Edgardo Lander and
Pablo Navarrete*


This paper was
originally published by the Transnational institute (TNI).

can download the report in English and in Spanish


Hugo Chávez assumed the presidency in February 1999, Venezuela
has undergone a process of profound political and social changes.
These transformations have been reflected in the government's
official discourse and in the fundamental pillars of the government's
economic policy. In Chávez's initial electoral platform and
during the early part of his government, he spoke about combating
"savage neo-liberalism" and searching for a more humane
capitalism: a Venezuelan "third way" as a solution to the severe
socio-economic crisis facing the country. During his government,
however, this discourse has evolved, culminating in Chávez's
public statement in January 2005 in which he rejected capitalism as a
model for Venezuela and spoke of the need to create 21st Century

understand the nature of the Chávez government, it is first
necessary to consider the causes and magnitude of the collapse of the
old socio-economic order based on the oil rent model. In analysing
the economic policy of the Chávez government, we have
identified three phases, marked by critical inflections in the
government's policies. The first refers to the period between
Chávez assuming the presidency in 1999 and the November 2001
approval of the so-called "Enabling Laws", which contained a
series of measures that signalled profound changes in the Venezuelan
economy. The net result of these laws was to bring together
heterogeneous interests opposed to the Bolivarian Project. As a
result, a second phase began that lasted until mid-2003 and can be
characterised as a battle for state control. During this period, the
majority sector of the opposition used a variety of insurgent-type
policies that culminated in the April 2002 coup and the 2002-2003
business-oil strike/sabotage and their subsequent defeat by the
social sectors supporting the government. The final phase begins in
mid-2003 with the implementation of government social programmes
known as "Missions" and lasts until the present day. This phase
has been characterised by an attempt, on the part of the government,
to create mechanisms to facilitate structural changes in the
Venezuelan economy. We will use the second half of 2006 (June) as the
final date for the current analysis.

Prior to examining
the Chávez government's economic policy, it is necessary to
contextualise Hugo Chávez's victory in the 1998 presidential
elections with a brief summary of the principal aspects of the
Venezuelan political system from 1958 to the electoral triumph of


democracy, understood as the governability pact created following the
defeat of the Marcos Perez Jiménez military dictatorship in
1958 with the signing of Punto Fijo pact that same year, was based on
a project that linked democracy, oil nationalism and development
through the distribution of oil rent in a clientalist system
(Hellinger, 2003, 43).

so-called "puntofijismo" was consolidated in the 1961
Constitution and its main protagonists were the two main political
in the country,
"Acción Democratica" (AD),
(Social Democratic) and COPEI (Social Christian).

political pact also counted on the support of the Armed Forces; the
Catholic Church hierarchy; the main trade union federation,
Confederación de Trabajadores de Venezuela
(CTV; Confederation
of Venezuelan Workers of Venezuela); and the main business
organisation, Federación de Cámaras y Asociacianes de
Comercio y Producción de Venezuela (FEDECAMARAS; Federation of
Chambers and Associations of Trade and Production of Venezuela)
(López Maya and Gómez Calcaño, 1989). It is
necessary to mention, however, that this political project was not
entirely consensus-based given that left-wing organisations, in
particular the Movement of the Revolutionary Left (MIR) and the
Communist Party,
influenced by the recent triumph of the Cuban Revolution, were
excluded and openly repressed by the State apparatus.

without a social revolution, and without changes in the distribution
of economic resources or power in society, a sustained growth in oil
rent made possible a process of distribution which allowed
simultaneously, the profoundly unequal enrichment of high- and
middle-income sectors of society as well as an improvement in the
living conditions of the majority of the poorest population in the

growing oil rent and unequal distribution of the permanently
expanding pie was the foundation for the construction of a
modernising policy and ideology with a strong social-democratic
content in which the role of the state was central. Unlike the
majority of countries in Latin America, in this period there were no
clearly right-wing parties, parties that identified themselves as
conservative, or even as liberal. Within the imaginary of development
and modernisation, the dominant classes did not see the subordinate
and clientalist incorporation of grassroots sectors and their growing
demands as a threat to their interests. And of vital importance, the
public spending used to finance education, health and infrastructure
did not come from a tax on the goods and income of the most affluent
sectors. The social democratic consensus was based on an oil income
that was expected to continue increasing forever and therefore permit
the distribution of an ever bigger pie. The distribution of the main
source of the country's wealth was not
seen as a ‘zero sum game' where what was given to one player
necessarily has to be taken from another.

the quadrupling of fiscal income as a result of the hike in oil
prices in 1973 – during the first government of Carlos Andrés
Peréz – the collective delirium
of La Gran Venezuela (The
Great Venezuela) began: the imaginary rich country that, with very
little effort, was well on the road to becoming a society of
abundance. Critical voices were drowned out in an oil rent orgy.(1)


last two decades of the 20th Century in Venezuela were characterised
by a sustained economic and political deterioration. After more than
two decades of sustained growth, a significant improvement in the
living conditions of the population, and the consolidation of the
legitimacy of democratic regime, in February 1983 the symbolic
beginning of the end of the oil bonanza
in Venezuela Saudita (Saudi Venezuela),
takes place when the Luís Herrera Campíns government
decided to devalue the Bolivar after many years of fixed parity with
the US dollar. The Venezuelan crisis was slower to develop than in
the majority of Latin American countries. Nevertheless, given the
expectations of sustained growth and the improvement in living
conditions that formed part of the Venezuelan imagination, its
political and cultural impact was very deep. It was a very prolonged
crisis marked by a sustained deterioration in the living conditions
of the majority of the population over a two-decade period.

Per capita income in
Venezuela in 1998 was 34.8% lower than it was in 1970 (Heston et al,
2002). The decline during this period represented the steepest
decline in Latin America and one of the worst in the world, even
worse than Africa during this period (Weisbrot, 2005). Between 1970
and 1997, workers' income was reduced to approximately half and by
1997 Venezuela was one of the most unequal countries in the world,
with a Gini coefficient that surpassed South Africa (62.3) and Brazil
(61.8) (Rodríguez, 2000, 1, 6). Between 1980 and 1996,
according to a study from the Catholic Andrés Bello
University, it is estimated that poverty in the country increased
from 18% to 65%, the largest increase in poverty in any Latin
American country in this period (cited in Wilpert, 2005).

terminal crisis in the Punto Fijo political model took place during
the second government of Carlos Andrés Pérez
(1989-1993) and the profound breakdown of Venezuelan society was most
clearly expressed in the social explosion in February 1989 known
as El Caracazo.

a backdrop of a sharp reduction in international reserves,
significant fiscal and balance of payments deficits, together with a
foreign debt that – in these conditions – was un-payable, the
Andrés Pérez government signed a Letter of Intent with
the International Monetary Fund (IMF) that committed it to
implementing an orthodox neo-liberal structural adjustment policy,
despite the fact that during his electoral campaign he had appealed
to the "abundance" of his first government.

response to the initial impact of the neo-liberal structural
adjustment measures – the increase in the price of gasoline in the
domestic market sparked a surprise increase in public transport
prices – there was massive public ransacking in the main cities on
a scale unheard of in Venezuelan history. The government imposed a
curfew and ordered a brutal military repression that resulted in the
death of 276 people according to official figures. The PROVEA human
rights organisation reports that 366 people died. Some foreign
correspondents refer to as many as 2,000 to 3,000 dead (CIDH, 1999;
PROVEA, 1990).

Caracazo represented
the first mass grassroots and spontaneous response to the rigorous
conditions that international financial bodies were imposing in the
majority of countries on the continent. The fact that there was no
grassroots rejection of the two coup attempts in 1992, nor defence
of the democratic regime, confirmed the breakdown and the growing
illegitimacy of a political system that had been considered
exceptional, a show case for democracy in Latin America.

oil industry was one of the areas of the economy where the
neo-liberal agenda gained the most ground in Venezuela with the
beginning of the so-called Gran
Viraje (Great Turnabout) policy implemented during the Andrés
Pérez government. These neo-liberal policies covered a broad
spectrum: prices, production volume, relations with the Organisation
of Petroleum Exporting Countries (OPEC), modes of foreign capital's
participation in the oil business, Petroleos
de Venezuela
(PDVSA) investments abroad, tax policy, as well as relations between
the oil company – whose shares were entirely owned by the
Venezuelan state – and the Ministry of Energy and Mines (MEM), the
public body responsible for elaborating and carrying out the
country's oil policy. (4)

yet another expression of the depth of the political crisis facing
the country, Carlos Andrés Pérez did not finish his
second presidential term as he was removed by Congress under
accusations of corruption. This dynamic led to the breakdown of the
two-party system that was evident in the next elections. Rafael
Caldera abandoned COPEI, a party of which he was a founder, and
leading ideological figure for half a century. Having decided to
launch his candidacy, he created the
Convergencia Nacional party, an
electoral alliance between 16 political forces that included
representatives of the traditional left such as Teodoro Petkoff.
Rejecting the neo-liberal adjustment polices, instead he proposed a
‘Letter of Intent with the People'. His electoral victory
represented the first time since 1958 that a candidate who did not
belong to AD or COPEI had been elected president

surviving the most severe financial crisis in the country's history
during his first years of government and after a long period of
indecision, Caldera ended up agreeing to a ‘Letter of Intent'
with the IMF. In 1996, under the ‘Agenda Venezuela' slogan, he
adopted the basic orientations of the neo-liberal agenda he had so
strongly questioned. The consequences of the labour law reform that
drastically reduced the social benefits of workers were particularly
severe as were the policies to open up and internationalise the oil
industry. The sustained deterioration of people's living conditions
continued and the illegitimacy of the political system, its parties
and their leaders deepened.

The application of
structural adjustment policies gave particular visibility to two
inter-related characteristics that Venezuelan democracy shared with
other countries on the continent and that the expanding oil income
had partially hidden and/or attenuated. First of all, the elite
nature of the political regime of the time, that was profoundly
exclusive and insensitive to the demands of the majority of the
population. Secondly, the severely limited nature of the autonomous
decision-making powers of the political system due to the economic
and geopolitical conditions forced on by international financial
bodies. These two issues constitute the backbone of Chávez's
discourse: the 'popular' and ‘national autonomy'.

1997 Hugo
Chávez's "Movimiento Quinto Republica" (MVR)
decided to participate in the 1998 presidential elections and
registered as a party with the
Supreme Electoral Council. By the time of the 1998 elections, the MVR
had become the main reference point for the left in the country and
the main left-wing organisations decide to support it, constituting
the "Polo Patriotico". Despite the fact that the AD and
COPEI withdrew support from
their respective candidates at the last moment and backed Henrique
Salas Römer in a final bid to impede a Chávez victory, in
the December 1998 presidential elections he won the presidency of the
Republic with 56.2% of the vote


In Chávez's
speeches as a presidential candidate and at the beginning of his
presidency, his insistence on the 'popular', the national, the
sovereign, equality, participatory democracy, the critique of
neo-liberalism and "savage capitalism", as well as the rejection
of a uni-polar world and the priority placed on relationships with
countries in the south, particularly those in Latin America, is very
clear. Nevertheless, there remained a basic question: What would a
viable counter-hegemonic project consist of in the current world? Is
it the search for greater levels of national autonomy? The return to
developmentalism, to import substitution? An endogenous development
model? A social welfare state? An anti-liberal project within
capitalism? An anti-capitalist project?

most systematic initial proposal of an alternative productive model
is the so-called "Bolivarian Alternative Agenda" of 1996 (Chávez,
1996). This document defines five productive sectors that constitute
the mixed nature (public/private) of the proposed economic model,
classified according to sector and property regime:

Basic and Strategic companies. Oil sector, basic companies. Mining,
high military technology. State owned.

