professor franklin gonzález, phd central university of...

Megatrend Review, vol. 4 (1) 2007

Professor Franklin González, PhD 69Original scientific paper UDK 338.1(87) Received: January 25th, 2007

Professor Franklin González, PhDCentral University of Venezuela, Caracas, Bolivarian Republic of Venezuela

SOCIO-ECONOMIC SYSTEM AND ECONOMIC POLICY OF VENEZUELA

Abstract: This article analyses different opinions on socio-economic system and eco-nomic policy of Venezuela lead by the government of President Chavez. The opinions are in confrontation, but the thing they have in common is their identification of Venezuelan model of socio-economic development with the personality of President Chavez. Some anal-ysts consider him as a neo-liberalist, and the others as a communist or populist. For the sake of objectivity, the results achieved by the government of President Chavez in economic and social fields in seven years period are presented here. The conclusion is that Venezuela has democratic government, building successfully a specific sort of socialism of 21st century.

Key words: Venezuela, socio-economic system, neo-liberalism, populism, econo-mic policy, social policy

1. Opinions on Venezuelan socio-economic system

Words are merely labels attached to things, they are not the things themselves, one will never find out what the things are really like, or even what names

do indeed belong to them, for names we attach to them are nothing more than that-names we gave them. “Death at intervals” by José Saramago

(“Las intermitencias de la muerte”, José Saramago)

Venezuelan national constitution introduced by a referendum held on December 15th 1999 does not explicitly indicate the nature of the socio-eco-nomic system that Hugo Chavez’ government opted for on that occasion. This has created various dilemmas and disagreements amongst the scientific and academic public as to what degree this system is market-oriented and to what degree it is marked by the features of a centrally-planned economy characteri-stic of communism. Article 299 within the VI section of the constitution which relates to socio-economic system, especially its sub-section I entitled “On the socio-economic system and the role of the state in the economy” states the following: “Socio-economic system of the Bolivarian Republic of Venezuela

Socio-economic System and Economic Policy of Venezuela


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is based on the principles of social justice, democracy, efficiency, free compe-tition, protection of environment, productivity and solidarity, with a view to securing general social progress and an existence worthy of an individual and beneficial for the community. The state, together with private initiatives, will promote the continuing growth of the national economy in order to create conditions for the rise of employment rates, high national income, raising of the population’s living standards and enhancing economic sovereignty of the state, along with achieving legal security, reliability, dynamism, sustainability, consistency and justice of the economic growth, all with a view to accomplis-hing a fair distribution of wealth by means of a democratic, participative and strategic planning accompanied by open consultations”.1

Constitutional articles ranging from 300 to 310 only serve to confirm and amplify these statements pertinent to all economic sectors, large, medium and small. Given such constitutional principles it is more than clear that Venezuelan highest legal act gives no foundation for an administrative and planned economic system inherent in communism. In order to introduce such a system a modifi-cation of the National constitution would have to be conducted. However, both in the Economic Transition Programme 1999-20012 and general principles of the Economic and Social National Development Plan 2001-20073 the government made it clear that the essential systemic premise was “the role of the market to the degree that is possible and the role of the state to the degree that is necessary”.

The character of the Venezuelan socio-economic system is quite often expla-ined through the policy led by the president Chavez. Analysts advocate oppo-sing views. Critics’ opinions are primarily based on the criticism of the persona-lity of the president Chavez. On the other hand, there are those who claim that behind Chavez’ personality, which they also talk about but in a positive sense, stands his policy of which the main aim is to reclaim rights of the poorest that Venezuelan state policy so far completely ignored. Some of the critics of this policy are: Andrés Oppenheimer, Mario Vargas Llosa, Alain Touraine, Manuel Alcántara, and Jorge G. Castaсeda. The following are amongst the advocates of this policy: Luís Inacio Lula da Silva, Fidel Castro, Ernesto Cardenal, Gianni Vatimo, José Cademartori, James Cockcroft and José Vicente Rangel.

In his book “Chinese tales, Washington’s fraud, populist lie and Latin Ame-rican hope” (Cuentos Chinos, el engaсo de Washington, la mentira populista y la esperanza de América Latina) Andrés Oppenheimer interviews Venezuelan oppo-sition leaders and concludes that Chavez “leads a neo-liberal economic policy”

1 Bolivarian Republic of Venezuela, 2000, pages 321-3222 F. González, El Pacto de Punto Fijo, la Agenda Venezuela y el Programa Económico de

Transición 1999-2000. Desarrollo y sus Problemas, Caracas Ediciones de la Facultad de Ciencias Económicas y Sociales UCV, 2001

3 Ministerio de Planificación y Desarrollo (Ministry for planning and development): Líneas Generales del Plan de Desarrollo Económico y Social 2001-2007, Caracas, Venezuela, 2001


Professor Franklin González, PhD 71

but that “his rhetoric is not accompanied by what is usually associated with radi-cal transformations such as structural changes in the economy and institutions”.4 Mario Vargas Llosa claims that the social-economic model championed by Cha-vez is a model “of revolution and populism, of demagogy and authoritarianism”.5

