Venezuela: Exchange Rates and the Battle for Petroleum Income
“If politics is no longer the art of the possible, this is because financial power has kidnapped faith and the future, time and hope.” Giorgio Agamben (Quoted by President Nicolás Maduro in the National Assembly October 8, 2013).
These last two weeks have attested to a process of assuming positions in economic policy. The decisions that the government is taking on economic questions are the result of a calculation in the scenario of political and social confrontation.
On the government side, measures were announced that nuanced the dangerous slant that, from the Ministry of Finance, had been presented as a monolithic and one-dimensional proposal. We must insist that the big problem of exchange-rate flexibility through the "free market" is its incoherence and its lack of pertinence to the scenario of confrontation with dominant groups, where the predominance of financial capital is central.
In this economic warfare, four things need to be kept clearly in mind in order to maintain the correlation of forces in favour of the revolution: a) who the enemy is; b) knowing the battle-field where the confrontation is taking place; c) knowing one’s own strategy; and d) maintaining the support of the people.
The scenario of the dollar is a fundamental battlefield for the present economic warfare. The exchange-rate issue is a sample of what is under dispute: it is the struggle for oil income, controlling both the distribution of dollars (exchange control, SICAD, exchange rate bands) as well as the generation of dollars (PDVSA).(1)
Knowing the battle-field: the fight for the control of income
The sectors that have controlled economic power during the past eight years have been able to sway the balance of power in their favour, so when they cornered the government in February of this year, it desperately attempted to escape from this situation via a strong devaluation.
These sectors have control of the oil income that has flown out of the country and is held in foreign accounts. In financial assets alone they control 160.14 billion dollars according to the Venezuelan Central Bank (BCV). By accumulating this quantity of resources they managed to sway the balance of power against the Government, and have been able to unravel, corrupt and discredit the control of foreign exchange (CADIVI).
Their demonstration of power is overwhelming. They managed to set a parallel exchange rate at something over 40 bolivars to the dollar (2), creating extremely pessimistic expectations that resulted in rising prices and shortages of key goods. Lamentably, the use and abuse of some of the policies proposed by the representatives of financial capital (national and international) fed the capital flight, including structured notes, the massive emission of debts in dollars and the SITME (3).
Knowing the enemy strategy
Exchange control (CADIVI) (4) and PDVSA are the hills that the enemy intends to conquer, in order to regain control over the generation of income (PDVSA) and its distribution (exchange control). They have already achieved a partial control over the distribution of oil revenues, that is, they have taken back the power that the government won after the coup in April 2002 and the oil sabotage, and they have wrested from the government the power to control the currency through CADIVI.
The high command of the Chavista Bolivarian government is showing signs of awareness of this situation.
They announced the creation of the Economic Superior Body and they have emphasized perception of an "economic war". It seems that the proposals of those in favour of making exchange controls more flexible and of swap market resurgence lost ground in the face of resistance from the organized groups of the revolution and as a result of analysis of the battle field made by the Government led by President Nicolas Maduro.
Among other measures the government has announced are speeding up exchange control mechanisms and the reinforcement of monitoring mechanisms. We need to rescue CADIVI from the pit it was pushed into by the powers of Capital, in collusion with corrupt government bureaucrats seeking to become a bourgeois class with the primitive accumulation they achieved through the theft of large amounts of financial resources.
On the side of the promoters of the removal of exchange controls, one pole was formed by the proposals of the group of ex-ministers (Felipe Perez, Victor Alvarez and Gustavo Márquez). There will be time to confront ideas with this sector, which limits itself to undertaking economic analysis devoid of references to class confrontation. Moving in the unreal world of mainstream economist’s models is equivalent to being a bull in a china shop. Opting for the removal of exchange controls and giving credit to exchange control bands, smacks of political ingenuity that could favor the balance of power of the representatives of capital.
The removal of exchange controls in this circumstance of class confrontation would be an error, not only economically but also politically, that is, it would definitively contribute to the dismantling of the revolutionary process.
Knowing the enemy
From, the brilliant speech of President Maduro in the National Assembly, on the occasion of his request for enabling powers, it was possible to clearly identify the principal enemy in the contemporary economic war: speculative and parasitic finance capital. When we speak of speculative financial capital we are referring to private banks and their whole alliance with powerful productive and commercial capital.
Finance capital, and especially the private banking sector, has kidnapped the economy. When the President quoted Giorgio Agamben, it is easy to identify one of the most powerful enemies in this economic warfare.
"The Bank with its grey bureaucratic experts has occupied territory abandoned by the Church and the priests; having the control of credit, what they can manipulate and manage is faith, the scant and uncertain confidence that our era still has in itself, and this is being done in a most irresponsible and unscrupulous way, looking to make money from the confidence and the hopes of human beings, establishing the amount of credit that each can access and the price that they must pay for it. In this way, controlling credit they govern not only the world, but also the future of men, a future that the crisis makes increasingly short and decadent.”
There are secondary enemies such as some national productive sectors that have close relations with foreign capital. These control the logistics and the circuit of production and distribution. But the model of accumulation is dominated by financial capital, that capitalist block that has made possible the criminal appropriation of income and its flight out of the country.
Financial capital, in addition to its parasitic and speculative character, is also profoundly cynical. As the people do not directly identify them as the enemy, since they do not appear directly involved in the upward valuation of the parallel dollar, or of the prices of goods and wages and the shortages, they claim to be advising the government on policy. They offer their broad experience and professional knowledge. They are like the Pranes (mafia) who offer advice based on their practice as mafiosos.
As long as we have this private banking system and their network of relations with the productive sector, the transition to socialism will be impossible.
Maintaining the support of the people
Those who have been most affected by this confrontation are working people. Those responsible, having created a hopeless situation, the uncertainty that goes with a brutal reduction in purchasing power, look to weaken popular support.
All this is supported by the private media, whose objective has been to confuse the people, making the government appear as the only or principal element responsible for the situation. Pamphlet journalism creates a novella in which the protagonists are Merentes, Giordani and Ramírez (5). Meanwhile the principal actors hide behind scenes, from where they achieve the objective of dividing and dispersing popular and revolutionary forces.
It is important to reinforce the political awareness of the people, disarming the enemy strategies and making them public. This is a delicate moment, unfavorable to a great extent, but it is also a moment when it will be possible to make some great qualitative leaps in raising awareness among the population.
(Translated for Alai by Jordan Bishop)
Simón András Zúñiga is a Venezuelan economist, and forms part of the collective Sociedad de Economía Política Radical
(1) SICAD: Complementary System of Administration of Foreign Currency (program of the Venezuelan Central Bank). PVDSA: Petróleos de Venezuela, S.A. (state oil company).
(2) The official exchange rate is US$1 = 6,29 bolivars.
(3) SITME: Transaction System for Securities in Foreign Currency.
(4) CADIVI: Commission for the Administration of Currency Exchange.
(5) Nelson Merentes, Minister of Finance; Jorge Giordani, Planning Minister; Rafael Ramírez, president of PDVSA.