Essential consumer goods. Construction industry, the agro industrial
industry, SMEs, tourism. Mixed ownership.

Essential services and Government. Productive sectors such as
education and health, as well as a non-productive government sector,
which generates essential non-tradable services. Mixed ownership

Banking and Finance. Oriented toward financial intermediation. Non-
tradable. Mixed, but regulated and controlled by the State

Major Industry. This is fundamentally made up of the major import
industry, a generator of goods and non-essential services.
Fundamentally private


mixed nature of the economy is repeated in Chávez's campaign
entitled, "A democratic revolution: Hugo Chávez's
proposal to transform Venezuela" (Chávez, 1998). While it
criticises the path that the Venezuelan economy has taken, it does
not question
capitalism as a system. Rather, it seeks a "humanist, self-managing
and competitive" economic model that is summarised by the phrase
"as much market as possible and as much state as necessary."
Significantly, in the political field the document emphasises the
need to transform the existing political-juridical framework through
the Constituent Process in order to "give way to an authentic
participatory democracy."

these initial guidelines issued by the government regarding the
direction of economic policy, it is constitutional reform as a means
for institutional change that dominates the first year of government.
As we have mentioned, for the government, political reform was a
pre-requisite for economic reform and in the move away from the
so-called Fourth Republic to the Fifth Republic.


On the same day he
was sworn in as President in February 1999, Chávez announced a
referendum to consult the population about the formation of a
Constituent Assembly. Despite strong opposition from the old
political class, the Supreme Court ratified the constitutionality of
this referendum and it was held in April that same year. Chavez won
the referendum with 87.75% of the vote, but the abstention rate was
62.35%. In the elections for the Assembly members held in July, the
government coalition obtained 125 out of 131 seats. The referendum to
approve or reject the new Constitution took place in December and was
approved by 71% of voters.

the limitations in the process to draft the new Constitution
(5), there was a significant contrast between the national project
outlined in this text and the neo-liberal orthodoxy that dominated
most of the continent. This contrast appeared both in the
dispositions that ratify (or deepen) the contents of the previous
Constitution as well as in new dispositions. It is neither a
socialist project nor even an essentially statist project. While in
the majority of the initial doctrinal documents of the Bolivarian
movement, the state appears as the main backbone of societal
transformation, in the Constitution the role of the state is encased
within a market economy with private activity given a preponderant
weight (Camejo, 2002).

new text guarantees economic freedom (article 112), the right to
property (article 115), it grants private initiative a role in the
generation of economic growth and employment sources (article 299)
and consecrates fiscal balance, stipulating that this will be
balanced in the budget, giving the Central Bank of Venezuela (BVC)
the autonomy to formulate and exercise monetary policy (articles 311
and 318). At the same time, it defines clear and central state
responsibilities in trade policy and the defence of national
industries (article 301), reserves oil activity and other strategic
activity for the state (article 302), and assigns the state a
governing role in the development of sustainable farming and food
security (article 305)
(Constitution, 1999).

The guarantees that
the text grants economic and social rights, in particular health,
education and social security, are equally significant. Perhaps the
most significant change in the 1999 Constitution vis-à-vis the
previous text (1961), however, is the broad range of new forms of
participation that combine traditional forms of liberal
representative democracy (separation of powers, the election of the
executive and legislative authorities at a municipal, state and
national level) with forms of direct "participatory and
protagonist" democracy. It is here, in the promotion of a
participatory democracy and economy where it is possible to see an
approach to an alternative economic model (Albo, 2006).


from the the notable exception of oil policy, during the first years
of government there was neither an integral proposal for a
development model nor an economic policy that was consistent with the
radicalism of the political discourse. In the area of hydrocarbons,
however, there were significant changes from the outset
(6). Despite the fact that the official policy of the Venezuelan
state was supposedly to continue to defend oil prices through the
regulation of export volumes agreed to by OPEC, the policy
spearheaded by PDVSA following the application of neo-liberal
policies in Venezuela during the second Carlos Andrés Pérez
and Caldera governments pointed in the opposition direction.

market share over price levels, the company had systematically
violated its OPEC commitments. For PDVSA's upper management, the
oil cartel hampered the free operation of the global oil market. Its
violations of OPEC quotas, as well as the goal to broaden its market
participation, were aimed at weakening the OPEC to render it
irrelevant or prepare the ground for
Venezuela's withdrawal. The voluminous over supply of Venezuelan
crude had a significant impact on the collapse of oil prices in the
international market, leading to the lowest prices in 50 years (7) in
1998-1999. In Venezuela, this led to a significant fall in fiscal
income, a huge fiscal deficit, a balance of payments deficit, and a
heavy recession, with its corresponding increase in unemployment,
trends that were accentuated in the first year of the new government.

From the moment
Chávez assumed the presidency, the MEM began an aggressive
policy aimed at recovering, both the weakened OPEC, as well as oil
prices. To an important extent these new oil policy initiatives made
it possible to establish credible commitments regarding lowering
production volumes, not only by OPEC member countries but also by
other exporters that did not belong to the organisation, such as
Mexico and Norway.

To the surprise of
the principal analysts of the world oil market, the agreements were
met and this is the leading factor behind the tripling of the price
of Venezuelan oil in the world market, from less than US$8 per barrel
at the beginning of 1999 to US$24 toward the end of that same year.
Parallel to this, the process to open up the oil sector, that formed
part of PDVSA management's privatisation strategy, was suspended,
and progress was made on legislation to reverse the insignificant
role given to domestic capital in the industry. At the same time, the
first steps were taken to recover National Executive control over oil
policy and the basic orientations of the company, that in previous
years had reached increasing levels of autonomy. (8)

Nevertheless, in the
absence of a global development project that served to effectively
orient the economic policy in different areas, it is possible to find
varied orientations, even some that could be seen as corresponding to
divergent strategic proposals.

the profound nature of the economic crisis, the basic orientations of
the macroeconomic policies were mostly orthodox (9), with priority
placed on macro-economic balances and an emphasis on inflationary
control (10). Exemplifying this focus, Maritza Izaguirre, Finance
Minister in
the last year of the Caldera government, remained in this role. This
orientation is found in the "1999-2000 Economic Transition
Programme" issued by the government, which emphasises
macro-economic stability "as a sine qua non condition for the
development of sector policies aimed at encouraging an economic
on a solid and permanent foundation" (Cordiplan, 1999). It includes
the following about the general orientation of the economic policy:
"The central pivot of the specific actions of monetary, financial
and exchange rate stability is a prudent fiscal policy related to tax
reform, adjustments in spending, tariffs and the price of goods and
public services."

Despite the fact
that there was political insistence on the need to review and
renegotiate the foreign debt, this was paid with rigorous
punctuality, and in the first year the government maintained its
commitments with the IMF that had been assumed by the Caldera
government (López Maya, 2006). Given this capacity for
payment, no new loans were requested from the IMF thereby avoiding
new negotiations, conditions and supervisions on the part of that
body. A consequence of this political decision was a significant
increase in the internal public debt, and an increase in interest
rates and in financial sector earnings. President Chávez met
with foreign investors on numerous occasions, exhorting them to
invest in Venezuela and guaranteeing juridical security and political

notable examples of economic decisions that represented continuity
with neo-liberal policies were two juridical regulations in the early
years of government: the Law to Promote and Protect Investment (11)
of October 1999 (FUNDELEC, 1999) and the General Telecommunications
Law of March 2000 (TSJ, 2000), that was lauded by international
investors as a model of openness and transparency.

of the
documents that most clearly demonstrated the difficulties to
formulate economic guidelines that were consistent with the political
and social orientations of the process of change was the General
Lines of the Economic and Social Development Plan of the Nation 2001
– 2007 (MPD, 2001) published in September 2001. In this document,
structured around the objective to achieve balance in five major
areas (economic, social, political, territorial and international),
the economic balance is formulated in the following

the period 2001-2007, the foundations will be established for a
productive model capable of generating self-sustaining growth,
promoting productive diversification and achieving international
competitiveness in a context of macroeconomic stability, and which
will facilitate a deep and diverse reinsertion in globalised
international trade" (ibid, 16).

Over and over again,
insistence was placed on the priority of export-orientated growth:

additional source of fiscal income is required that will come from
new agricultural, industrial and private sector branches, which will
conform a new economy with the mass export of goods and services
that, together with freeing the national economy from an excessive
dependence on the exports of crude oil and refined products,
primarily of a petroleum origin, will substantially increase non oil
fiscal income" (ibid, 16-17).

The focus of the
document is evident: the sustainability of socio-economic growth will
require broadening the motor of development currently concentrated in
oil. The aim is to include new branches for agricultural, industrial
and services production, capable of generating solid array of exports
to globalised markets, while also covering the essential demands of
the internal market. The document proposes achieving these objectives
through private investment and initiative, as well as with state
presence in strategic industries (Lebowitz, 2006).

document also talks about "developing the social economy," a
sector that will consist of associative companies such as
cooperatives, small family businesses and self-managing small
businesses, which are seen as an "alternative and complementary
route to what is traditionally known as private economy and public
economy." (MPD, 2001, 27-28). A key aspect of the document,
however, it that it assigned a minor role to co-operative and
self-managing activities.

social production units that the document proposes are small: the
idea is to stimulate them by democratising capital, with training and
micro-financing from institutions like the recently created Women's
Development Bank (Banmujer) (12) that will subsequently form part of
a micro-financing system. It proposes that by decreasing regulations
and tax commitments and increasing training, it will be possible to
insert the informal economy into the formal economy. The document
argues that it is essential to "transform workers from the informal
sector into the managers of small businesses." The goal of the
state is to create "an emerging business class" (Lebowitz 2006,

to the mentioned document, the true means to transform the economy
was based on stimulating private capital, both domestic and foreign.
The state was given the responsibility of creating a more propitious
situation for investment through: the promotion of financial
stability; the creation of productive chains to process natural
resources; the creation of free trade zones; the creation of a stock
market to "create a growing democratisation of management
capitalism,"; stabilising exchange rates; and in general creating a
"climate of trust for foreign investment in the country." (ibid).

