Venezuela: A Country Report

The Inevitable Revolution: How Venezuela’s History Fashioned the “Bolivarian Revolution” of Hugo Chavez

By Brennan C. Full

Introduction

Venezuela serves as a testament to the power of oil and the subsequent authority afforded to the international industry it spawned.  The influence of this specific commodity far exceeds the financial realm, expanding into every minutia of society, shaping national psychology and identity.  From decades of foreign control to oil revenues funding social reform, the relationship between the people of Venezuela and oil has been in constant flux.  In order to truly understand Venezuela and its current socio-political atmosphere one must become acquainted with how oil shaped the politics of the past therefore irrevocably influencing the culture of today.

The country’s current president, Hugo Chavez (elected 1999) is one of the most recognizable political figures in the world.  Chavez has captivated millions within his country, touting anti-Western slogans and declaring the inception of the “Bolivarian Revolution.”  Chavez has placed the nationalized oil company, Petroleos de Venezuela S.A. (PdVSA), firmly under the government’s control purportedly using petrodollars to fund widespread social reform.  This paper aims to frame Chavez’s rise to power as the logical progression of a nation that has experienced years of subjugation to Western hegemony.

 To contextualize our analysis of Venezuela’s current political environment we will very briefly look at Venezuela’s early history, focusing on the beginning of commercial production of oil.  We will discuss the pitfalls of the petro-state and in-turn come to understand how both Venezuela’s history and present day have been dictated by petroleum.  We will examine how this precious commodity came to shape the culture and politics of the nation and how Hugo Chavez’s administration plans to mobilize oil revenues to lift millions out of poverty.

Venezuela the Petro-State: Foreign Influence and Opacity

 There is, without a doubt a very distinct “nature” to oil producing countries.  Their histories are often plagued with decades long oppressive dictatorships, armed internal conflicts, and seemingly inescapable cycles of poverty.  How is it possible that countries possessing the most desirable and necessary natural resource on earth continuously place on the “Failed State Index?”  Of the 12 member states of OPEC, 3 fell within the top 35 (“alert” ranking) of the Failed State Index for 2011.  More than half of the member states ranked within the top 100 (“warning” ranking) with Venezuela placing 80th.  This index, measuring a state’s vulnerability to social unrest, economic decline, and political upheaval illustrates what many academics refer to as the “resource curse” (Fund for Peace: 2011).

 The technologically intensive production of oil combined with the West’s long history of ever increasing consumption leads to the root of the issues petro-states face.  Specifically, Venezuela’s history of oppressive regimes and stagnating development dates back to the turn of the century when oil was first discovered.  Early 20th century Venezuela was governed by the ruthless Juan Vicente Gomez whom neglected to envision oil production as a domestic industry.  Instead, under Gomez’s rule Venezuela was established as a regulatory “no man’s land,” granting foreign companies free range to the vast oil reserves contained within the country’s subsoil (Betancourt: 1979).

 Gomez’s reign began with huge swaths of land being auctioned off to foreign oil companies.  In 1909 the first oil exploration and production concession was issued by the Venezuelan government to an American company.  This 30-year concession, like many of the period, was incredibly favorable to the interests of the foreign company.  The contract, which required that the company buy Bs. 120,000 in Government bonds and a pay a meager 5% royalty tax allowed the company free reign over much of the Lake Maracaibo region.  News of the favorable conditions led to a sudden influx of foreign companies pressing to gain similar concessions (Betancourt: 1979).

In conjunction with the scramble for concessions came a number of reforms made to better serve the interests of the international oil companies (IOCs).  In June of 1912 several representatives from various IOCs met with government officials claiming that articles 40 and 42 of the Venezuelan Mining Code were “unconstitutional.”  These articles laid provisions for profit sharing between those harvesting resources from the sub-soil and the owner of the “surface land.”  Under these articles 33.3% of all products excavated belonged to the owner of the “surface rights.”  The subsequent amending of articles 40 & 42 furthered the power of both the state and foreign companies by removing the Venezuelan people from debate over concessions (Betancourt: 1979).