In his essay “Is there a left-wing option in Latin America?” (¿Existe una izquierda en América Latina?) Alain Touraine says that “despite the successes achieved since Chavez was elected, his model is still a weak model of the social transformation, given what opportunities for change have been presented to the authorities, especially when we know what enormous financial resources Venezuela obtained through raising oil prices drastically”.6

A journalist Manuel Alcántara claims: “Hugo Chavez has revived five classic constituents of Latin American populism dating back half a century ago, and these are: the role of a caudillo in the party; emotional, rhetorical speeches that offer solutions with a strong symbolic content; the foundation of national move-ments as an expression and a framework for the participation and political per-formance of people (the nation) who had been deprived of their entire meaning and significance before the caudillo appeared; an extreme, staunch anti-north-Americanism translated into an ever-mounting verbal disagreements with presi-dent Bush, along with the inescapable siding with Castro, and finally the return to the dominant role of the state in a re-centralised economy”.7

Mexican former minister of foreign affairs Jorge G. Castaсeda says that those who still believe that Chavez can be identified with the left wing party are mistaken: “That is a mistake. I believe that this man can stand for the rea-sons why left-wing flags are waved but not for the reality. I believe that Chavez’ policy means just spending the money they got from oil. What is he going to do once the money is out? There is no substance, no social policy, no economic policy, and no international relations policy. There is nothing. The only thing that is still there is lots of money as there is still lots of oil.”8

Brazilian president Luiz Ignacio Lula da Silva said in an interview: “I beli-eve Chavez is good for Venezuela. He is the president who over the last 30 years has done most for the poor.”9 Fidel Castro, on the other hand, said: “If

4 A. Oppenheimer, Andrés, Cuentos Chinos, el engaсo de Washington, la mentira populista y la esperanza de América Latina, Editorial Sudamericana, Buenos Aires, Argentina, 2006, pages 223-263

5 Ll. M. Vargas, “Corrido mexicano”, Published in a daily: El País,Spain, September 25th 20066 A. Touraine, “¿Existe una izquierda en América Latina?”, Nueva Sociedad 205, September-

October 2006, Published on: http://www.nuevamayoria.com/ES/PERSPECTIVAS/, page 27 M. Alcántara Sáez, “¿Qué Izquierda surge hoy en América Latina?, más diferencias que

similitudes”, Daily El País, Spain, May 28th, 2006, page 218 J. M. Calvo, “El triunfo del populismo petrolero”, Daily El País, Spain, May 2nd 2006, page 15 9 J. Marirrodriga, “Quiero una relación privilegiada con EEUU”, Interview with the presi-

dent of Brazil Luiz Ignacio Lula de Silva, Daily El País, November 3rd 2006, page 3



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one looks at Chavez one can see an original, indigenous Venezuelan son, a son of the mixed Venezuela that has all those extraordinary features and a remarkable, indeed remarkable, talent.” In Chavez “we discover an educated, intelligent, progressive man, an authentic Bolivarian”.10

A Nicaraguan poet Ernesto Cardenal claims: “In many countries the poor vote against their own interests and support those who in reality exploit them; however, there is a revolution in Venezuela that has opened their eyes. There are more than one million persons who have just barely become literate, tho-usands of Venezuelans who were not able to attend universities before and are finally enrolled now, many of those who had no health insurance and now they do have it.”11

An Italian philosopher Gianni Vattimo says: “Chavez has won me over to the Chavez-ism. I saw a project “Barrio Adentro” whereby professors and doctors are spread in various Caracas settlements and that appears to me to be quite democratic a principle; as opposed to that, when Bush talks about democracy, people laugh… Where has such a huge popularity of Chavez come from? It stems from the fact that his policy is predominantly based on the help to the poor. We deal here with the transformations of social structures.”12

Jose Cademartori, a Chilean economist who was a minister Salvador Allende’s government, expresses the following opinion: “It is important to point out that all these missions and projects get implemented not in a con-descending, bureaucratic or clientalist way, but rather through an active civic participation that is deprived of party-related and political exclusions. Local communities, settlements, local health committees, active participation in the distribution of the communal budget, Bolivarian circles, an explosive growth of communal associations, an increased role and participation of unions and their activities in finding solutions to labourers’ problems, autonomous activi-ties of indigenous Indian organisations-all these things contribute to the par-ticipative and mass revolution that the people of Venezuela are taking part in for the first time in their history.”13

A historian and political activist from the United States James Cocroft main-tains: “Agrarian reform is sped up in Venezuela; participative democracy has been enhanced; there has been a resurgence of the state institutions, including an anti-corruption campaign; there is a new law on the social accountability of the radio and TV and the entire self-defence against imperialism has been reinforced,

10 I. Ramonet, En Fidel Castro. Biografía a dos voces, Editorial Sudamericana, S.A., Buenos Aires, Argentina, 2006, pages 472-473

11 Ministerio de Comunicación e Información (Ministry of communication and information): Las Misiones Bolivarianas, Colección Temas de Hoy, Caracas, Venezuela, 2006, page 53

12 Ibidem, page 5413 Ibidem, page 57



including their informal pact with Cuba which de facto means that in case impe-rialism attacks one of the two countries, it will have to cope with the both.”14

According to Venezuelan current executive vice-president Jose Vicente Rangel, Chavez “is a man of simple words. He is linked with the grass roots. Chavez has stepped out of the political stereotype. He is not vulgar, his spee-ches are not banal, he has managed to preserve common people’s language and put it into the centre of the presidential discourse. He is just another ordi-nary man from the people”.15

As the reader can notice, we have been presented here with two large, widely divergent and difficult to reconcile groups of opinions with respect to the president Hugo Chavez.