summary, we could say that the conception of the economy advanced in
this document distanced itself from the neo-liberal model in the
sense that it rejected the "cult of the market of neo-liberalism,"
ruled out the privatisation of the oil industry and other state
industries, and granted the state a leading role in directing the
economy. There is no doubt, however, though that it does not imply a
rejection of capitalism. Rather, it is an alternative to
neo-liberalism. This is clear if we consider that part of the
theoretical foundation of the document was the book by Chilean
economist Osvaldo
Sunkel "El desarrollo desde dentro: Un enfoque
neo-estructuralista para América Latina" (Sunkel, 1994).
The "Cepalino" focus of this book is exemplified by the phrase
that affirms that the "balance between
the state and the market" proposed by Latin American
neo-structuralism can be qualified as a "free market strategy
helped by the government" (ibid, 394). It is not surprising that in
the light of this discourse and the policies, many analysts who were
critical of the process reached the conclusion that it had a
basically neo-liberal economic orientation.(13)

Financial markets
and Venezuelan businessmen were of another opinion. The political
discourse was taken more seriously than the economic policy
statements: the country risk increased and there was large-scale
capital flight (14). There was also a severe contraction in fixed
capital formation which fell 18% during the first year of government.
However, it increased by 0.9% and 11.9% in 2000 and 2001
respectively. Fixed capital formation in the public sector displayed
a similar trend: it declined 15% in 1999, rising by 1.2% and 15.1% in
2000 and 2001 respectively (BCV, 2006b). GDP fell 6% in the year
1999, but then increased by 3.7% and 3.4% during 2000 and 2001 (BCV,
2006c). The unemployment rate rose from 11.2% in 1998, to 14.9% in
1999 but fell to 13.9% in 2000 and to 13.3% in 2001 (BCV, 2006d).
Inflation declined significantly from 29.9% in 1998 to 20% in 1999
and later to 13.4% in 2000 and to 12.3% in 2001, its lowest level
since 1985 (BCV, 2006a).


Beyond the multiple
limitations that could be attributed to improvisation, budgetary
restrictions and serious breakdowns in the management capacity of
public policies and co-ordination among the different levels of
government, during this period there was a greater conceptual and
doctrinal coherence regarding social policies than in the productive
terrain. Starting with the constitutional guarantee of economic,
social and cultural rights, all the main documents regarding social
policy rejected targeted policies toward the most vulnerable groups.
Emphasis was placed rather on the need for universal social policies
aimed at achieving social equity and overcoming the political
inequalities and cultural exclusions that marked Venezuelan society
(15). This policy is based on participation (16) as a means of social
inclusion and construction of citizenship. (17)

first major social programme of the Chávez government was
Plan Bolívar 2000,
(1999-2001), a civil-military emergency programme to: repair public
infrastructure in the barrios, schools, clinics and hospitals;
provide medical attention; repair and build housing as well to
distribute food to remote areas of the country. Despite this
programme having a significant social and political impact in the
low-income sectors, where it was focussed, it presented severe
problems and limitations, generating major controversies due to its
improvisation, lack of institutionalisation and transparency, as well
as accusations of corruption (Wilpert, 2003).

In the early years
of government, there was an important increase in public and social
spending. Public spending as a percentage of GDP went from 23.7% in
1998 to 31.6 % in 2001, an increase of 33.3% (SISOV, 2006a). Social
spending as a percentage of public spending went from 34.6 % in 1998
to 38.3% in 2001, an increase of 10.7% (SISOV, 2006b). Practically
all the increase in social spending was aimed toward social security
and education, areas that have been clearly considered priority
areas. With the exception, however, of potable water and sewerage
services provided by regional hydraulic services – primarily part
of HIDROVEN – there were few systematic and accumulative advances
in the other areas of social policy during the early years of the
government (18).


first landmark in the attempts to converge the political discourse
with the economic proposal took place in November 2001 with the
approval of the so-called Enabling Laws (MPD, 2001b). (19) Of the 49
laws approved under the Enabling Law, those where the principal
objective is to democratise property and production stand out. There
are several laws that aim to finance or promote alternative economic
modalities for business organisations. In this context, notable
examples were: laws geared toward reorienting financing instruments
from the public sector to finance economic and social development
(20); the promotion of small- and medium-sized industry (21); the
creation of a micro-credit system (22); the ‘Fondo Único
Social' (23); and the promotion of alternative modalities for
property and for organising production, such as co-operatives. (24)

There were three
laws that sparked more polemic and negative reactions on the part of
business sectors and the political opposition in general: the
‘Fishing and Aquaculture Law', the ‘Land and Agrarian
Development Law' and the ‘General Hydrocarbons Law'.

Fishing and Aquaculture Law was aimed at guaranteeing the
"responsible and sustained use of hydro biological resources,
taking into account biological, technological and economic aspects,
food security and pertinent social, cultural, environmental and
cultural aspects." It
granted priority to the "demands of the national market" and
protection of the "artisan fishing communities as well as improving
the quality of life for small scale fishermen", and it protected
the fishing grounds of artisan fishermen in continental waters and
those close to the maritime coast. It promoted "the application of
responsible practices that ensure the management and efficient use of
live aquatic resources regarding the ecosystem, the biological
diversity and the genetic patrimony of the nation." For this, it
defined as "property of the state, hydro biological resources that
are permanently or temporarily in national territory and in areas
under the sovereignty of the Republic." It established restrictions
on industrial fishing and reserved "exclusively for traditional
artisan fishermen" a broad range of activities to exploit fishing
resources (MPD, 2001h).

Land and Agrarian Development Law
(MPD, 2001i):


"… is aimed
at establishing the foundation of integral and sustainable rural
development, understanding this to be the fundamental means for human
development and the economic growth of the agrarian sector within a
just distribution of wealth and strategic, democratic and
participatory planning, eliminating large estates as a system
contrary to social justice, general interest and social peace in the
countryside, ensuring biodiversity, agro-food security and the
effective guarantee of rights to environmental and agro-food
protection of present and future generations" (article 1).

While recognising
private property, it established limits based on both the right of
peasants to land and the constitutional objective of ensuring
agro-food security. It also established the goal of eliminating large

"For the
effects of the present Legal Decree the elimination of large land
estates is declared to be of public and social interest, as
established in article 307 of the Constitution of the Bolivarian
Republic of Venezuela. In this sense, the National Land Institute
will proceed with the expropriation of private land that is necessary
for the sustainable ordering of farm land, in order to ensure its
food and agriculture potential, remaining subrogated in all the
rights and obligations that according to this Legal Decree could
correspond to the Republic" (article 72).

The National Land
Institute was given the right to recover land it owned that was
illegally or illicitly occupied.

lands] are subject to the fulfilment of the social role of providing
food and agriculture security of the Nation. In this sense, they must
submit their activity to the need to produce food products according
to the agricultural and food security plans established by the
National Executive" (article 2).


law guaranteed the right of peasants to land as well as the value of
the conuco
as a productive modality.

is recognised as a historic source of agricultural biodiversity. The
National Executive will promote, in those areas developed by
conuqueros, the investigation and dissemination of ancestral farming
techniques, the ecological control of plagues, soil preservation
techniques and the conservation of germ plasmas in general"
(article 19).

Based on what was
contemplated in the constitutional text, the General Hydrocarbons Law
specified a series of regulations regarding the country's main
industry that defined orientations that were radically contrary to
the liberalising orthodoxy in place in Latin America (PDVSA, 2001).
Of these orientations, below we emphasise five of special importance.
In first place was the reaffirmation that the state was the owner of
all the hydrocarbons fields:

hydrocarbons fields existing in national territory, no matter what
their nature, including those that are in the territorial ocean bed,
on the continental platform, in the exclusive economic zone and
within the national borders, belong to the Republic and are goods of
public dominion and therefore inalienable and indispensable"
(article 3).

The second aspect to
be emphasised refers to an issue that has been extremely polemicised
in Venezuela in recent years: the growing autonomy that PDVSA had
assumed regarding the State, reaching a point where it operated like
a "State within a State." It had become like a company that
operated more under the logic of a transnational energy company
regarding its corporate interests than as a public company that
belongs to all Venezuelans. Public control over the company was
established in the following terms:

"It corresponds
to the Ministry of Energy and Mines to formulate, regulate and
monitor the policies and the planning, implementation and control of
hydrocarbon activities, which includes what is related to the
development, conservation, use and control of said resources; as well
as the market study, the analysis and establishment of hydrocarbon
prices and their products. In this sense, the Ministry of Energy and
Mines is the competent national body in everything related to the
administration of hydrocarbons and therefore has the authority to
inspect the work and activities that are inherent to these as well as
to control operations that generate taxes, rates or contributions
established in this Legal Decree and review their respective
accounts" (article 8).

In the third place,
it is important to emphasise the priority that the law grants
regarding the formation of capital and national capacity in the area
of hydrocarbons:


"The National
Executive will adopt measures to encourage the formation of national
capital to stimulate the creation and consolidation of operating
companies, of services, the manufacture and the supply of goods of a
national origin for activities foreseen in this Legal Decree. In this
sense, the State, the bodies and the companies referred to in this
Legal Decree must incorporate in their contracting processes, the
participation of companies with national capital in conditions that
ensure the optimum and effective use of goods, services, human
resources and capital of Venezuela origin" (article 18).

In fourth place is
the definition and limits of the partnerships that the state oil
company can establish for the creation of mixed companies:

"The primary
activities indicated in article 9 will be carried out by the State,
either directly by the National Executive or through companies of its
exclusive property. Equally, it can do so through companies where it
controls the decisions as it holds more than fifty percent (50%) of
the social capital, which for effects of this Legal Decree are called
joint ventures. The companies that are dedicated to carrying out the
primary activities will be the operating companies" (article

Finally, and also
contrary to the current liberal common sense, royalties were
established as one of the basic modalities of the tax structure in
the hydrocarbons industry.

"Of the volume
of hydrocarbons extracted from any field, the State has the right to
a 30 percent (30%) participation as a royalty" (article 44).

The 49 laws approved
under the Enabling Law and, in particular, the laws on fishing, land
and hydrocarbons were catalogued by the business sector and the
political opposition as a violation of private property with many
arguing that this confirmed the statist or communist nature of the
government's political project (26). This sparked a period of
intense confrontation between the government and the opposition that
would last, in its most critical period, for approximately a year and
a half.


a result of the 49 laws approved under the
Enabling Law, in the
final months of 2001 and for the first time during the Chávez
government, different opposition sectors began to create an alliance
and agree on a common agenda (Lander, 2004). The first confrontation
between this opposition alliance and the government took place on the
10 December, 2001 when FEDECAMARAS, with the support of CTV, (27)
called a "national civil strike". While the effect of the strike
was limited, it represented the beginning of a breakdown that would
culminate four months later in the 11 April coup. Moreover, the
strike confirmed the consolidation of a coalition of interests
opposed to the government who were willing to use a variety of
methods, both legal and extra-legal, to overthrow the government.
This policy of the Venezuelan opposition found growing foreign
support, in particular with the government of George W. Bush in the
United States, whose relations with the Venezuelan government were
deteriorating rapidly. (28)

The political
confrontation in the country continued to grow worse and within this
climate of uncertainty there was increasing capital flight. This led
to a series of devaluations in the national currency and, given that
Venezuela imports around 80% of its consumer goods, inflation became
a serious problem. In the first quarter of 2002, inflation increased
6.9% (INE, 2006a). (29) Up until January 2002, the government had
tried to defend the Bolivar using international reserves but when
capital flight sharply increased following the December 2001 strike
the government was forced to abandon this strategy given the speed at
which the reserves were being depleted. Between November 2001 and
January 2002, the international reserves (including the FIEM) (30)
fell by $2.661 billion, which meant they declined to $16.922 billion
(BCV, 2006f). The capital flight, the increasing inflation and the
general economic uncertainty were accompanied by a decline in
investment and an increase in the unemployment rate (Wilbert, 2002).
Between November 2001 and January 2002, unemployment increased more
than 25%, from 12% to 15.8% (INE, 2006b).