 Over the years, foreign company’s influence continued to grow as bribery or “loosening of purse strings” became business as usual for government officials.  In order to maintain some semblance of order, it became necessary for Venezuela to formulate Oil Laws.  According to a 1939 article by Clarence Horn in Fortune Magazine, “Gomez called the company managers and told them: ‘You know about oil.  You write the laws.  We are amateurs in this area.’”  A New York lawyer drafted the law that remained in place for many years.  Any hope for more equal distribution of wealth or policies that even considered the interests of the Venezuelan people were squandered (Betancourt: 1979).

 Venezuela’s early history reveals virtually no evidence of domestic control over the oil industry.  People were kept in the dark as to the amount of money the government was collecting from land concessions, bribes or rents.  There was no public debate during Gomez’s reign to decide how oil money was to be spent and all opposition was brutally oppressed.  It is within this history of foreign control and easily bought off government that symptoms of what ails many petro-states present themselves. This characterized the years under an oppressive regime, fueled by foreign money and susceptive to foreign influence.

 The “Dependency Theory” of the 1950s delineates that historically, the situation of countries developing in the 20th century differ drastically from those that developed in the 1800s.  The developing nations of the past were not competing in a technologically advanced, industrialized, global economy.  These contextual differences go beyond solely effecting economic development and expand into the realm of politics.  This theory proves especially enlightening when looking to further an understanding Venezuela’s enduring fiscal opacity.

 Terry Lynn Karl articulates in the essay “Ensuring Fairness: The Case for a Transparent Fiscal Social Contract” that the supposed “resource curse” faced by many petro-states are more so an amalgamation of political issues than economic deficiencies.  The author draws heavily upon Dependency Theory without explicitly naming it.  Karl places heavy emphasis on the important role taxation played in the development of European nation-states.  Karl argues that without taxation there is little incentive for governments to practice transparency concerning revenues and budgets.  The author goes further to imply that without taxation there is little reason for the public to be concerned with government expenditures (Humphreys: c2007).

 This erudite essay explores the differences in the nation building processes of the 19th century compared to those of the 20th.  Karl explains that the struggles of the developing European state primarily concerned territorial disputes.  These violent clashes between countries required taxation in order to fund protective measures, commencing an agreeable culture of taxation and transparency.  Conversely, Karl points out that within petro-states the establishment of the state typically coincided with an influx of foreign influence and money chasing after the valuable resource.  As mentioned before, early Venezuelan government was steeped in bribes and enjoyed the steady income from the oil industry.  Through the country’s history there has been no need for the government to tax civilians due to oil revenues.  Furthermore, to commence a policy of taxation within a country experiencing acute poverty would undoubtedly create political upheaval and further economic stagnation (Humphreys: c2007).

The amending of articles 40 & 42 of the Mining Code, along with the drafting of Oil Laws set the precedence that foreigners no longer needed to negotiate with the Venezuelan people (Betancourt:1979).  This combined with the government’s lack of accountability cleaved Venezuela into two, establishing what many referred to as the “Magical State.”  This phrase refers to a dichotomy present within Venezuela’s national psychology.  Many Venezuelan’s perceived the country as divided into two bodies, the “social body” made up of the Venezuelan citizens and the “natural body” comprised of oil and the incredible wealth it yields. (Coronil: 1997)  This national bifurcation mobilized the political ideal of late 70s known as “sembrar el petroleo” (“sow the oil”).  “Sow the oil” refers to a utopia in which the two “bodies” of the country become unified to establish a symbiotic relationship, an ideal that marks a significant turning point in Venezuela’s politics.  A long history of both foreign influence and ever expanding corruption set the stage for the “revolution” taking place today.

“Endogenous Development”

 Hugo Chavez’s presidency is often associated with two principles: empowering the nation’s marginalized people and staving off Western hegemony.  These convictions mobilized much of Venezuela to bring Chavez to power in 1998 and have helped him remain (more or less) for over a decade.  The admiration that Chavez has conjured and maintained throughout the decade comes as no surprise if one understands the country’s history composed of decades of subservience to foreign oil companies.  Chavez embodies the archetype of the “good revolutionary,” (Santiso: 2007) never ceasing to decry the West while always glorifying his “Bolivarian Revolution.”