2. President Chavez’ economic policy

So that I do not come across those who want to chew me but not swallow me: there are lots of them, I do not know why.

“Letters”, by Simón Rodriguez

In this part of the paper we are endeavouring to provide an answer to one crucial question that has long been circulating amongst many academic circ-les and world’s political analysts, and the question is: what is president Chavez’ and his government’s economic policy? There is no simple and unique answer to this, whish is a fact to a degree corroborated by some previous reviews concer-ning the character of Venezuelan economic system. Critics of Chavez’ views of Venezuelan economic issues state that the economic policy in the country is led by a communist leader who allegedly does not respect private ownership at all, and the fact that he is friends with Fidel Castro only serves to prove further that Chavez is trying to establish a regime similar to the one existing in Cuba.

Let us start by reminding ourselves of a statement issued by Chavez before he became Venezuelan president: “I, Hugo Chavez am neither a Marxist nor an anti-Marxist. I am neither a communist nor an anti-communist. One needs to step out of Marxism. It can serve as a framework but it is not a solution, especially for our country and our economic circumstances in which, I beli-eve, there is no trace of the clash between the labourers and entrepreneurs.”16

On the other hand, there are some insinuations to the effect of Chavez’ government being neo-liberal, an opinion based on some of its features, such as the anti-inflation policy, opening up towards foreign capital, especially in 14 Ibid., page 5915 C. Marcano, A. Barrera Tyszka, Hugo Chávez sin uniforme. Una historia personal, Editorial

Colección Actualidad, Caracas, Venezuela, 2005, page 37316 A. Blanco Muсoz, Hablan el comandante, Ediciones de la Universidad Central de

Venezuela, Caracas, 1998, pages 392-393



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the oil and telecommunication sectors, the budget policy and reportedly the social insurance privatisation project.

As for the economic field, the policy of public spending during Chavez’ government’ rule came predominantly as a response to a historically inadequate spending of the public sector viewed against the needs of the society, especi-ally of the dependent part of the population. Upon a request of the employed the state provided a substantial help for this part of the population by means of introducing new and increasing the existing budget subsidies, all in line with Venezuelan economic capacities. Therefore, there is nothing similar to neo-libe-ralism in this area.

The inflation related issues and troubles were not dealt with by a restric-tive monetary policy but rather by doing away with monetary restrictions in the famous Charter on the Monetary Stabilisation (TEM) brought by the Venezue-lan government of Rafael Caldera II (1994-1999). This instrument used for com-bating inflation did not bring the expected results though. Such anti-inflation instruments have practically become obsolete today.

There were three phases in the area of the exchange rate policy. The first was a phase of foreign currency restrictions; it was prevalent between 1999 and the beginning of 2002 and represented nothing else but a continuation of the former government’s monetary policy. The second phase lasted from the beginning of 2002 to the beginning of 2003 and in this period a policy of the ultimate freedom with respect to the shaping of exchange rate on the mar-ket was implemented. Amidst economic conditions prevalent in Venezuela at the time, the success of such a policy depended exclusively on Venezuelan Oil Industry, a company that was state-owned and represented the prime source of foreign currency. As a result of the effects of an entrepreneurial crisis and oil sabotage that happened at the end of 2002 and the beginning of 2003, from that moment onwards and in order to prevent massive loss of international reserves the government resorted to the implementation of an exchange control system. But in reality it cannot be stated that in any of the three mentioned phases there was a dogmatic affiliation to certain economic theories.

Interest rates moved freely; in the beginning, when the government was founded, interest rates were at their highest, then for a long period of time stood at a somewhat lowered level, which is also the case now. However, this situation has resulted from an agreement with private commercial banks, which cannot be said to be a neo-liberal feature However; banking liquidity has increased during this government’s rule.

The macro-economic stabilisation investment fund (FIEM), which has finally become a reality, has started achieving results and managed to accu-mulate a sum of money that can be of help in the moments of crisis when foreign currency is needed. The truth is, however, that the fund’s resources are not even during the elections made use of in an indiscriminate way in order



to satisfy the demands of workers in the public sector despite the fact they are fully entitled to claim a pay rise.

Essentially, there are two reasons to account for the phenomenon of ope-ning up towards foreign capital in the areas of telecommunications, electric power production and financial sector, which, altogether, was characterised by some as neo-liberalism. One reason is the guarantee of competitiveness and the quality of service and the other is entrepreneurial incapacity shown in the past by the domestic private sector.

Another qualification attached to Venezuelan president is the claim that he is a populist, considering that in his speeches he addresses the distribution and the support to the demand and spending far more than production and wealth generation.