Toward the beginning
of April 2002, the confrontation between the government and its
opponents had reached such a level that the media openly referred to
an imminent coup. The opposition alliance convened a 48-hour strike
for 8 and 9 April, which hours before it was to end became an
indefinite strike and a march against the government was announced
for 11 April. This march took place amidst violent acts and
culminated with the coup that put the president of FEDECAMARAS, and
one of the main opposition leaders, Pedro Carmona, in power. While
the new regime received the support of some foreign countries and
multilateral agencies like the IMF (31) a little less than 48 hours
later significant constitutionalist elements within the army,
supported by massive mobilisations by grassroots sectors who demanded
the return of Chávez, managed to restore him to power (32).

failed April coup, Chávez began a series of contacts and
conversations with sectors of the opposition (Diaz Rangel, 2006) and
both he and others who supported him lowered the tone of their
discourse and made a series of concessions to their adversaries
(Ellner, 2003b). For example, in the economic arena a series of
changes took place within the economic cabinet and new people entered
who were considered more acceptable to sectors of the opposition.
(33) At the same time, these changes lead to a moderation of the
government's economic discourse. The new team published a document
"proposal for consensus" that proposed changing the "third-way"
path of previous government plans (Mujica y Rincón, 2006). As
an alternative, the document proposed what it called a "Fourth Way
Option" based on a model of society that combined, in the economic
aspect, the two traditional mechanisms used to assign resources, the
state and the market, and added a third, solidarity. (34)

these attempts on the part of the government to placate opposition
groups, the polarization of Venezuelan society continued and in
December 2002 a new campaign began to overthrow the government. Once
again, the opposition alliance was grouped around FEDECAMARAS and the
CTV and, with the significant participation of PDVSA executives, the
"Democratic Co-ordinating Committee" was created. This convened a
national 24-hour strike for 2 December. It too became an indefinite
strike that lasted for 62 days until February 2003.

strike was concentrated in strategic industries of the economy such
as energy, petro-chemicals, transport and the distribution of food.
Significantly, the opposition managed to paralyse almost all of
demanding that President Chávez leave office (Lander,
2004). (35) As a result of blackouts and fuel shortages, companies in
different sectors of the economy were forced to close their doors,
significantly affecting the transport of people and goods and the
nation's economic activity in general. Oil production dropped from
a daily average of 2,900,000 barrels per day in November 2001 to what
PDVSA has estimated reached 25,000 per day in the worst moment of the
strike (ibid) (36).

Thanks to the
grassroots resistance to the strike and an immense effort on the part
of professionals and workers from the oil industry and outside
collaborators – civil and military – the strike was finally
broken in February. As a result, the opposition's second attempt
within a year to overthrow the government failed. However, the fact
that national industry had essentially shut down, in particular
PDVSA, had a catastrophic impact on the economy.

to PDVSA, during the strike the country stopped exporting around
328.75 million barrels of crude and gas, which, according to real
sales prices, would have represented additional income for PDVSA of
$8.340 billion (PDVSA, 2006). (37) This loss, together with the
continuous capital flight (38), contributed to a fall in GDP of 6.3%
in the fourth quarter of 2002 (39) and 24.4%, during the first
quarter of 2003. GDP fell 26.7% in the first quarter of 2003 compared
with the same period a year earlier. (BCV, 2006c).

spectacular fall in the GDP lead to a severe worsening of
socio-economic indicators. Between November 2002 and February 2003,
unemployment increased from 15.7% to 20.7%. As a result, the
unemployed population increased from 1,852,736 to 2,406,251 people
(INE, 2006b). Between the first half of 2002 and the first half of
2003, poverty increased 30.1%, rising in absolute terms from 41.5% to
54%; extreme poverty increased from 16.6% to 25.1% (INE,
2006c). There
was a steep slide in international reserves, which fell 12.3% between
November 2002 and January 2003 (BCV,
2006f). This last fall lead the government to implement, on 5
February 2003, exchange rate and price controls – on mass
consumption products, medical products, cleaning and services
products – to attenuate the negative effects on the national


Despite the severe
socio-economic costs of the oil strike in the country, the recovery
of effective control of PDVSA on the part of the executive was of
enormous importance regarding the implementation of the government
programme. The upper- and middle-level PDVSA management had been
implementing an oil policy that was not only different from, but
radically opposed to, the government's strategic project. This
explains why the oil industry played such a key role in the principal
confrontations between the government and the opposition in the years
2002 and 2003.

By April 2002, the
upper and middle ranking company management, the self-denominated
"meritocracy" had placed PDVSA at the service of the coup, a
position that was epitomised in one of its slogans of the time: "Not
a single drop of oil for Cuba." This same management staked
everything on the removal of Chávez during the 2002/2003 oil
strike. Not only did they lose their political wager, it was shown,
to their amazement, that the industry could operate without them.
This allowed the government to make the entirely legal decision not
to reincorporate the majority of the upper and middle ranking
management who had carried out a strike with openly stated
insurrectional aims for more than two months. (40)

With the end of the
strike the government recovered effective control over the company,
resuming the internal operations of all of its control and
information systems. In 1993 the PDVSA board had decided to create
the INTESA information technology company. PDVSA held 40% of the
company's shares while 60% was in the hands of Science
Applications International Corporation (SAIC), a company with close
relations both with transnational oil companies and with US security
bodies. This company ended up controlling all the financial data,
budgetary data, and information regarding operative physical
installations and PDVSA business. As a result, highly confidential
information of fundamental importance for the security and defence of
Venezuelan sovereignty had remained in the hands of a transnational
firm (MEP, 2006). It was probably easier for transnational oil
companies and US government agencies to obtain immediate trustworthy
information about PDVSA's operations than for the Venezuelan State,
its owner. This external control over all the main information
systems was one of the most significant obstacles when it came to
reinitiating PDVSA's operations during the oil strike.

In mid-2003 PDVSA
began to be in synch with the political changes that were taking
place in the country. The National Executive, through the Ministry of
Energy and Oil, recovered both political control over the company and
oil policy. From this moment, the strategic orientation to reverse
the liberal orientations that the company had imposed in previous
years advanced with greater coherence and fewer obstacles. The
government, after a defensive phase in which it sought above all to
survive and reactivate the oil industry, the foundation of the
national economy, acquired more confidence and began to spearhead
policies aimed at consolidating its political and social base with
concrete, tangible public policies with the capacity to impact on the
living conditions of the vast majority of the population. This marked
the beginning of the third phase of government.

the defeat of the oil strike and the government's recovery of
political control over PDVSA, the government decided to accelerate
the economic and social changes. The food shortages that resulted
during the strike demonstrated the strategic value of having a broad
and stable food production base within the country. The strike not
only confirmed the degree of dependence that the country has
regarding food imports, but also the major concentration in the
processing and distribution of these and other basic products. It
also showed that the Venezuelan economy – and its current political
process – was extremely vulnerable to manipulation (price and
access) in international trade and to the will of
oligarchic-political business sectors. (41)

does one respond to these conditions when neither socialism nor the
nationalisation of the economy formed part of the constitutional
design or were foreseen in the initial political project of
In addition to the broad grassroots support the government received
and the Armed Forces' backing for democratic governance, the
capacity to resist the oil strike was possible because of the
exceptional conditions oil income grants the Venezuelan economy. It
was thanks to the country's international reserves that it was
possible to bring in emergency imports (food and fuel) that
contributed to defeating the strike. Oil income in the hands of the
State also made it possible to design new responses to the political
and economic changes of the time. As a measure that was not just
short term (the immediate political impact of generating employment)
but rather strategic, a development model was spearheaded that was
defined as endogenous (42) and based on the priority of the "social
economy." (43)

from a recognition of the precarious nature of the structures of
state management to impel public policies – in particular new
social policies – it was concluded that the political timing of the
Venezuelan conflict, made it impossible to wait for administrative
reforms to improve management capacity in the face of new and urgent
demands. For this reason, the Executive opted to
create "misiones", a range of extraordinary programmes
that, by partially by-passing state bureaucracy, sought to respond
to each of the social problems identified as critical and requiring
an urgent response. (44)

the area of health "Misione
Barrio Adentro" was
created, a programme that proposed taking primary and family health
care to grassroots sectors across the nation with the mass
participation of Cuban doctors. In the area of food, the "Misione
was created, aimed at commercialising food products and other basic
products to guarantee the supply of quality, low priced goods to
low-income sectors across the nation. In the process of creating
alternative production and commercialisation channels, the aim was to
strengthen cooperatives and small companies.

the area of education a civic-military programme called "Misione
was created, that sought to provide literacy training in the short
term to the two million people that, it was calculated, did not know
how to read and write. In subsequent phases (Misione Robinson II),
those who were recently literate carried out primary school studies.

aim of the "Misione
was to provide secondary education for people of any age who had
completed primary school but had not done or finished secondary
school. The "Misione Sucre"
proposed the broad incorporation of high school graduates into
university programmes but would place priority on students from the
lower-middle class and the poorest sectors. In the agricultural
sphere, the "Misione
proposed providing peasants with land, training, technical and
marketing assistance as well as infrastructure, services and

targeted social policies, which prevailed throughout the continent in
recent times, these policies were aimed at achieving social equity
and overcoming political inequalities and cultural exclusions. For
this, they emphasised participation and the construction of
citizenship (Parra and Lacruz, 2003). They
were not conceived as policies to compensate the negative social
effects of economic policies but rather as an integral part of these
policies. The
announced goal was that the missions would achieve a growing
co-ordination to construct the productive and social fabric of the
new Venezuela as well as a new public institutionalism.

is in this period, during which the principal missions were created
and when there began to be significant changes in the living
conditions of the majority of the population, that a recovery in the
Venezuelan economy also became evident. In the second quarter of
2003, GDP increased 26.8% compared to the previous quarter and in the
third and fourth quarter of 2003 the increase was 3.3% and 7.6%
respectively. Despite these increases, in 2003 GDP fell 7.7% compared
to 2002. It is in the first two quarters of 2004 that the economic
recovery began to gain strength and GDP increased by
36.1% and 12.1% respectively compared to the same period a year
earlier, to reach an average 24.6% in the first half of 2004. (BCV,

the failure of the oil strike and before the economy showed evident
signs of recovery, sectors opposed to the government sought to
regroup and continued their efforts to overthrow President Chávez
Rangel, 2006). (45) This time they concentrated their efforts in the
legal arena gathering signatures to call for a consultative
presidential referendum, according to what was set out in article 72
of the new Constitution. (46) As result, the National Electoral
Council (CNE) convened, for the first time on the continent, a
referendum on 15 August 2004 to revoke the President's term. Here,
not only was Chávez's continuation as President of the
Republic at stake but also the extraordinary dilemma between
continuing along the difficult path of change or reverting to a
neo-liberal economic model and policy and a re-alignment of Venezuela
with the United States. President Chávez had his mandate
confirmed with the support of 59.1% of voters, with an abstention
rate of 30.1% (CNE, 2006a). These results marked the seventh
consecutive election that Chávez and the political forces
supporting him had won since 1998. (47)

this latest victory of President Chávez, several social
organisations demanded that the government take advantage of the
political situation to strengthen the changes (the "revolution
within the revolution"), and encourage grassroots organisations to
participate in and monitor public management. They also called for
candidates for governors and mayors to "be submitted to primary
elections in assemblies of militant citizens" (Conexión
Social, 2004). While this final demand was failed to be taken up in
the election of regional and municipal authorities held on 31 October
government candidates won the majority of the positions. (48) With
these results, the government consolidated the new political majority
that was ratified with the August presidential election
y El Troudi, 2006).

