VENEZUELA: A
COUNTRY REPORT
BRENNAN FULL, AILEEN ALMANZAR, JORGE DAVILA
CHAVEZ’S “NEW SOCIALISM”
CAN VENEZUELA’S PRACTICE OF “SOWING THE OIL” SERVE AS
A VIABLE MODEL FOR POVERTY ALLEVIATION IN RESOURCE -RICH
COUNTRIES?
BRENNAN FULL
BRIEF HISTORY OF VENEZUELA’S OIL
1. 1912-1943 - Initial discovery and production
• Largest players: Royal Dutch Shell and Rockefeller’s Standard
Oil
• ‘29 - Venezuela as world’s largest oil exporter, second largest
producer (2nd to US)
2. 1943-1974 - Venezuela’s right to oil
• ’43 - Hydrocarbons Act - foreign companies could no longer
make profits larger than the amount paid to the Venezuelan
government
• Overproduction and U.S. quotas --> Very low oil prices
• ’60 - Formation of the Organization of Petroleum Exporting
Countries (OPEC) and Venezuelan Oil Corporation
BRIEF HISTORY OF VENEZUELA’S OIL
3. 1974-1998 - Oil boom and Nationalization
• ‘73 - Middle east oil embargo -> price of oil quadruples
• ’74 - Carlos Andres Perez - “Sow the oil”
• ’76 - Oil nationalized - PDVSA created
4. 1998-2003 - Government asserts control
• ’98 - Chavez elected - rallies members of OPEC to adhere to quotas
• ’02 - Massive strike - 18,000 employees fired
• Present - Company never fully recovered from firings of ‘02 - public participation
has increased
Source: U.S. Department of State
PDVSA
• Created 1976
• Oversees the exploration,
production, refinement, and
export of oil as well as exploration
and production of natural gas
• Fifth largest oil reserves in the
world
• The president of Venezuela has
the power to appoint the
president of the PdVSA
• Prior to Chavez - President often
selected from the existing
managerial team
PDVSA TODAY
• President: Rafael
Ramirez (also serves as
Minister of Energy and
Petroleum)
• Ranked 66th largest
corporation in the
world (Fortune)
• Employees: 80,000
• Revenues: $88,361
million (17.2% increase
from 2009)
• Profits: $4,313 million
Source: CNN Money - Fortune 500
EXPORTS
• Exports (2009) - $60.9
Billion
• Petroleum - $57.6 Billion
(94.58% of total
exports)
• Other products aluminum, steel, iron
ore, cigarettes, fish,
cement, and paper
products
• Markets (2005): U.S.
57.5%, Netherlands
5.2%, Mexico 4.5%,
Colombia 4.5%
Source: U.S. Department of State
OIL PROFITS = GOVERNMENT REVENUE
• According to the the Guardian:
95% of total government
revenue can be linked to oil
money (2008)
• The CFR reported that “oil
generates about 80% of the
country’s total export
revenue, contributes about half
of the central government’s
income, and is responsible for
about one-third of the
country’s GDP.” (Stephanie Hanson, 2009)
• Increases in oil prices have
allowed Chavez to bolster
social spending
BOLIVARIAN MISSIONS
✤
Series of social justice, welfare, anti-poverty, educational,
electoral, and military recruiting programs
✤
Implemented by Chavez administration
✤
2007 - Government earmarked 44.6% of budget for social
programs
PDVSA FUNDED MISSIONS
• Ribas Mission (7/06) - Education; • Identity Mission - Concerned with
citizenship; issuing identity cards
high school
• Sucre Mission (late 2003) Education; college
• Vuelvan Caras Mission Employment; youth job training
• Barrio Adentro Mission - Health;
low cost medical services
• Mercal Mission (4/03) - Food;
low cost purchases and
production stimuli
• Guaipaipuro Mission (10/03) Indigenous rights
MEASURING RESULTS
MEASURING RESULTS CONT
MEASURING RESULTS CONT
MILLENNIUM DEVELOPMENT GOALS
VENEZUELA’S FUTURE
• More and more pressure is placed on PdVSA ->
finance social missions, expand production, pay off
labor liabilities, and develop gold mining projects
• PdVSA’s debt - $30 Billion (USD)
• US demand for Venezuelan oil on the decline
CORRUPTION IN
VENEZUELA
THEMES TO BE DISCUSSED
• Economic/sociocultural factors that have made
corruption rampant
•
•
•
•
•
Massive amounts of petroleum revenue
Rapid influx of money into markets
Avarice
High tolerance (complacency?) for deviancy
Low levels of regulation, punishment, accountability and
transparency
• What corruption has resulted in:
• How corruption relates to continued presence of poverty
• How corruption has resulted in citizens growing more
disillusioned with government and state of affairs
• Types of Corruption present in Venezuela
Source: Corruption Perception Index 2010
United Kingdom: 20
Chile: 21
United States: 22
Uruguay: 24
Spain: 30
Portugal: 32
Costa Rica: 41
Brazil: 69
Cuba: 69
Colombia: 78
Mexico: 98
Argentina: 105
Ecuador: 127
Honduras: 134
Venezuela: 164
Somalia: 178
WHAT IS CORRUPTION?