The first thing that has to be borne in mind here is the traditional concept of populism in literature: “A demand for the equality of political rights and a uni-versal participation of common people, though in a way mixed and united with a demand for authoritarianism, often carried out through a charismatic leader. Further, social demands have also a role to play (or at least the demand for social justice), along with strong defence of small ownership, with the national compo-nent being very prominent, as well as the negation of the significance of classes. This is all accompanied by acknowledging the rights of ordinary people who are opposed to the privileged interest groups generally considered to be clashing with the nation and common people. Depending on the prevalent social and cultural circumstances any of these elements can take the lead but it should be said that they are all present in the majority of populist movements.”17

On the other hand, the term “populism” is used to determine the following as a part of the neo-liberal discourse: “Policies regarded as irresponsible, adven-turous, inflationary, promoting social concessions that are incompatible with the iron set laws regulating the fiscal society. Those are fictitious regimes that would end up producing opposite effects: inflation would harm the power of pur-chase stemming from increased wages, fiscal misbalance would lead to financial crises that could hinder economic growth and bring it to a halt, rise of taxes and an increase in state expenses would weaken the investment capacity.”18

However, in the case of Venezuela some very generous and philanthropist social programmes, such as famous scholarships and family subsidies applied during the 90s, have been dispensed with. As from 2003 the government of Hugo Chavez Frias has been building its social policy through the programmes such as “Robinson mission” (a programme aimed at improving literacy levels),

17 E. Laclau, La razón populista, Fondo de Cultura Económica de Argentina SA, Buenos Aires, Argentina, 2005, pages 15-16

18 E. Sader, “El populismo: su más completa traducción”, Published in: EL Economista de Cuba, Online, No. 266, December 16th 2005. Also, January 23rd 2006: http://www.eleco-nomista.cubaweb.cu/2000/sumario2005.html, page 1



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“Mission Sucre” (Sucre – looking after high school students who failed to enrol at a university), “Ribar Mission” (intended for those without secondary school education), “Barrio Adentro Plan” (Barrio Adentro – constant medicinal servi-ces for the community), “Vuelvan Caras Mission” (Vuelvan Caras – assisting the unemployed), as well as public markets and many other initiatives that both look after the lower classes and provide security and stability to the upper classes.

In a country like Venezuela it used to be the state itself, being the biggest employer, who took care of the high unemployment rates by means of opening new working posts to a degree its income allowed. Nowadays, though the cir-cumstances remained the same, the practice has been discontinued but unem-ployment rates have still dropped.

Given these facts, it becomes difficult to qualify a government as populist when that same government has created conditions so that the country now has considerable international foreign currency reserves, is timely paying off its fore-ign debt, along with a constant increase in the health budget, housing issues and social care on the whole. It should be stated that the ratio between the public debt and gross domestic product in Venezuela has been reduced significantly.

We are all bearing witness to a social policy that has almost eradicated illi-teracy, including more than a million of children in primary schools and tho-usands of secondary school and university students; this government has also achieved that thousands of Venezuelans have had their cataract impaired eye-sight restored; thanks to its health programme it has managed to provide basic health care for millions, including the indigenous population who have reclai-med their rights, not only as a nation but also their political rights.

The practice other governments who aspire to fulfil their promises should be following is to enable the functioning of all the Bolivarian schools offering guaranteed education, health care, nutrition and recreation for their students; to secure stable and in line with wages pensions for pensioners; to follow the pattern of workers’ real wages getting progressively higher and entrepreneurs constantly increasing their profit margins.

Now Chavez is accused of being a populist as, in order for Venezuela to become a “more just and democratic” society, what has been “demanded” is the persecution and “radical breaking of relations with a disreputable and corrupt elite that has no political communication with a great majority of the population. That is, every progress called for a regime change. But in order to succeed in it, it was neces-sary to create a new collective actor of public character. There was no opportunity whatsoever for a progress without an ever-growing populist influence. In the case of Chavez all populist features are present: the same mobilisation of masses, con-stitution of a nation, ideological symbols around which this collective identity is formed (Bolivarianism), and finally, central role of a leader as a cohesion factor.”19 19 E. Laclau, “La deriva populista y la centroizquierda latinoamericana”, Revista Nueva Sociedad,

No. 205, September-October 2006; http://www.nuso.org/upload/articulos/3381_1.pdf, page 1



Finally, what certainly is true is that Chavez is a man in constant search for new ways. He is not dogmatic. In the beginning he was advocating the so called “third way” (Tercera Vía), and later talked of “capitalism in the form of a human”. I believe Chavez is a leader strongly convinced of pragmatism that is very characteristic of the present moment but, paradoxically, coloured with an ideology. There is a constant feature about Chavez: he was a follower of the ideas of Simón Bolívar and all the values of freedom, equality and inde-pendence which were championed and defended by the liberators, combined with the Christian faith values. Chavez has now embraced an anti-imperialistic position and is advocating the “XXI century socialism”. This is one of his quo-tations:” If we want to release our nation from poverty, misery and exploitation, if we aspire to contribute to the salvation of the life on our planet, let us change capitalism. There is no other way. Various mixed paths have been put on trial, paths “in between”, including the humane capitalism. It is a big farce: there is no such a thing as humane capitalism; the same would be to call the devil saint. The only way for our nation to pursue if we want to get out of the grave we were buried in centuries ago is to the way of socialism which is up to us to create here: socialism in Venezuelan way, suitable for the time in which we live.”20

The discussion about this proposal remains for a future essay, the only thing we can say here is that it is, both politically and academically, a proposal that is going to ignite various debates enriched by some lived through experiences and political models that are currently implemented, especially in Latin America.