12 and 13 November 2004, a high level government workshop took place
that gave rise to a document, based on a presentation by President
Chávez ("the new strategic map for the country"), that
identified ten major strategic objectives (MINCI, 2004) (49).
the economic model (objective 7), it was emphasised that "the aim
is not to eliminate private property" but to accelerate "the
construction of a new productive model" in order to "transcend
the capitalist model" in the long term, given that this model was
"non viable" and "impossible" (ibid, 30-31). This rejection
of capitalism as a model for Venezuela led Chávez to insist,
for the first time in a public act in Caracas in December 2004, that
it was necessary to re-conquer the concept of socialism and seek a
route toward a new form of socialism that overcomes the errors of the
past – a "socialism of the 21st Century"
(Raby, 2006, 176-177) (50). These declarations, marking a new
inflection in the Venezuelan process, represented the beginning of a
political offensive, which was accompanied by the consolidation of
the economic recovery. In the third and fourth quarter of 2004, GDP
increased 7% and 5.9% respectively compared to the previous quarter.
In 2004, GDP increased 18.3% compared to the previous year,
representing the biggest increase in any country in the Western

of 2005, there was an improvement in the majority of socio-economic
indicators,and the government stepped up its efforts to create
mechanisms to facilitate structural changes in the economy. We will
analyse in greater detail three closely intertwined areas in which
the government focused its action: 1) the oil industry; 2) Latin
America integration and the search for multi-polarity in the
international arena; 3) the social economy and endogenous


the end of the oil strike until today, the government has continued
playing an important role within OPEC, seeking to increase world oil
prices. As a result of these high prices, per capita oil income in
Venezuela has increased from $226 in 1998 to $728 in 2005 (Wilpert,

to the rise in world oil prices, the government has sought to
increase its negotiating capacity regarding multinational companies
(MNCs) operating in the oil sector. Significantly, in April 2006 the
National Assembly approved a new regulation that eliminated the
operative agreements on the grounds that their contents were
"incompatible with the rules established in the oil nationalisation
regime" (National Assembly, 2006). With this legal instrument, the
Executive negotiated with the companies that were party to these
contracts to form new consortiums in which PDVSA would have the
majority share, in accordance with the General Hydrocarbons Law. (51)
This was justified on the ground that it represented the recovery of
national sovereignty and the end of the "disguised concessions"
of the oil sector opening. (52)

This series of
reorientations in government oil policy, that included changes in the
tax framework (increase of royalties and taxes) and the
transformation of operative agreements into joint ventures, made it
possible for a growing portion of the company's income – the
product of high oil prices on the international market – to pass
into State hands. According to a PDVSA report, in 2005 the global
income of the company reached $85,730 billion. Between royalties,
income tax and dividends and "contributions for social
development", the total contribution to the nation was $25 billion
(MEP, 2005) (53).

The increase in
public spending that has followed the rapid accumulation of State
resources has played an important role in the high economic growth of
recent years. After falling during 2002 and 2003, public spending as
a percentage of GDP recovered and in 2005 reached nearly the same
level it was in 2001. (54) At the same time, social spending as a
percentage of public spending rose from 38.3% in 2001 to 40.7% in
2005 (SISOV, 2006a; 2006b) (55). In 2005, GDP grew 10.3% compared
with 2004. In the second quarter of 2006, GDP increased 10.2%
compared to the same period in the previous year, marking the 11th
consecutive rise since the final quarter of 2003. In the first half
of 2006, GDP rose 10.2% compared with the previous year (BCV, 2006c).

Another fundamental
change to the reorientation of oil policy is its insertion as a core
part of the Venezuelan State's current foreign policy. The most
significant developments are the policies to diversify markets and to
use oil as a tool to strengthen geopolitical relations and encourage
Latin American and Caribbean integration. With differing degrees of
success, depending on the responses of potential counterparts, the
Venezuelan government has proposed multiple modalities of
co-operation in the oil area. The most significant of these is the
creation of Petrocaribe (56) (in which 15 countries from the
Caribbean are participating) and the proposal to create Petrosur and
Petroamerica with other major state-owned hydrocarbon companies on
the continent. PDVSA has also bought into or entered into
partnerships with both existing refineries and those to be
constructed in Paraguay, Uruguay, Argentina and Brazil.

of the American continent, China has been the focus of oil
geopolitics and where the search for a diversification of markets has
developed most. According to Hugo Chávez, in 2006 exports to
China surpassed 150,000 barrels a day and the aim was to reach
300,000 barrels a day by 2007 (El
Universal, 2006). As an expression of this market diversification
policy, negotiations are also under way to supply India and Vietnam
with oil.

has also been a significant diversification of the origin of foreign
investment in oil and gas.
In the case of the Orinoco Belt, memorandums of understanding to
quantify and certify the reserves have been signed with companies
from India, Russia, China, Spain, Iran and Brazil (PDVSA, 2005). In
the "Strategic
Gas Development Plans", companies
from Italy (ENI) and Norway (Statoil) are investing, alongside those
of the United States (PDVSA, 2006b).


All of this
indicates that while Venezuela will continue to supply oil to what
has historically been the main market for Venezuela exports – the
United States (57) – the bulk of the increase in exports planned for
the next few years are aimed at other markets: Latin America, the
Caribbean and Asia.

It is also worth
mentioning that there are a series of criticisms and concerns
regarding the implications of current Venezuelan State oil policy.
These do not come only from energy transnationals, the US government
or the Venezuelan opposition, including the oil "meritocracy".
Due to space constraints, we will only analyse the most important
criticisms and concerns.

Firstly, there is a
substantial difference between the 2001 ‘General Hydrocarbons Law'
(PDVSA, 2001) and the 1999 ‘General Gaseous Hydrocarbons Law'
(PDVSA, 1999). In the case of oil, private capital and transnational
capital must be in partnership with PDVSA and may only hold a
minority stake. In the case of gas, however, private capital – both
national and international – can hold a 100% of shares and can
negotiate concessions of up to 30 years, renewable for a similar
period. This is probably because PDVSA has less experience in gas
exploitation and the main fields are offshore, which require massive
investments and technological capacities that the company does not
have at present.

A second criticism
refers to the seeming contradiction between the verbal radicalism in
defence of sovereignty and the fact that, in the transition from
operative agreements to joint venture companies, transnational
capital is more directly incorporated into oil development as a
partner of the state. It has been argued that the Venezuelan
population is being misled with a nationalist, anti-imperialist
rhetoric when in reality the participation of international capital
is increasing in the development of the country's resources
(Mather, 2006). With joint ventures, even though a majority
participation of PDVSA is established, something is now authorised
that was banned by the 1975 nationalisation law, a law that reserved
the exploitation of those resources for the State. In defence of
joint ventures, it is argued that their fiscal benefits are far
superior compared with the conditions under which the previous
operational agreements these replaced were negotiated.

and with implications that could not only question oil policy but
also core aspects of the Chavismo
project as a whole, is the significance of increasing the dependence
of the Venezuelan economy on oil activity, and both the cultural and
environmental impacts of the mega development projects announced by
the government. While it may be true that there has been a reduction
in the production volume targets programmed by the "old PDVSA",
significant increases in hydrocarbons exploitation volumes are
planned, both oil and gas.

to the PDVSA web page, the company "expects to reach production of
5.847 billion barrels a day by 2012" (PDVSA, 2006c), which
represents a 72% increase on the average production volumes
of 2006. To achieve this increase in hydrocarbons production, the aim
is to open up a large portion of national territory – including
major territorial ocean areas – to oil and gas production (Red
Alerta Petrolera-Orinoco Oilwatch, 2005).

This is taking place despite increasingly conclusive indications that
human activity, particularly the consumption
of fossil fuels, represents a serious threat to the continuation of
life on the planet. Moreover, in speeches President Chávez
himself consistently questions the development/consumption model
based on burning fossil fuels and warns of the threat this represents
for the planet.

The main thrusts of
this expansive policy, as well as each mega-projects in the pipeline,
bidding processes to exploit gas farther offshore, new investment
in the Orinoco belt, and the construction of major gas pipelines
toward the south or toward Colombia and Central America are all
announced either by the President or spokespeople from the Ministry
of Energy and Mines and PDVSA announce, as decisions that have
already been taken. There is no public information about the
environmental impact studies that, according to Venezuelan
legislation, are obligatory for projects of this nature. Nor is there
any broad-based, democratic, informed debate about the implications
of these projects for the future of the country and the world.


government offensive following the failure of the oil strike had
implications for the nature of Venezuela's international insertion,
both in the region and internationally. Since the beginning of its
term, the government had spoken of multi-polarity and its desire to
promote processes of integration in Latin America and the Caribbean,
but it was only with the recovery of the State's political control
over PDVSA that substantial achievements were seen in this area.