• Government corruption violation of public interest for
personal/partisan gain.
• Involves the use/abuse of political power in order to obtain
higher social status and material wealth.
• Includes actions that erode ethical standards of society
• Illegitimate transactions from the public to the private
• For Venezuela, it is the combined illegal actions of the
public arena (civil servants or public officials—on their
own or with private citizen complicity), and of the
private realm, both with the ends of illicitly appropriating
money, resources and other goods, or to obtain any kind
of patrimonial advantage
HISTORICAL-STRUCTURAL
COMPONENT
• Has a historical-structural component since:
• It is a wide-reaching and meaningful social occurrence
• It transcends society beyond quantitative indicators
• It maintains a constant presence throughout the historical
timeline.
• There has always been corruption in Venezuela, since
colonial times; but rampant corruption can be attributed
to the 70’s where:
• Venezuela’s incorporation to the dynamics of world capitalism
was consolidated, and neoliberal shocks were introduced
• Exploitation of petroleum increased along with technological
expertise
• Massive growth of commodity imports as a result of increased
circulation of money
Source: “Historia de la Corrupción en Venezuela.” Bernardo Carpio
MOTIVES FOR CORRUPTION I
• Poorly paid bureaucrats
• Low-level officials ask for payment from the public to do
basic tasks
• High-level officials ask for commissions from private
contractors
• Weak political and social institutions
• Lack of adequate administrative norms and judicial
controls: Impunity
• Corrupt acts are justified through electoral legitimization
MOTIVES FOR CORRUPTION II
• Large volumes of revenue from petroleum exports
• Not earned by work of the majority of the population, but by a
small group of oil industry technical staff  dependency of the
population on oil, since it’s not their own work, it’s much easier
to engage in corrupt action (Francisco Javier Marin Boscan,
2004).
• In 1997 Pro Calidad de Vida, a Venezuelan nongovernmental
organization (NGO) doing anti-corruption work, estimated that
some $100 billion in oil income had been wasted or stolen
during the last 25 years.
• Public Complacency/Complicity
• Some claim that corruption has become a way of life in
Venezuela, deeply engrained in the culture itself
• Massification instead of democratization of corruption
WHAT HAS CORRUPTION DONE TO
VENEZUELAN SOCIETY?
Corruption has affected Venezuela’s:
• Political system—democracy—by invalidating potential
benefits from it
• Institutional design fails to operate effectively  public policy deviates
from its original purpose and produced unexpected outcomes
(Source: Raul Gonzalez Fabre).
• Economy and its growth and development, by discouraging
investment, both foreign and domestic
• Distribution of wealth becomes more unfair and disparate (Source:
Raul Gonzalez Fabre)
• Education and Culture, by creating perpetuating incentives
instead of deterrents against corruption
• Social capital gets destroyed as well as social confidence (Source:
Raul Gonzalez Fabre)
• National sovereignty, by eroding the State’s dignity, integrity,
and ability to effectively protect public order and well-being
 Corruption is a problem both at the State and Society levels
Source: “El Combate a la corrupción en Venezuela” by Adelso González Urdaneta
TYPES OF CORRUPTION
Grand Corruption
• Corruption derived from major
policy decisions by the highest
decision-making levels of
government
Examples:
• Acceptance of foreign contributions for
presidential campaigns.
• Argentina-Suitcase scandal
• Expenditures of up to $17 billion in the last
four years, mostly to buy weapons, personal
items, and political loyalties
• Presidential airplane acquisition:
violation of article 314 of VZLAn
constitution and of law regulating
government expenditures
Source: Gustavo Coronel, “Corruption, Mismanagement, and Abuse of Power in Hugo Chavez’s Venezuela”
TYPES OF CORRUPTION
Bureaucratic Corruption
• Includes violation of laws, norms, and regulations by government
employees or non-government accomplices.