3. Socio-economic reality of Venezuela

We have set out on a path of discovering our own, indigenous culture in order to create a free country in the 21st century, inhabited by free people,

a country where equality rules, for equality and freedom cannot be separated. If they are separated then deformities are generated that have been arising here

over the last years, and elsewhere in the world, in Africa and Asia, everywhere. “Bolivarian missions”, by Hugo Chavez Frias

More than any assessments that can be made or questions that are raised, which after all can spawn a never-ending debate, in this part of the paper the achieved results will talk for themselves. According to our criteria, we see the results not only as the best indicator of what is in reality going on in Venezuela today, but also as witnesses of the government’s successes. Accomplished results are of extreme importance for all parts of a society which either function in the name of these results and (or) depend on their application; they are far more important than any paradigms, theories and economic policy drafts and plans.

20 Ministerio de Comunicación e Información: ibidem, page 61



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Also, it has to be added that these results would be even more telling if there had not been for the coup d’etat in Venezuela on April 11th 2002 in which president Chavez was deposed for 47 hours, followed by a crisis that shook enterprises and an oil sabotage at the end of 2002 and the beginning of 2003; these are events that disturbed the fundamentals of the economic and social convalescent values.

Direct material expenses incurred by these events were enormous, estimated at between six and seven and a half billion American dollars, but still, indirect costs and their mid-term effects were even more serious.21

Economic situation got worse in several months and practically a new twist had to be made, generating a new reality that is the subject of the remaining part of the paper.

3.1. Institutional reforms

A process of political and institutional reforms was started in Venezuelan political system in 1999, with a view to expanding the scope and intensity of democratic practices in the country and within Venezuelan society. The men-tioned reforms included the creation of a new constitution that extended and enhanced civic rights and had its content updated, with special effort invested in involving a major part of the population who had been excluded from enjoying basic rights and public services throughout the history.

Venezuelan state was now defined as democratic and social, a stat of law and justice. Constitutional articles 5 and 6 introduce the concept of participative democracy and direct democracy mechanisms, as well as other ways of politi-cal participation, both within the section IV that relates to political rights and people’s referendum, and in the entire normative framework.

The new constitution, adopted in a people’s referendum on December 15th 1999, empowered people to recall everyone who was brought to power through the electorate’s wish once half their term has expired (Article 72). Apart from this, there was also an institution of a referendum with the aim of voting trust or mistrust.

Two new types of governance were introduced by this constitution. Apart from the classic, already known types, that is, executive, represented by Hugo Chavez Frias, president of the republic, judiciary, at the top of which was the Supreme court of justice, and legislative, manifested through he Natio-nal Assembly, there were two new types of governance introduced now: civic governance, comprising National Defence, a new institution, General Inspec-torate or National Ministry and Republican General Supervision Service, and

21 J. Torres López, Ed., Venezuela, a contracorriente. Los orígenes y las claves de la revolución bolivariana, Icaria editorial, s.a., Barcelona, Spain, 2006, page 75



electoral governance that was independent from others, given that this was an institution managed by political parties.

Apart from this, Carta Magna prescribes the indigenous population’s rights and treats the issue of human rights as an issue of supra-national importance.

Eight people’s referendums were held in Venezuela between 1999 and 2005. In 1999 a referendum was held with a view to people voicing their attitude towards the formation of the Constitutional Assembly; then later a referendum was held aimed at validating a new constitution. In the year 2000 all forms of governance, both old and new, were confirmed legitimate; the first presidential referendum was held on August 12th 2004 and on October 31st 2004 first regio-nal assemblies were constituted. Elections for municipal councils and parochial boards were held in August 2005 throughout the country, and on December 4th the elections were held for the National Assembly members, Latin-American Parliament and the Andean Parliament.

On December 3rd 2006 new presidential elections were held in Venezuela when a president was elected for a six-year term.

3.2. Current social policy

Institutional changes achieved in Venezuela served to generate an in-depth reform of the way of approaching the plan and the implementation of social policy that now perceives humans as dignified beings involved in social flows.

We are dealing here with an integral social policy aimed at the eradication of poverty through the process of universalisation and a transversal and integral performance of public policies and programmes intended to actively involve vul-nerable individuals and groups in social events and to make the society as a whole enjoy the highest degree of social involvement, justice and general happiness.

A model that reigned in Venezuela and other countries in the region for several years has thus been abandoned; the model was characterised by the pre-valent influence of economic factors and a pronounced aspiration to a macro-economic stability at all cost, but lacking any rigorous evaluation of potentially bad consequences that such measures could bring to the population and spoil in the process some important indicators that were relatively stable that far.

The new constitution aspires to achieve the indiscriminate involvement of all Venezuelans, along with the concept of an integral social policy that prioritises social rights irrespective of individual’ economic status and envisaged as basic human rights. Therefore, the following is demanded: education, health care, secu-red living space, all within a universal social security based on civic society prin-ciples rather than relations of privilege and inferiority and surpassing the concept according to which the satisfaction of social needs is merely an act of mercy or simple public aid, but rather seen as an inalienable right of all Venezuelans.