Chávez reached the presidency in 1999, he was profoundly
isolated in a Latin American context where nearly all the governments
could be characterised as neo-liberal and submissive to the policies
of the US government. If this context had remained unaltered, the
government's project would have had little chance of success. A
great deal has taken place in the continent and the world, however,
since the struggles against the WTO in Seattle in 1999. (58)

a doubt, the main factor that has conditioned the behaviour of the
Venezuelan government in the international arena is its relationship
with the government of the United States, particularly after Bush's
election in 2000. (59) The greater autonomy assumed by the Chávez
government, initially regarding oil policy (the recovery of prices,
the recovery of OPEC, etc) and in relations with other member
countries of OPEC (some of which the United States considers part of
the ‘axis of evil') led to initial confrontations. Subsequently,
the US government's direct involvement in attempts to destabilise
the Venezuelan government played a central role – its support for
the April 2002 coup, its funding for the opposition, as well as the
use of tactics first tried by the US in Nicaragua and later in the
"colour" revolutions of Eastern Europe.

first significant victory regarding the US government's plans for
America took place in April 2003 around the negotiations for the Free
Trade Agreement for the Americas (FTAA). (60) In the meeting of the
FTAA Trade Negotiations Committee held in Puebla (Mexico) in 2003,
the Venezuela government openly criticised the FTAA, and this
strengthened the already consolidated networks of social movements in
the region opposed to the FTAA. (61)

ALBA proposal ("Alternativa
Bolivariana para las Américas"
or Bolivarian Alternative for the Americas) is developed as an
integration option for peoples who oppose the logic of the FTAA and
free trade agreements. In December 2004, Cuba and Venezuela signed a
declaration (containing 12 orienting principles) and the first
agreement within the framework of ALBA, and, in April 2006, the
Bolivian government of Evo Morales signs up (Fox, 2006a). (62) One of
the 12 orienting principals of ALBA concerns the Televisora
del Sur
(TELESUR) communications project, which was created in July 2005 by
the governments of Argentina, Cuba, Uruguay and Venezuela.(63)
TELESUR seeks to respond to a critical issue: the monopoly held by
North American corporate media over sources of information on the

the IV Summit of the Americas, in Mar del Plata in November 2005, the
FTAA seems to have definitively died.

April 2006, the Venezuelan government decided to withdraw from the
Andean Community (CAN) (64), citing the decision of some members of
the CAN to negotiate free trade agreements with the United States. In
May 2006, Venezuela withdrew from the Group of Three (G-3), a trade
partnership formed 11 years ago with Colombia and Mexico. As an
alternative to Latin American integration, Venezuela turned to
MERCOSUR and in June 2006 is admitted as a full member, together with
Argentina, Brazil, Paraguay and Uruguay, pending the final approval
by the congressed of these countries. Moreover, during this period,
Venezuela signed a multiplicity of political, economic and energy
agreements with CARICOM nations (Petrocaribe), South American
countries and with other countries (for example China, Russia, etc).

the continuous deterioration in political relations between Venezuela
and the United States and attempts on the part of Venezuela to arrest
and formulate alternatives to the free trade initiatives for America
promoted from Washington, trade between both countries is more robust
than ever. Annual figures recently published by the
Venezuelan-American Chamber of Commerce and Industry (Venamcham)
demonstrate that in 2005 the total trade between Venezuela and the
United States was $40.373 billion, an increase of 146.4% since 1998.
However, the BCV estimates that this trade, which has traditionally
represented half of Venezuela's international trade, will be 48.2%
in 2006 (Camel, 2006). With the consolidation of commercial
agreements between Venezuela and the countries indicated above, it is
most likely that the proportion of trade with the US will tend to


the public rejection of capitalism and Chávez's declaration
in late 2004/early 2005 in favour of a "socialism of the 21st
Century" for Venezuela, a period began in which initiatives related
to the social economy and endogenous development were accelerated.
These initiatives were constructed on the foundation of a series of
policies existing in this sector.

March 2004, the Mission
"Vuelvan" Caras (About-Face)
was created to combat poverty and generate permanent employment
through job training, (65) socio-cultural formation (66) and the
creation of Endogenous Development Groups (NUDE) (67) in tourism,
agriculture, infrastructure, services and industry. Beyond a simple
employment programme, the Mission aimed to be:

"A vanguard
instrument for social and economic transformation and the battle
against poverty. It was aimed at promoting the transition toward a
new model of endogenous, sustainable and solidarity development,
based on the cultural transformation of social relationships and
production and through job training and the promotion of
co-operatives in poor and excluded sectors and their full inclusion
in local socio-productive processes" (MINEP, 2006). (68)

September 2004, the Ministry for Popular Economy (MINEP) was created
to co-ordinate the transition from a capitalist economic model to "a
social and sustainable economy" (MINEP, 2006) (69). In particular,
the MINEP is responsible for institutionalising the Mission "Vuelvan
Caras" and co-ordinating work with existing and new
micro-financing institutions. (70)
Moreover, the MINEP is responsible for co-ordinating and creating
policies promoted by micro-businesses, co-operatives and other
sustainable productive units that contribute to the collective
well-being, dignify productive work and provide technical assistance,
infrastructure and credit for cooperatives and micro-businesses. The
MINEP also attempts to ensure markets for the production of
co-operatives and helps manage contracts with institutions and state
companies through business summits (Piñeiro Harnecker, 2005).

measures have accelerated the growth of the number of co-operatives
registered in the country, a process that has intensified since 2003.
(71) In 1998, there were 877 co-operatives registered with the
National Superintendence of Cooperatives (SUNACOOP). (72) By June
2006, the number had increased to 131,581 (SUNACOOP, 2006).

the total 108,870 co-operatives registered as of February 2006, 81.3%
were constituted by 5 to 10 members. While the majority of these
co-operatives are in services (52.1%) and production (31.7%), they
also operate in activities such as transport, social protection,
consumption, savings and credit, and housing (SUNACOOP, 2006).
Despite the significant increase in the number of co-operatives in
the country, many of these co-operatives have not been continuous and
there has been a high mortality rate. Only 37,552 were considered
operative by SUNACOOP in 2007. (73)

With regards to the
relationships of production within the different associative
productive forms and their relationship with the State and private
sector, the government has promoted the concept of co-management.
This practice, which was also one of the demands of the new union
federation created in April 2003, the National Workers Union (UNT),
has been encouraged in several State companies such as the CADAFE and
CADELA electricity distribution companies and the Alcasa aluminium
production company. Co-management has also been implemented in a few
companies expropriated by the government after they were abandoned by
their owners. These companies have been re-launched with 51% of
shares held by the State and 49% by workers' co-operatives. In 2006
in co-ordination with UNT, the government evaluated another 700
production units that were not active and that could be expropriated
and turned over to their former workers to make them operative
(Wilpert, 2006). The government has promoted another modality of
co-management in the private industrial sector of the economy by
providing subsidiary loans and other incentives under the ‘Inside
Factory' programme. Inside Factory was created in May 2005 and as
of December 2006, 856 companies had joined the Framework Agreement of
Co-responsibility for Industrial Transformation, which formed part of
the Inside Factory programme (MILCO, 2005; Iribarren, 2006). (74)

July 2005, to ensure that co-operative companies, co-managed
companies, and those managed by the State were guided by a new series
of principles, President Chávez proposed the creation of a new
type of economic production unit known as a Social
Production Company (EPS,
for its initials in Spanish). (75) In November 2005, Chávez
defined the EPS as follows:

"They are those
economic entities dedicated to the production of goods or services in
which the work has its own meaning that is not alienated, is
authentic, in which there is no social discrimination in work or any
type of work, there are no privileges in the work associated with the
hierarchical position. These are economic entities marked by
substantial equality among their members, based on a participatory
and protagonist planning, and under a regime of state property,
collective property or a combination of both" (MINCI, 2005).

In conclusion, with
regards to the social economy, the government has deepened its
efforts to expand associative types of property and control, such as
co-operatives and co-management. These associative forms of
production have been stimulated through diverse types of micro and
small credit granted by state funding entities. At the same time,
there has been an intense promotion of purchases and the contracting
of services and works by the public sector as a means of generating
productive capacity. These initiatives, framed within the search for
endogenous development and, as of 2005, "socialism of the XXI
century", have increasingly defined the socialist nature and the
new strategies of the Bolivarian process.


order to explore the potential of the Venezuelan process as an
alternative to neo-liberalism, it is not enough, evidently, to review
the main programmatic texts of the government or to analyse the new
constitutional framework. There is a wide margin of interpretation
and possible action within these broad programmatic orientations. It
is by confronting
the problems and experiences accumulated by the government in the
execution of their program's management, in the internal debates
within the forces promoting change, in the struggles against the
opposition and in the way that obstacles are approached which give
their policies greater definition and substance and help bring about
more precise proposals about the future. As
the confrontation with sectors of the opposition became more acute,
polarisation became consolidated in Venezuelan society and the
political times became shortened. In this way, solutions were sought
which point to a more consistent break with the neo-liberal model.

this context, in order to characterise the operation of the Venezuela
economy during the Hugo Chávez government and to explore the
nature of the changes that have taken place during this period, it is
necessary to look at the economy on two fronts, which while they
cannot be separated from the whole, are useful as levels of analysis
for discerning the most significant trends.

the one hand, there are the macroeconomic policies (monetary policy,
inflation control, fiscal policy, exchange rate policy, etc), where
some orthodox policies were applied initially that did not break with
the existing neo-liberal framework. At the same time, however,
policies of an anti-neo-liberal nature were applied, too, such as the
rejection of the privatisation of the oil industry and other state
industries. The nature of of the initial phase of government has
several explanations that are not mutually exclusive. Among these,
the following stand out: the general weakness of the government plan,
particularly the lack of a coherent economic plan; the priority given
to political-institutional change as a pre-requisite for economic
reform; the ideological battles within Chavismo;
the magnitude of the economic crisis the country faced; and
especially the government's need to survive. These policies
essentially related to the ‘normal' management of public finances
have an impact on the productive apparatus as a whole and, of course,
have political consequences, which we have considered. This not only
refers to macroeconomic policies but also to those factors usually
taken into account when evaluating the operation of an economy, for
example, oil policy and the creation of new public companies. These
factors might have successful indicators without this necessarily
meaning that a path has been opened to change the economic model.

the other hand, there are the social policies, the promotion of the
social and grassroots economy; foreign policy; the new institutional
forms etc. These are areas where there have been significantly
different and, in some cases, novel orientations in public policies.

it is still insufficient to attempt to understand the behaviour of
the Venezuelan economy by parameters used to evaluate ‘normal'
economies. The reason for this relates fundamentally to the
exceptional factors of political confrontation both inside and
outside of Venezuela, which have had a severe impact on the behaviour
of the economy.

current Venezuelan political process is part of a continental and
global struggle against the destructive dynamic of a militarised
neo-liberal globalisation. Its deepening, indeed its very survival,
depend on how this global confrontation plays out. Moreover, the path
that Latin American integration processes – economic, political and
cultural – take will be, in this sense, decisive. It is an
open-ended process that is generating a great deal of expectations.

a post-Berlin Wall global context characterised by the absence of
clear alternatives to the hegemonic neo-liberal capitalist model, it
is unsurprising that initially in Venezuela there was no alternative
national project that broke with the prevailing scheme. It is only
since mid-2003, the last phase described in this report, that a new
economic model begins to emerge, which is clearly distinguished from
the hegemonic neo-liberal project. (77)

* Edgardo Lander is
Professor of Social Sciences at the Universidad Central de

Venezuela in Caracas
and a Fellow of the Transnational Institute. His books include

a la crítica del marxismo realmente existente; La ciencia y la

como asuntos
politicos; Neoliberalismo, sociedad civil y democracia and La

del saber:
Eurocentrismo y ciencias sociales.