• Can involve extortion, bribery, stealing of public funds, abuse of
political power, nepotism, and other varieties of illegal/unethical
use of public assets for private gain
Examples:
• Government contracting is mostly conducted without following existing
bidding regulations
• Transparency International identify this as one of the main causes of corruption in VZLA
• 95% of all known public contracts are awarded without bidding (according to TI)
• Corruption at the National Electoral Council
• Electoral registry consists of 17 million voters, a statistical impronbability since population
±26 million, 60% of whom are too young to register
• 39,000 voters who are over 100 years old
• Tascón List
• Corruption at the Supreme Tribunal of Justice
• Justice Afiuni: demoted after not complying with Chávez’s opinion on a corruption case.
Source: Gustavo Coronel, “Corruption, Mismanagement, and Abuse of Power in Hugo Chavez’s Venezuela”
TYPES OF CORRUPTION
Systemic Corruption
• Interface between government and private sector
• Involves both large amounts of money and small favors –
“petty corruption”
Examples:
• Corruption in state-owned petroleum company
• Misuse of funds for purposes of political propaganda
• Little to no transparency
• Emergences of a new rich “revolutionary” class
• New bourgeoisie, those closely associated to the government, that
drives Hummers and Audis and fly to Miami for shopping sprees on
private jets (from article in El Nuevo Herald)
• Government-controlled private corporations
• Government family members who own private companies are given
privileges
Source: Gustavo Coronel, “Corruption, Mismanagement, and Abuse of Power in Hugo Chavez’s Venezuela”
VENEZUELA: POLICE
Source: Transparency International Global Corruption Barometer 2010.
WHAT’S BEING DONE?
Government launched an offensive
• against corruption as part of austerity drive
• Public prosecutor initiated court cases against former and
current officials for alleged corruption
• In 2009, 9 ex-mayors convicted for corruption charges: 5
pro-Chavez and 4 in opposition
• to cut down superfluous expenses and bloated
salaries
• Getting rid of particular “mega salaries” and “mega
bonuses”
• Rafael Ramirez, pres of PDVSA, announced cutback of 2009
budget by cutting executive salaries by 20% and freezing
executive bonuses
Source: “Venezuela Combats Crisis by Fighting Corruption, Bureaucracy” by Federico Fuentes
DO PEOPLE BELIEVE CORRUPTION HAS
DECREASED?
IN THE PAST THREE YEARS, HOW HAS
THE LEVEL OF CORRUPTION IN THE
COUNTRY CHANGED?
Source: Transparency International Global Corruption Barometer 2010.
HOW WOULD YOU ASSESS YOUR
CURRENT GOVERNMENT’S ACTIONS IN
THE FIGHT AGAINST CORRUPTION?
VENEZUELA-CUBA
RELATIONSHIP
JORGE DAVILA
ABSTRACT
Venezuela-Cuba a Contradictory
Relationship
• Relationship between two peripheral countries
• Political, social, and cultural arrangement between
Caracas-Havana which goes beyond than a
diplomatic and commercial relationship
INTRODUCTION
1. The aim of this work is to understand the extent and
intention of Venezuela-Cuba Relationship
• The relation among both countries that amount 1% of
Venezuela’s GDP and programs that add up to US$ 1.5
billion in 2009
• Composed of 31 Cuban entities and institutions in more
than 157 bilateral projects
2. The use of Venezuela’s oil revenue dependency to
promote Chávez continental leadership
• State and non-state manipulate Venezuela’s aid in form of
favors, donations, financing, and non-returnable
investments.
• Recipients capture the revenue through the subsidized and
deferred sale of oil.
TWO JUNCTURES IN VENEZUELA- CUBA
RELATIONSHIP
1. The first, fundamentally bilateral, went from the
arrival of Hugo Chávez to the presidency for the first
time in 1999 until 2004.
2. The second goes from 2004 until today, in the
context of the Bolivarian Alliance for the Peoples of
Our America, ALBA.
ECONOMIC, COMMERCIAL AND
SOCIAL COOPERATION
First stage:
• Converge and defense of two similar ideological and political projects.
• Economic and commercial increase to create a common identity at the
regional level
• Grow the supply of Venezuela oil in Cuba to overcome a severe
economic crisis
• Reinvigorate the global leftist movement
Second stage:
• December 14, 2004, the Integral Cooperation Agreement between Cuba
and Venezuela was modified and expanded. The expansion of this
agreement consolidated a new phase of economic complementarities
beyond energy cooperation and the exchange of human resources.
• Bolivia joined the ALBA the same year, Nicaragua in 2006, Dominica and
Honduras in 2008, and Antigua and Barbuda, Saint Vincent and the
Grenadines, and Ecuador in 2009.
• This alliance allows trade of goods inside member countries with no tariffs,
in addition to the Unified System for Regional Compensation (SUCRE) for
foreign exchange operations between member countries, and
considered the basis for a future common monetary system.