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On the top of everything, this is carried out within and aiming at a broad democratic political model, a genuine guarantee of political, economic and social rights of all social constituents, based on social representation and a broad policy, a real and effective democracy that moves and involves various social sectors that used to be excluded, all in order for them to start exercising their rights of representation and political involvement as active participants contributing to the effort towards achieving an even progress of the nation. To this affect, the National Assembly adopted Law on national councils in April 2006, with a view to promoting organised communities’ role in the “forma-tion, execution, control and evaluation” of public policies”.22

National government’s social goals were reinforced by carrying out of Missions comprising wide-range social programmes intended to guarantee health care access to the socially excluded through a participative health care management model (“Barrio Adentro”), then a mission dedicated to writing and reading skills (“Robinson I” mission – Misión Robinson I – for the duration of which a million and a half of Venezuelans were made literate in a year), one more to do with the continuation of primary education (“Robinson II” mission – Misión Robinson II), the termination of secondary education for citizens who never completed it (“Ribas” mission – Misión Ribas), guaranteeing the access to universities for all high school graduates who failed to enrol at a university and transforming the status of those excluded from the sub-system of university education (“Sukre” mission – Misión Sucre). By means of the last three missions opportunities for the continuation of education on all three levels (primary, secondary and university levels) were created for more than three million Vene-zuelans who had given up on education. Further, some other social objectives were the provision of basic necessities for the population of Venezuela, especi-ally those from deprived economic backgrounds (“Merkal” mission – Misión Mercal), the improvement of the living standards of Venezuelans through the involvement of the population in the process of the creation of their own means of sustenance (“Vuelvan Caras” mission – Misión Vuelvan Caras), the return of rights to the indigenous Indian population in line with the Constitution of the Bolivarian Republic of Venezuela (“Guaicaipuro” mission – Misión Guaicai-puro), the expansion of scientific and technological knowledge to all corners of the country (mission “Science” – Misión Ciencia), turning the culture into something of national significance that all social sectors could benefit from (mission “Culture – Misión Cultura), the expansion of a free health care system already developed in Cuba and Venezuela to the entire Latin America, in order to reduce the phenomenon of cataract (mission “Miracle” – Misión Milagros).

Whilst in this area of social policy it should be stated that education expen-ses amounted to 4.2% of the GNP in 2005; whilst in 1996 they stood at 2.2%; 22 Ministerio de Comunicación e Información: Ley de los Consejos Comunales, Colección

Textos Legislativos, Caracas, Venezuela, 2006, page 7



health care expenses reached 0.79% in 1996, and in 2005 1.70% of the GNP; a bit more than 1% of the GNP was allocated to the housing whilst science and technology were disbursed 2.1% of public spending.

Social expenses viewed against entire public spending have risen considera-bly, from 8.2% in 1998 to 13.2% of the GNP in 2005.

The infant mortality rates have dropped over the last seven years from 21,4 in 1998 to 16, 1 in 2005.

The United Nations Development Programme (UNDP) used the non-upda-ted data on the literacy and health care system in Venezuela from 2004 and pro-duced a Human Development Report on November 9th 2006 entitled “Beyond scarcity: power, poverty and the global water crisis” which shows a considera-ble progress in the Venezuelan human development the rates of which are the highest within a period of almost ten years and with the biggest growing ten-dency exhibited since 1975. The report also indicates a significant drop of poverty levels during 2004; however, this is not expressed through poverty index as such, according to which the situation has remained the same compared to 2003, but is rather manifested through a drastic reduction in the number of population who live on less than 1 or 2 American dollars a day; namely, the figures have dropped from 5.0% to 8.3% and from 32.0% to 27.6% respectively.

According to the report, Venezuelan human development index has gone up from 0.772 to 0.784, which places the country 72 on the world’s list led by Norway with the index of 0.965, whilst the best positioned Latin-American country is Argentina, ranked 36 with the HD index standing at 0.863.

Concerning the infant mortality rate index, the reduction trend can be said to have been sustained throughout the rule of President Chavez’ government. The cited report shows a reduction in the number of the dead per every tho-usand of the new-born from 18 to 16, which altogether amounts to nearly two thousand children saved from death. However, the UNDP used the data from 1999 and 2000 when calculating the education index, along with the literacy rate that stood at the time at 93% and was valid till 2001, thus not reflecting at all the successes of the “Robinson” mission which were acknowledged by the very UNESCO on the occasion of proclaiming Venezuela a country without illite-racy. Though data presented by the UNDP bear witness merely to the Bolivarian government’s achievements up till 2004, when the country was still recovering from the oil sabotage that had led it to the brink of an economic and institutio-nal downfall, Venezuelan human development and poverty eradication can be said to have been progressing in a sustainable manner.

The implementation of such social policy is going to be fully continued of Venezuela throughout 2007. According to the 2007 budget, social requirements are considered to be allocated up to 45% of public income, which is a truly histo-ric figure and not only in Venezuela. Besides, this figure serves to prove what the real orientation of Hugo Chavez Frias’ government is, that is, social priorities.