* Pablo Navarrete is
an independent researcher and journalist specialising in Latin

America. He has a
BSc in Economics and an MSc in Globalisation and Latin

Development, both from the University of London. He is the Latin

America editor for
the British magazine Red Pepper and is on the management board

of the Latin America
Bureau in London.

This article was
first published by the Transnational Institute, Havens Center

Rosa Luxemburg Stiftung, November 2007. Contact [email protected]
for more information and printed copies.


1.Two examples of
these calls to attention that had a limited impact are: Pérez
Alfonso, 1977; and Equipo Proceso Político, 1978.

2.In contrast to the
experience of many other countries in Latin America, during the past
decades, the Venezuelan electorate has consistently voted in favor of
electoral programmes that offer the greatest resistance to
neo-liberalism. This was the case in the elections of Jaime Lusinchi
in 1983, Carlos Andrés Peréz in 1988, Rafael Caldera
1983 and Hugo Chávez in 1998.

3.Hugo Chávez
later said that many military officers were sensitised by this
repressive experience, which accelerated the conspirational movement
and precipitated the coups that were attempted in 1992 (Blanco Muñoz,
1998, 182-183).

4.In many respects,
these policies were in fact a de facto reversal of the regulations
established by the law through which Venezuelan hydrocarbons were
nationalised in the 1970s (Congress of Venezuela, 1975).

5.For example, it
was not clear in the political debate prior to convening the
Constituent Assembly what the main problems of the country were that
had their origins in the 1961 Constitution or that required a new
Constitution to be resolved.

6.Given Venezuela is
an oil producer, where oil exports represent approximately 80% of the
total value of exports and nearly half the fiscal income, oil policy
is the necessary starting point for any evaluation of the country's
economic policy.

7.By January 1997,
the OPEC oil basket was at $23.45, crashing until it reached $9.72 in
December 1998. The prices of the Venezuela oil basket are slightly
lower than the OPEC oil basket and by February 1999 (when Chavez
assumed the presidency) the price of the Venezuela basket for export
reached $7.35 per barrel, with the average for that month $8.43
(Lander, 2004)

8.For a detailed
discussion of these reorientations of Venezuelan oil policy, see the
articles included in "La reforma petrolera en Venezuela" (Tema
central) (Revista Venezolana de Economía y Ciencias Sociales,
2002; and Mommer, 2003.

9.We use the term
orthodox to talk about essentially neo-liberal policies that are
promoted by multilateral bodies such as the World Bank and the
International Monetary Fund (IMF). The term Washington Consensus and,
more recently, post-Washington Consensus have been used to describe
the application of these neo-liberal measures in Latin America.

10.Average inflation
in the previous decade (1989-1998) was 52.5%, reaching a peak of
103.2% in the year 1996 (BCV, 2006a).

11.This law contains
the basic orientations of foreign investment protection included in
the majority of the most recently negotiated international free trade
agreements. It established a broad definition of investment, the
right to national treatment (it allowed for certain sectors to be
reserved for the state or Venezuelan investors); investments did not
require prior authorisation, unless the law expressly indicated it
was necessary; and it introduced the concept of "measures
equivalent to expropriation." In the case of expropriation,
compensation will be at market prices and these will be "deposited
in convertible currency and will be freely transferable abroad."
The controversies between the investor and the Venezuelan state will
not be addressed in national tribunals but through diplomatic
channels or in an international arbitration court.

12.Banmujer was
created in March 2001.

13.See, for example,
García, 2000 and Vera, 2001. From another perspective, see
Parker, 2003.

14.It is estimated
that between 1999 and 2001, the total amount of capital flight
reached $26.2 billion, 40% of the value of oil exports in that same
period. (Blanco cited in Parker, 2005, 139).

15.According to the
Center for Social Science Investigation (CISOR), "The actions of
social policy has been oriented more towards the suppression of
political limitations (lack of power and contexts for participation)
and cultural limitations (lack of recognition and devaluation of life
styles) than to the removal of obstacles of an economic nature
(poverty and inequality). From this point of view, the social
policies do not seem to be aimed at addressing the deprivation of
liberty or limitations caused by socio-economic injustices. This is
due to the fact that poverty, from the perspective of the current
government, is a product not of the conditions of productivity, but
of social relations of domination and exploitation." (Parra y
Lacruz, 2003, 80)

16."There is an
orientation towards encouraging types of organisation related to the
social economy. As a result, cooperatives are considered ideal
instruments for social policy as they favor the organisation of the
grassroots, encourage employment, eliminate intermediaries between
production and trade. Given that the problem of social exclusion is
caused by the poor distribution of wealth and political exclusion,
the solution is therefore found in a a greater participation in the
distribution of goods and in participatory and democratic types of
social organisation. For this reason, issues such as the social
economy, the democratisation of the distribution of land, the
restructuring of the compensation regime and the encouragement of
grassroots organisations appear as solutions to the social problem.
Participation becomes a tool to transform living conditions" (ibid,

17."The proposed
social policy is a policy to propagate citizenship but understood as
that which makes effective all human rights; and the constitutional
dispositions of 1999 considerably broaden the extension of those
rights." (ibid, 80).

18.The most
systematic and credible source about the results of public management
regarding economic, social and cultural rights is the report produced
each year by the Venezuelan Action in Human Rights Education Program
(PROVEA). [].

19.. This group of
laws were decreed by President Chávez in accordance with the
attribution granted by the National Assembly in November 2000 under
the law that "Authorises the President of the Republic to dictate
Decrees with the Force of Law in the delegated areas" (Ley
Habilitante, 2000).

20.Law for the
Transformation of the Investment Fund of Venezuela into the Economic
and Social Development Bank of Venezuela (MPD, 2001c).

21.Law for the
Promotion and Development of Small and Medium-Sized Industry (MPD,

22."The present
Decree Law is aimed at creating, stimulating, promoting and
developing the Micro-Financing System oriented toward facilitating
access to financial and non financial services in a swift and
opportune manner, to grassroots and self managing communities, family
businesses, self-employed individuals, unemployed people and any
other forms of community association that develop or have initiatives
to develop economic activity, in order to integrate them into the
economic and social dynamics of the country." (MPD, 2001e).

23.The ‘Fondo
Único Social' has the task to concentrate and co-ordinate
process to attract, administer and invest resources to optimise the
development and implementation of policies, plans and programmes
aimed at favouring and strengthening social development, integral
health and education. It must impel the grassroots economy; promote
the development of micro businesses and co-operatives as forms of
grassroots participation in economic activity and in the job training
of young people and adults." (MPD, 2001f).

24.Law To Partially
Reform the Special Law on Cooperative Associations (MPD, 2001g).

25.Royalties as a
component of the tax regime has two fundamental differences regarding
a regime based exclusively on the paying of taxes on profits. In the
first place "the royalty (…) by basing itself only on the volumes
produced and the trade price, simplifies the collection and obligates
a greater effort to reduce costs, sharing between the owner and the
investor the risks derived, for example, from prices." (Rodríguez
Aranque, 2002, 193-194). In second place, royalties, unlike tax on
income corresponding to commercial or industrial activities,
recognises the fundamental fact that with the exploitation of a
non-renewable resource like hydrocarbons, the Venezuelan nation
collectively becomes poorer as a source of wealth is being used that
belongs to everyone, that Venezuelan oil is not a "free gift from
nature for the companies and international consumers." (Mommer,
2003, 176).

26.It is interesting
to note that while some of the most radical critics of the Chávez
government criticise him for being communist (Gomez, 2003) others
accuse him of being neo-liberal (Sonntag, 2003).

27.While during the
first two years of the Chavez government the CTV was on the
defensive, by 2001, as the result of an organisational reform
process, its leadership was consolidated and demonstrated growing
aggression toward the government (Ellner, 2003a, 217-218).

deterioration increased rapidly after President Chávez's
televised condemnation of the US invasion of Afghanistan in response
to terrorist attacks that took place on September 11th 2001 in the
United States.

29.In 2001 the
figure was 12.3%

30.Investment Fund
for Macroeconomic Stabilisation

31.On April 12th,
the day after the coup, Thomas Dawson, director of foreign relations
for the IMF told journalists "we are ready to assist the new
administration as it sees fit." (IMF, 2002).

32.Due to a lack of
space, it not possible to address the events in the days surrounding
the April 2002 coup in greater detail. For more information regarding
these events, in particular the role of the private media, see the
Irish documentary "The Revolution Will Not be Televised" Bartley
and O'Brian, 2003. Regarding the role of the United States in
supporting the coup, see Golinger, 2005;2006; Lander, 2002.

33.In May 2002 the
head of the economic team, Jorge Giordani, in the Ministry of
Planning and Development, was replaced with Felipe Pérez; in
the Finance Ministry, the economist Tobías Nóbrega
replaced Nelson Merentes; in July 2002, Gastón Parra is
replaced as president of PDVSA by Alí Rodriguez, who – at
the time – is considered a candidate for consensus.

34.For a detailed
analysis about this issue and the action of each of its elements,
including altruism, see Pérez, 2002; Wilpert, 2003a.

35.Given the
importance of the shut down of PDVSA in the strike and the
coup-related behavior of high and middle ranking executives during
the strike, the term oil-business strike/sabotage is commonly used to
refer to the strike. We will use the term oil strike from now on.

36.In December,
average production fell to 707,000 b/d; the average in January has
been estimated at 738,000 b/d; during February, it reached 1,865,000
b/d; and by the end of March, it had recovered normal levels,
averaging that month 2,672,000 b/d (Lander, 2004).

37.Given the
multiplying effect that this fiscal income would have had, the real
cost of the oil strike for the economy was much higher.

38.According to Lope
Mendoza, president of Coindustria, during the 1999-2002 period
capital flight reached $33.179 billion, more than in the previous 40
years (Leon, 2003).

39.GDP fell 8.9% in
the year 2002 (BCV, 2006c).

40.A total of 18,756
workers were not reinstated after the end of the strike (PROVEA,
2003, 47).

41.When considering
these vulnerabilities one cannot ignore how the US government has,
for decades, used trade as a political weapon, in particular in the
blockade against Cuba.

42.The guiding
principles of this, rooted in CEPAList developmentalism,
characterised as an "endogenous development" project are found in
MPC, s. f.

43.According to the
team that worked on this proposal in the Ministry of Planning and
Development, the "social economy" is an "alternative economy"
where "democratic and self-managing practices prevail." It is
"powered by associative work and non salaried work and the means of
production are collectively owned (with the exception of the case of
small businesses)." It is "centered on the equal division of
surplus," it is "in solidarity with the social context within
which it develops" and is "anchored to its own autonomy regarding
the monopolist centers of economic or political power." It is
oriented by the following ethical principles: "1. The expansion of
democratic and libertarian values toward all social practices. 2. A
commitment to brotherhood and solidarity within the community and
labor environments in which we move. 3. An egalitarian meeting with
one another. 4. The struggle for the complete liberty and dignity of
our nations. 5. A profound love of the earth and nature. 6. Absolute
respect for human rights. 7. The priority of general interest above
individual interests" (MPD, 2004). For a more in-depth discussion
of the meaning of the social economy with the project for change in
Venezuela, see Vila Planes (2003).

