Reprinted from Caribbean Net News
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Ideology trumps profits in Venezuela's revolution

Wednesday, February 7, 2007

by: Christian Oliver

CARACAS, Venezuela (Reuters): "Fish lay eggs, don't they?" Venezuelan President Hugo Chavez asked Mary Quintero, a student at an agricultural collective who had just reached the half-way point of her course on fish-processing.

She was stumped. The first half of her course had focused on the doctrines of socialism and had not mentioned fish, pregnant or otherwise.

During a television show last month, Chavez grilled workers at several socialist projects that are meant to be the bedrock of the OPEC nation's new economy. Many politicians would have blushed at the results.

Some workers were studying to grow medicinal herbs for which there was no suitable soil in the region. One admitted the trucks promised to a coffee plantation would not be able to negotiate most of farm's pot-holed roads.

But Chavez was undaunted, seeing the principle of the socialist collective as far more important than profits.

"Can you assure us all the resources here are being invested in furthering the path of 21st century socialism and not bolstering capitalism and perversion?" he asked a collective director. She agreed socialism was on course.

MAINSTREAM ECONOMY

This anti-capitalist ideology is now reaching into mainstream sectors of the economy, not just fish roe, aloe vera and coffee beans.

Chavez is pressing ahead with an intensive program of nationalizations, targeting foreign investors as he takes over oil and gas fields, giant cattle ranches, power utilities and Venezuela's No. 1 telecommunications firm.

Business and opposition leaders say he is ruining the economy. Washington paints Chavez as an authoritarian leader who is threatening democracy in Latin America and whose nationalizations will be an economic failure.

"The economy cannot be bossed about and does not respond to whims. It rebels against barrack-room orders," opposition pollster Luis Vicente Leon wrote in an editorial in the El Universal daily, picking up on Chavez's military roots.

Some Wall Street investors believe Chavez will be forced to soften his policies and cut back popular handouts to the poor as international oil prices ease and the economy weakens.

The inflation rate is now above 18 percent, food prices have surged 31 percent in the last year, shops are reporting shortages in basic foodstuffs, and the currency is trading at more than twice the official rate.

But Chavez is not easily dissuaded and he cites high growth, which the central bank has estimated at 10.3 percent for last year, as a sign his socialist revolution is working.

He has also proved in the past that he sticks to his guns even when faced with economic problems.

Locked in a political battle with the striking oil industry, Chavez watched the economy contract by 8.9 percent in 2002 and then 7.7 percent in 2003 but didn't back down.

"The view in the market is that Chavez has lived up to the repercussions of what he does. Not only did he stare down the strikers in 2002-2003 but he has devalued the currency," said Christian Stracke, Latin America specialist at CreditSights.

Chavez defends gutting the state oil company of its managers and many of its specialists in 2003 by saying they were effectively attempting a coup. He was willing to accept the production gremlins their departure caused.

OPEC pegged Venezuela crude output at about 3 million barrels per day (bpd) before the strike. Most analysts reckon Venezuela is now straining to pump about 2.6 million bpd.

BIT BETWEEN HIS TEETH

Nationalizations are only part of a radical program Chavez has launched since winning landslide reelection in December.

He has won powers to rule by decree, wants a single governing party and seeks an end to presidential term limits.

"He has the bit between his teeth and feels very confident. He is going to plow ahead," said Michael Shifter, Latin America analyst at the Inter-American Dialogue think-tank. "But he may have to pull back if there are obvious failures."

Leon also believes Chavez will have to rein in his post-electoral enthusiasm when he wakes up to the damage his reforms are doing.

"It will not be easy for Chavez to affect the production of the private sector without compromising his room for maneuver, and when he finally understands that, I do not think he is going to commit hara-kiri," he said.

Critics have said Venezuela's repeated calls for an OPEC output cut to push up prices shows nervousness about income.

Stracke disagrees, saying Chavez will easily keep his firm support among Venezuela's poor, particularly with local crude at $48, and that the handouts central to his popularity are one of the easiest parts of the budget to maintain.

"It is just a small percentage of GDP. He has done a good job of avoiding budget promises that could bring the government to its knees. If oil goes to $20 (a barrel), there could be subsidy problems but free-lunch operations are very inexpensive."

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