82

This figure, above all, is a strong counter-argument against those who are still of the opinion there is not such a thing as current social policy in Venezuela.

If there is anything indubitable and clear in the results achieved by the government of Hugo Chavez Frias then it is the fact that social strata invisible in the past are now starting to be noticed.

3.3. Macroeconomic indicators

Venezuelan economy has made significant strides since 2004. The GNP exceeded 130 bn dollars in 2005, the GNP per capita exceeded 6 000 dollars, which is still quite low but showing signs of recovery in the years to come; on the other hand, the GNP growth rate was 9.4 in 2005, thus proving the sustai-nability of the growth supported additionally by a high level of economic acti-vities in the non-oil private sector and accentuating the growth of the manu-facturing sector by 8.7%, trade and servicing by 19.9%, construction sector by 20.1% and communication sector by 15.9%.23

The GNP growth rate was around 9% in 2004 and all currently available data are leading towards a conclusion that Venezuelan economy will be pro-gressing till the end of the decade at the sustainable annual growth rate of more than 5% of the GNP.

Inflation rate is still high, though showing undoubted tendencies to decrea-sing. In 2004 it reached 17%, in 2005 dropped to 15%, whilst in 2006 it stood at around 14%. The unemployment rate was 11% in 2005 and till the end of 2006 the figure dropped to a single digit, owing to the efficiency of the government-led policy and an increase in the number of private job openings.

International reserves are already exceeding 35 bn American dollars and foreign debt comes to around 27 bn, a bit more than 20% of the GNP, which is altogether a favourable ratio compared to other countries with similar living conditions and characteristics as in Venezuela.

State risk is currently at its lowest level, never before achieved in the history of Venezuela. An average price for a barrel of oil reached more than 50 dollars in 2006, which by far exceeded any budget-related calculations.

In a Daily Ultimas Noticias from Sunday, November 12th 2006, in his column “The Sundays of Diaz Rangel”, a journalist Eleazar Diaz Rangel puts forward information on some economic indicators that we are listing here due to their importance:

“Active assets in commercial banks totalled at 124.31 billion of Bolivars in September, which is 48.22 billion more than in the same period last year, reflecting a 63.4% increase, all based on a study Aristimuсo Herrera & Asociados. As never before, profits reaching 1.163 billion dollars were accumulated till September.

23 Banco Central de Venezuela, 2005



According to a f lash opinion poll conducted by Conindustria, economic growth is estimated at 7.3%, and at 6.0% in 2007; the growth in the industrial sector reached 5.8%, and 3.8% in 2007, and the use of capacities rose to 61.0% against 58.15% in the first term.

Real estate and construction sectors are going through a favourable patch, given that rise of 7.7% and 23.0% has been recorded over the last two years res-pectively.

Auto motor association reports a rise in new car sales in October (36,527) by 54.48% compared to the same month in 2005 and by 9.41% compared to Sep-tember (33,384). According to a research conducted by Consecomercio the trade has gone up this year by 35.2% – “68% of the polled enterprises revealed that the elections had had positive effects on sales”.

A research conducted by ACNelsen shows that sales in supermarkets have risen to the total of 30%. Figures relating to broad consumption show a rise from 15% in 2005 to 29%, whilst nutritional products sales have been doubled from 14% to 28%.

In its global economic publication for the year 2007 Le Nouvel Observateur exhibits a list of countries leading the global growth processes; Venezuela ranks 30 in its contribution to the growth and is surpassed only by Brazil, Argentina and Mexico from the South-American region. Venezuela is at the same level with Norway, Finland and Austria (featuring a growth rate of 7.4%), exceeded only by China (9.6%), Argentina (7.7%) and India (7.5%).”

The reality cannot be hidden and these data speak for themselves.

4. Conclusion

There are two groups of opinions concerning the economic policy of Hugo Chavez Frias, president of the Republic of Venezuela since October 1999. However, all the opinions are marked by the identification of Chavez’ economic policy with his personality. Some argue that Chavez is linked to the values characteristic of the Western democracy, especially the United States, whilst others claim just the opposite, hailing Chavez as a personality who offers hope to the vulnerable not only in Venezuela but in many other world’s nations, especially Latin America.

In this paper we endeavoured to overrule both schools of thought seeing Hugo Chavez Frias as either neo-liberal, communist or populist; I dare say we have succeeded in doing so-what is certain is that we deal here with a man who surpasses all these qualifications and is essentially deeply democratic, thus denying numerous contradictory allegations; he is solid and serious in his public addresses, an indubitable leader in Venezuela and elsewhere, absolutely responsible and charismatic, which is admitted even by his opponents. It is difficult to differentiate between his public and personal life, he is people’s



84

man and a man certainly born to be in power, but not for his personal benefit but rather in order to serve to those who were forgotten, both nationally and globally.

Chavez’ government’s results speak volumes about his democratic perso-nality. By objectively analysing the results of the economic and social policy accompanied by a transformation of Venezuelan socio-economic system we have shown in the paper to what great extent Venezuela has progressed in all these fields. The figures are telling enough.