44.By October 2003,
President Chávez had announced the creation of seven
government missions to combat poverty (Wilpert, 2003b). By November
2006, there were 19 different missions (MRE, 2006). See ILDIS, 2006
for a comprehensive evaluation of the some of the main government

45.In March 2004,
they organised a series of disrupting actions in several cities
called guarimbas that included stopping transit in several zones and
destroying public and private property valued at hundreds of millions
of bolívares (Díaz Rangel, 2006, 184).

46.After a great
deal of conflict about the number and the validity of the signatures
that were presented in April 2004, it was confirmed that the
opposition had gathered signatures corresponding to more than 20% of
the registered national electorate.

47.These are:
presidential elections of 1998, referendum about convening a
Constituent Assembly (1999), Constituent Assembly elections (1999),
the referendum approving the new Constitution (1999), presidential
and governor elections (2000), mayor elections (2000) and the 2004
referendum to revoke Chávez's mandate.

candidates won nearly 300 mayors, 20 of 22 governor positions, and
the majority of representatives in the Regional Legislative Councils.

49.These are: "1.
To advance in the conformation of a new social structure. 2. To
articulate and optimize the new communicational strategy. 3. To
swiftly advance in the construction of a new democratic model of
grassroots participation. 4. To accelerate the creation of the new
institutionalism of the State apparatus. 5. To activate a new
integral and efficient strategy against corruption. 6. To develop the
new electoral strategy. 7. To accelerate the construction of a new
productive model, geared toward the creation of a new economic
system. 8. To continue implementing the new territorial structure. 9.
To deepen and accelerate the conformation of the new national
military strategy. 10. To continue impelling the new international
multi-polar system." (MINCI, 2004, 29-30).

famously repeated this statement in the V World Social Forum in Porto
Alegre, Brazil in 2005. According to Chávez, this socialism
will be different from the socialism of the XX Century though he does
not specify how to ensure that it will not be a socialism of the
State such as that implemented in the Soviet Union or Eastern Europe
or like that currently existing in Cuba (Wilpert, 2006).

51.26 MNCs
(including Chevron) "migrated" to this agreement. Two MNCs did
not accept and left the country: Total of France and ENI of Italy.

52.In August of that
same year, parliament agreed to increase the income tax charged to
companies that exploit crude oil from the Orinoco belt from 34% to
50% (La Jornada, 2006).

53.Between 2000 and
2005, the total income of the company increased by 61% and the
company's contribution to the nation jumped 121%. However, in that
same period, the nation's participation only increased from 21% to
29.1% of total company income.

54.In 1998, public
spending as a percentage of GDP was 23.7%. In 2001, it was 31.6%. In
2005, it was 29.5%. Between 1998 and 2005, public spending as a
percentage of GDP increased 25.5%.

55.During the Chávez
government, social spending, as a percentage of public spending
increased 17.6%, going from 34.6% in 1998 to 40.7% in 2005. During
this same period, as a percentage of GDP, social spending has
increased by 46.3%, going from 8.2% in 1998 to 12% in 2005. In
education, for example, from 1998 to 2005, real public spending per
capita has increased by 80%, with annual public spending in education
surpassing 4% of GDP (SISOV, 2006b; Weisbrot et al, 2006).

56.The agreement
that led to the creation of Petrocaribe was signed in September 2005
and included 13 countries from CARICOM plus Cuba and the Dominican
Republic (Lai, 2006).

57.According to the
Venezuelan American Chamber of Commerce and Industry in 2005,
approximately 70% of Venezuela oil is aimed at the US market
(Venamcham, 2005).

58.The progress and
the strengthening of the movements of resistance to neo-liberal
globalisation have had clear expressions in the World Social Forums
held since they began in Porto Alegre in 2001 to those carried out in
Bamako, Karachi and Caracas in 2006. The movements opposed to
structural adjustment policies, in particular privatisations, have
acheived important successes on the continent such as the case of the
Water War in Cochabamba in 2000. Equally important, from the
perspective of the continental geopolitical context in which the
Venezuelan government operates were the electoral victories of
candidates and parties considered "progressive" or left-wing in
many countries in South America in recent years.

59.From the
beginning of the Punto Fijo democracy, the governments of AD and
COPEI were unconditional in their support of the United States.

60.During the first
years of the Chávez government, like in many areas, there was
no clear vision of what was happening in the FTAA negotiations, the
World Trade Organization (WTO) or free trade agreements in general.
It was starting from the III Summit of the Americas held in Quebec in
April 2001, when the Venezuela government reserved its position on
the definition of democracy as exclusively "representative
democracy" and over the schedule of negotiations, that Venezuela
began systematically questioning the FTAA as a project that favours
TNCs of the United States to the detriment of development in Latin
American countries and the living conditions of the majority of the
population on the continent.

61.In the fifth WTO
ministerial meeting held in September 2003 in Cancún the
Venezuela government's position document circulated prior to the
meeting emphasised the following points. First, that combating
poverty and social exclusion was a priority. Secondly, the
ideological bias that favours the market over state action was
criticised. It promoted a process of participatory negotiations and
prioritised human rights over trade. Finally, it defended the
obligation of the state to provide strategic services (Venezuelan
Embassy in the United States, 2003). The important thing about this
document, which from its tone could have easily been written by
groups of the so-called "anti-globalising movement," is that it
criticised the theoretical foundation of the rules of the game in
international trade. After the Cancún meeting, the position of
other Latin American governments regarding the FTAA became more

62.See Arreaza
(2004) for a summary of information about the ALBA published by the
Foreign Trade Bank (Bancoex) of Venezuela.

63.The Venezuela
government is the majority shareholder of TELESUR, providing 51% of

64.At the time, the
CAN was comprised of Colombia, Bolivia, Ecuador, Peru and Venezuela.

65.The lanceros (the
name given to participants in the programme), the vast majority
recent graduates of the educational missions, receive a government
scholarship and training in a variety of jobs in the area of
production and services, with an emphasis on work within
co-operatives. Given the immediate needs of the country, the
programme began by focusing on the development of agriculture. Of the
total scholarships, 50% were for training in the farming sector and
30% for the industrial sector (placing emphasis on the food industry
and the production of shoes and clothes) (Lebowitz, 2006, 98).

elements of the ideological aspect of the programme include:
attacking the division between those who think and those who do, a
rejection of salaried work as such and the promotion of collective

67.The NUDE are
"areas or places with endogenous development potential according to
their historic and cultural characteristics" and to create them
"residents from the close by areas are invited to take part in
technical-productive and socio-political training, oriented toward
the later development of a co-management or self-management activity
in the area of development" (MINEP, 2005, 30-31).

68.According to
official sources, by June 9th 2006 there were 627,539 lanceros
registered in Mission About-Face, and as of 2005, 264,720 lanceros
had graduated. As of June 2006, there were 6,814 co-operatives
created by lanceros and by November 18th 2006, 954 billion bolívares
had been granted in credit and 130 NUDEs were operative (MRE, 2006).

69.With the creation
of MINEP, the Ministry of Social Economy created in 2002 was

70.The majority of
these new funding institutions such as Banmujer and the Microfinance
Development Fund (Fondemi) were created in 2001 as a result of the
Enabling Laws and, together with already existing financial
institutions, have been the "bastion of the social economy model"
(Fergusson, s. f.).

71.While the 1999
constitution demands that the State promote and protect the
co-operatives (articles 118 and 308), only after the approval of the
"Special Law on Co-operative Associations" in August 2001 (MPD,
2001g), was there a significant increase in the number of
co-operatives in Venezuela.

72.In 1998, 877
co-operatives were registered. In 1999, when the Chávez
government began, 33 more co-operatives were registered. Later in
2000, 94 more were registered, in 2001 the number of new
registrations was 1,154 and in 2002 2,280. In 2003, the number of new
registrations was 17,939, in 2004 36,765 and in 2005 41,485 to reach
a total of 100,627 co-operatives registered by the end of 2005. As of
June 2006, another 30,954 co-operatives were registered, resulting in
a total 131,581 registered co-operatives by June 2006 (SUNACOOP,

73.Oscar Bastidas,
General Co-ordinator of the Research Centre for Participation,
Self-Management and the Co-operative Movement (CEPAC) of the Central
University of Venezuela (UCV), has spoken of a "cemetery" of
co-operatives (Fox, 2006b). Starting on August 15th 2006 the MINEP,
the SUNACOOP and the National Statistics Institute (INCE) held the
first co-operative census to update and optimise the national
information system to register co-operatives. In November 2006, the
director of SUNACOOP Carlos Molina said that representatives from
37,552 co-operatives (21.7% of the 172.899 co-operatives registered
up to September 2006) formed part of the census. The final results of
the census will be ready at the beginning of 2007. The co-operatives
that do not form part of the census will no longer form part of the
SUNACOOP registry as it will be assumed that they are no longer
active (Contreras Altuve, 2006).

74.The government
"proposes a Framework Agreement to business people and workers in
order to guarantee economic sovereignty, democratise relationships of
production and achieve the productive inclusion of citizens"
(MILCO, 2006).

75.The concept of
EPS is to a large extent influenced by the book Beyond Capital by
Hungarian philosopher István Mészáros (Lebowitz,

76.In order to
qualify as EPS and obtain preferential treatment to obtain low
interest loans and state contracts, companies must meet a series of
requirements such as "prioritizing the values of solidarity,
cooperation, reciprocity, equity and sustainability, before the value
of profitability" (Wilpert, 2006). The EPS proposal is presented in
a more systematic form in the book Empresas de Producción
Social: Instrumento para el socialismo del siglo XXI (El Troudi y
Mondero, 2006).

77.In the December
3rd 2006 presidential elections Chávez was re-elected
president of Venezuela until 2013, with 62.8% of the vote compared
with 36.9% for the opposition consensus candidate Manuel Rosales
(CNE, 2006b). A few weeks after his re-election Chavez called for the
creation of a "united socialist party of Venezuela" with the aim
of building socialism "from below" through this new party. On
January 8th 2007 Chavez announced a series of measures that include
constitutional reform and the re-nationalization of some strategic
industries in the country, such as electricity and
telecommunications. Here Chavez characterized the 1999-2006 period of
his presidency as a "transition phase" and said he has entered a
new era, which he called the National Simon Bolivar Project between
2007-2021 (Wilpert, 2007). On January 10th, during his inauguration
speech, Chavez called for the promotion of "five motors" in the
national Simon Bolivar construction project, in order to lay the
foundations for a "Socialist Venezuela". These motors are: an
Enabling Law through which a series of laws will be reformed; a
constitutional reform that includes a proposal for indefinite
presidential re-election; a national programme for popular education;
a new geometry of power based on a political-territorial change in
order to create a system of federal cities and territories; and
finally the fifth motor will be the "explosion of Communal Power"
that will imply that the "communal councils must transcend the
local arena in order to form federations and confederations that
study the needs of the territory and participate in the new socialist
territorial ordering." As of this moment a new phase is announced
in the construction of what has been termed 21st Century Socialism