised on other nations not to enter into financial transactions with Venezuela. Access to loans from international agencies is limited, because we are the country “with the greatest financial risk in the world, with 3 thousand 600 points of risk - an index created by the Rating Agencies that at the same time and coincidentally belong to the world’s major banks.”

This means that for every 100 points of risk "they take 1% more interest, so if we are going to the international market for loans we have to pay 30% interest! Financial consortia block our access to dollars saying that we are a high risk country, but it turns out that Citibank, for example, while closing the doors to the Venezuelan government, has kept them open to grant
individuals loans.

"It is worth asking what is riskier in terms of liquidity, the government of a country with the largest oil reserves in the world, the second in gold as well as vast natural resources which almost no other nation of the world has, or entrepreneurs and individuals that obviously have fewer assets?”

This is not new. From 2012 onwards pressures built up in a circus full of contradictions where production increased or was maintained while shortages grew. When the black market flourished accompanied by queues to buy products or acquire bank notes.

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As a researcher, Curcio Curcio reflects that monopolies have altered the distribution systems because they do not deliver consumer goods efficiently and that allows them to be diverted into the black market. "The deception can be seen as companies maintain their production levels, including the pharmaceutical companies in Venezuela that have increased their sales. They also say that the state has not authorized or given preferential dollars to companies and that as a result there are shortages or falls in production.

However, they do not mention that from 2013 more than 300 billion dollars have been issued to pay for imports.

Shortages increase during election cycles

Remember that in 2003 Venezuelan employers organized a national strike against Chavez and consequently lowered production as an electoral process was approaching. From that point on and systematically, scarcity and shortage were increased at each election. At that juncture in December 2007 there was no coffee, sugar or milk in the market; at the conclusion of the 2007 referendum, which incidentally Chavez lost, all those products re-appeared on the shelves.

Such maneuvers are exemplified in the increase in the price of precooked corn meal that rose 3,700% (from 19.00 bolívares per kilo in March 2016 to 700,00 bolivars in December) “an increase that far outstripped the annual inflation rate. The owners of the flour mills, upon seeing customers in long queues waiting to buy their brand, responded by cutting production of
corn flour by 80% saying that there was no raw material available.

Inflation

Inflation has remained in double digits since 1998, even with the lockout of 2003 and the international financial crisis of 2008, but in 2013 it was as if the country had entered into an armed or conflict or suffered a huge natural disaster. It was caused by a maneuver that was clearly induced, by placing a level of illegal exchange rate that directly impacted inflation.

Curcio Curcio explains: "When the IMF warns that in Venezuela is going to have an inflation of the 1,700%, it is not because are good forecasters, but calculate the movement of the exchange rate needed and maneuver it so as to reach that level that is necessary to have an adverse political effect on the government."

Thus, the variation of the exchange rate has nothing to do with the economy, but it moves whenever there are elections, and at the same time, desperately seeks the resignation or ouster of Maduro as happened in the last three months of 2016. In that scenario, the money men manipulated the exchange rate to such an extent that it caused a lack of cash, hunger and scarcity of many products. In such a scheme of financial pressure, Curcio Curcio added the issue of external debt as the country paid 60 billion dollars in debt servicing but the result is that “the more we pay, the more we owe.”

The Chilean experience comes to Venezuela

Such a model was delineated by the US Senate that in 1975 made a study of the covert action in Chile that was revealed in declassified documents. These documents recognized that actions were organized to overthrow President Allende by means of financial pressures on the government, by financing opposition parties and right-wing organizations and by penetration and cooption the armed forces. In other words, U.S. Senators supported the establishment of the dictatorship of Pinochet to overthrow democracy. They said we had to overthrow a dictator like Allende and are applying the same discourse to Maduro.

Democracy and dictatorship

It is the discourse that justifies the actions of Trump. They say that the government generates a humanitarian crisis and thus seek to justify intervention. There have been 22 electoral processes since Chavism came to power in 1999 and the opposition won two of them – in 2007 and 2015. For the upcoming 15 October elections there are 226 candidates in 23 States of the country. All of them from the opposition and Chavism "and they still keep up the discourse about the Venezuelan dictatorship. They contradict themselves since the fact that there is mass participation in terms of both candidates and voters implies the recognition of democratic institutions, but the opposition and international discourse tries to indicate that the opposite is true".

Humanitarian crisis

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"They are justifying intervention, but how can you justify that there is a crisis if we have been living like this for four years? Despite this, Venezuela has a high Human Development Index (HDI) which increased. Even ECLAC (Economic Commission for Latin America & the Caribbean) argues that we are the least unequal country in Latin America despite the economic war.”

Therefore arguing that if the country were in a humanitarian crisis, inequality would be greater and indices of human development would not be at current levels, endorsed by this organization, ECLAC.

With the fight to reduce structural poverty progressing due to government policies, since subsidies are maintained for transport, food, basic services "and all this has been done despite the economic war".

Economic model based on the human being

When we speak about the economy it is just that – the economy -  but in Venezuela it is part of the human model, whether it grows or not. "What is important is what happens with health, poverty, education, therefore to measure the results we did not depend on the economic indicators. 

"There are government policies that focus attention on the human being and this allows the economic war to be resisted, in such a way that despite everything all the human indicators were consolidated.”

Curcio Curcio demonstrated this with mortality from malnutrition that she said had declined substantially and that unemployment rates declined by 66% in line with production.

She reflected that even taking everything into account, the fall in the price of oil by 2015 and the IMF maintaining the same trend for four years which highlights the financial crisis of Venezuela, Maduro’s government critics forget to add that despite the economic war, with a virtual siege and a manipulative media, that the per capita income of the Venezuelans is 9% higher than in the last 30 years.

But in addition, Curcio Curcio reports that one million 700 thousand decent houses and apartments have been built, as government policy to revive the economy, which contrasts with the induced contraction of the private sector in the past four years compared to the increase in the public sector.

Failure of the socialist model?

They say that the socialist model has failed, but for whom? If production in Venezuela increased the GDP and many people came out of poverty? Unlike government policies which in the 80s were neoliberal, inequality was higher and capital was concentrated in major sectors. But with the arrival of President Chavez national wealth was distributed more widely, with better housing; the privatization of health and education services was reversed, and pensions of senior citizens increased.

When high inflation appears, poverty increases, but in a regime with human consciousness, from 2003, inflation rose but poverty did not. Then there began a disproportionate economic attack and thereby, while poverty rates increased in terms of income, structural poverty did not. It was even reversed by the policies of a socialist model that is at odds with the policies of international capital.

Curcio Curcio argued that the struggle for the implementation of a neoliberal capitalist model in her country feels naturally threatened by the consolidation of a socialist alternative government in a country with vast reserves of gold, diamonds, oil, and and strategic geographic location.

"Since Chavez said in 2005, we are going to socialism, we became a threat to capitalism. They say that historically socialism has failed, but we are still being besieged and boycotted with an image in the media that seems that we have indeed failed, but the reality  is; "we are still standing and advancing.”


Translated and edited by Arturo Rosales of Axis of Logic.

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