• The alliance promotes the creation of several ALBA ‘grand-national’
companies
GLANCE OF THE FIRST STAGE IN CUBAVENEZUELA RELATION
Agreement Cuba-Venezuela in October 2000 to
promote exchange of good and services
• Venezuela sell oil at a fixed, preferential price of US$ 27 a
barrel
• Barrels are paid half in 90 days after purchase and the
rest over 25 years
• In exchange Cuba sent more than 14,000 workers,
mostly in the health sector
GLANCE OF THE SECOND STAGE IN
CUBA-VENEZUELA RELATION
After the ALBA creation
• Trade between Cuba-Venezuela grew from US$388.2
million in 1998 to US$ 7.1 Billion in 2007
• In 2008 trade goods between Cuba- Venezuela totaled
about US$5.375 billion, which US$4.892 billion were
Venezuela’s exports to Cuba and US$483 were imports
from Cuba
• Total aid to Cuba from Caracas in 2008: US$ 9.970 billion
• US$5.6 billion in payments for professional services; US$2.5 billion
in subsidies for oil sold at a fixed price of US$27 and US$1.87
billion in other bilateral cooperation projects. (Accumulated
aid since 1999 is calculated to be about US$18 billion)
STRATEGY AND MILITARY IN
COOPERATION RELATIONSHIPS
In 1999, the connection between Cuba and Venezuela
has been replacing the historical relationship between
Venezuela and the US.
• A military doctrine was adopted, taking in consideration an
eventual American attack on Venezuela first and then Cuba.
• The Cuban-Venezuelan strategy contemplates the need to
propose a regional block different from TIAR, with the
participation of Cuba and the exclusion of the US and help
revolutionary governments and movements in the region.
• Since 1999, the Venezuelan Squadron has provided
humanitarian assistance in Cuba related to natural disasters as
well as regular visits to the island for official delegations and
military study groups to perform professional exchanges and
military training.
NOTES
• Entering the 21st century, Cuba was able to relate its own
experience with those of the newly emerging Left in Latin America
and the Caribbean, which began to grow first in Venezuela and
later in Brazil, Bolivia, Ecuador and other diverse, interesting cases.
• The debate about whether Cuba is a security problem or a model
to be followed in the Americas is one more time in the table. This
has led to a debate in Latin America about revolution, the
supposed interference of these countries in the internal affairs of
other countries, and the possibility that the Venezuelan political
model follows the steps of the Cuban model.
• Since 1999, Cuba has had a important partner in Venezuela. The
expression “Cuba and Venezuela, two flags, one revolution”
indicate the approach between the two countries, their joint
participation in ALBA, the development of an important socioeconomic exchange, the creation of a complex cooperation
process, and the promotion of socialism.
• Noteworthy aspects of this relationship are the great financial
volume accompanying this experience and the asymmetric
cooperation model where Venezuela provides significant support.
QUESTIONS TO CONSIDER
• Is this cooperation conditioning to Venezuela’s oil
revenues or rather to the development of Cuba’s
economy?
• How can the effectiveness and efficiency of these
cooperation programs be measure?
• What hidden results can this combine effort have
for the balance of Venezuela foreign aid as well as
for Cuban society in terms of income distribution?
CONCLUSION
The Future cooperation between both countries
could continuing develop by:
• First, by continuing developing and expanding the main
elements of this alliance
• Second, It would include a political and economic
opening in Cuba. The Island would seek to build up
energy trade and financial relations with other countries
and start breaking the dependency from Caracas
• Third, It would arise from internal changes in the position
between both countries which would forced them to
reconsider their cooperation that has been base on the
duty of building socialism and promoting an antiimperialist foreign policy
SOURCES
Venezuela’s New Socialism Section
• US Department of State
• CNN Money – Fortune 500
• World Bank
Corruption in Venezuela Section
• Adelso González Urdaneta “El Combate a la corrupción en Venezuela”
http://www.clad.org/documentos/otros-documentos/el-combate-a-lacorrupcion-en-venezuela
• Gustavo Coronel. November 27, 2006. “Corruption, Mismanagement, and
Abuse of Power in Hugo Chávez’s Venezuela.” Development Policy Analysis no.
2. CATO Institute: Center for Global Liberty and Prosperity
http://www.cato.org/pubs/dpa/dpa2.pdf
• Federico Fuentes. “Venezuela Combats Crisis by Fighting Corruption,
Bureaucracy.” International News, Green Left Weekly Issue #793. May 6, 2009.
http://venezuelanalysis.com/analysis/4423
• Francisco Javier Marin Boscan. 2004. “La corrupción: ¿Un problema de
sociedad y/o político?” Frónesis. Vol. 11, no.2. p. 58-75. Caracas: Issn 6268