Venezuela is really becoming a showcase, a revolutionary experiment that can serve as an unpretentious model for other countries, that is, an example for other world’s nations.

Our intention was not to make these contemplations a paradigm, they are more of an analysis and an interpretation given by someone who has certain insight into the current situation and the state in which Venezuela finds itself, with all its limitations, faults and successes.

5. Annexes

Graph and Table 1: Growth rate of the real GDP (%) (1997=100)

Year Variation in percentage1998/97 0.3%1999/98 -6.0%2000/99 3.7%2001/00 3.4%2002/01 -8.9%2003/02 -7.7%2004/03 17.9%2005/04 9.3%

Source: Central Bank of Venezuela, President’s end of year address, December 2005, page 30; http://www.bcv.org.ve/excel/7_1_7.xls?id=342Note: In the first half of 2006 the growth exceeded 9%.

3.4%0.3%

3.7%

9.3%

17.9%

-7.7%-8.9%

-0.6%

1998/97 1999/98 2000/99 2001/00 2002/01 2003/02 2004/03 2005/04



Table 2: International reserves and foreign public debt (1998-2005, in millions of US dollars)

Date TOTAL RESERVES(Millions of dollars) FOREIGN PUBLIC DEBT

December 31st 1998 14,849 23,438

December 31st 1999 15,379 22,815

December 29th 2000 20,471 21,980

December 31st 2001 18,523 22,589

December 31st 2002 14,860 22,525

December 31st 2003 21,366 24,841

December 31st 2004 24,208 27,477

December 30th 2005 30,368 27,664

November 9th 2006 (*) 35,201 26,265

(*) Rough figuresSource: Central Bank of Venezuela; http://www.bcv.org.ve/excel/2_1_1.xls?id=28

Table 3: Interest rates (1998-2005)Period Active transactions Deposits within a 90-day deadline

1998 45.21 38.02

1999 31.89 18.90

2000 23.91 14.80

2001 25.64 14.13

2002 37.08 28.29

2003 24.05 17.58

2004 17.06 12.93

2005 15.36 11.74

October 2006 14.18 10.03

Source: Central Bank of Venezuela; http://www.bcv.org.ve/excel/1_2_15.xls?id=31



86Graph 2: Monetary liquidity (1998-2005), in billions of Bolivar’s

Source: Central Bank of Venezuela; http://www.bcv.org.ve/excel/1_2_1.xls. Recorded on the day of October 27th 2006

Graph 3: GDP for the year 2004 based on a UNDP report on human development in 2006 (GDP per capita, in dollars)

Source: UNDP report 2006Note: GDP per capita has significantly increased in Venezuela since 2004 when the report was produced

10,423,01412,794,225

16,623,762 16,995,89019,638,250

30,993,636

45,839,682

69,858,369

98,796,470

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

1998 1999 2000 2001 2002 2003 2004 2005 2006

$10,874

$6,043

$13,298$9,421$8,195

$6,552$5,678

$7,256$3,963

$4,813

$4,439$2,720

:VenezuelaArgentina

UruguayBrasil

SurinamPerú

ColombiaEcuadorParaguayGuyjana

Bolivia


Professor Franklin González, PhD 87Table 4: Inflation

Year

Variations in %

1994 70.8%1995 56.6%1996 103.2%1997 37.8%1998 29.9%1999 20.0%2000 10.4%2001 12.3%2002 31.2%2003 27.1%2004 19.4%2005 13.6%

Source: Central Bank of Venezuela, Annual report, 2005Note: Accumulated inflation in July 2006 stood at 8.1%, and annual rate was 13.15%.

Graph 4: Human development indices

Source: National Statistics Institute of Venezuela Note: Figures showing the scope of human development ranged between 0 and 1. High degree of human development is marked by values between 0.800 and 1. Medium human development has values between 0.500 and 0.799 attached to it. Low human development figures cover the range between 0 and 0.499, including the last digit.

0.6917

0.8144

0.73700.7512

0.7796

0.7704

0.8015

0.7648

0.62000.64000.66000.68000.70000.72000.74000.76000.78000.80000.82000.8400

1998 1999 2000 2001 2002 2003 2004 2005



88Graph 5: Social spending (in millions of bolivars)

Source: Integrated system of social indicators in Venezuela (SISOV), Ministry of planning, November 2006

Table 7: Public spending in percentages of GDP Year

Percentage

1996 7.31997 9.81998 8.2199 9.4

2000 11.02001 12.12002 11.22003 12.12004 12.12005 13.2


0.00

5,000,000.00

10,000,000.00

15,000,000.00

20,000,000.00

25,000,000.00

30,000,000.00

35,000,000.00

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005


Professor Franklin González, PhD 89Table 8: Public spending for education in percentages of GDP

Year

Percentage

1996 2.21997 3.61998 3.41999 4.12000 4.52001 4.82002 4.82003 4.62004 4.92005 4.2

Source: Integrated system of social indicators in Venezuela (SISOV), Ministry of planning, November 2006.

Table 9: Public spending for health care system in percentages of GDPYear

Percentage

1996 0.791997 1.481998 1.361999 1.462000 1.372001 1.532002 1.652003 1.522004 1.612005 1.70




90

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