 Prior to Chavez the nationalized oil company, PdVSA was referred to as a “state within a state.”  This phrase articulates the company’s maintained autonomy even after nationalization in 1976.  The company’s operations were controlled by a select group of managerial elites, most of which received their training abroad.  Early in Chavez’s presidency, massive strikes broke out within the oil industry.  The “oil lockout” as it came to be known was organized by opposition groups looking to take Chavez out of power.  Once the strikes unraveled the government took firm control of the company.  40% of the company’s employees were fired and Rafael Ramirez was named president of PdVSA.  Placing the oil behemoth firmly within the state’s control was crucial to funding Venezuela’s “endogenous development,” or internally stimulated development.  Chavez looks to achieve this through allocating large amounts of PdVSA’s revenues to fund social reform programs, or “Social Missions.”  Before Chavez, Venezuela saw no viable means of using oil profits to alleviate poverty or raise the standard of living throughout the country.  Whether or not one agrees with Chavez, Venezuela’s Social Missions have produced measurable positive results (Raby: 2006) (Wilpert: 2007).

PdVSA Funded Missions

 The Social Missions implemented by Chavez are a series of social justice, welfare, health care, and educational programs aimed at poverty alleviation throughout the country.  The various Social Missions have built schools, homes, and medical clinics primarily in impoverished parts of the country.  Today there are more than 15 different Social Missions functioning throughout the country.  Of these Social Missions, seven (Ribas, Sucre, Vuelvan Caras, Barrio Adentro, Mercal, Identity, Guaipaipuro) are specifically named by PdVSA as being directly supported by the company (PdVSA: 2011).  The thinking behind PdVSA run Social Missions is to circumvent the labyrinth of government institutions to allow money to more directly reach the programs quickly and efficiently.  As to whether or not this is the most efficient means of managing funds will be addressed later on.  In order to get a sense for how these missions impact development we will focus on the Social Missions that are directly concerned with an aspect of the UN’s Millennium Development Goals.

 The Ribas Mission is an educational program that was established in 2003.  The Mission’s motto “Winning is Vital” looks to further the education of adults who were unable to complete secondary education previously.  Through a partnership between PdVSA and the Ministry of Energy and Petroleum this mission has “incorporated” 718,309 “winners” (www.pdvsa.com).  This very abstract language is pervasive on PdVSA’s official website making the reading of “official data” difficult and virtually useless.

Sucre Mission is another educational program that addresses people’s desire to attend university.  The mission created the Bolivarian University of Venezuela (UBV) which is housed in the former offices of PdVSA’s management.  PdVSA is currently building a campus for the UBV and is paying for scholarships (www.pdvsa.com).

In order to train Venezuela’s future workforce the Vuelvan Caras Mission was designed.  The mission provides both youths and adults with technical job training as well as skills necessary to create functioning service cooperatives.  PdVSA sites that the strategy being implemented by the Vuelvan Caras Mission has resulted in a decline in unemployment by more than 2%, no dates included or data from previous years divulged (www.pdvsa.com).

 One of the most well known missions is the Barrio Adentro Mission which works to increase access to health care services throughout the country.  This service is utilized heavily in the country as low income families not need to pay for medical services.  In 2003 alone, Barrio Adentro performed 9,116,112 “patient consultations” (Castro, 2008).  This specific mission would not be possible without a cooperation treaty between Venezuela and Cuba.  Cuba receives oil from Venezuela at a very low cost in exchange for doctors being sent to Venezuela to aide in the implementation of this Mission (www.pdvsa.com).

Mercal Mission focuses on nutrition and food access for low income families.  The program provides subsidies to make food items less expensive and in cases of extreme poverty food is free.  According to PdVSA’s website the Mercal Mission “has reached” 75% of the country’s poor (www.pdvsa.com).  Again, no more information is available and the link to Mercal Mission’s dedicated website is broken.

The last Social Mission that pertains to the MDGs is the Guaipaipuro Mission which addresses a wide range of issues.  The primarily focus of Guaipaipuro is the preservation of the rights of indigenous people.  Within this framework the Social Mission “guarantees” that the agricultural needs of indigenous people are met (www.pdvsa.com).

Measuring Results

Reading the incredibly vague language used to describe the various Social Missions on the PdVSA website does little for someone looking to measure their efficacy and sustainability.  However, after months of research it became quite clear that information pertaining to government revenues, budgets, or exact amounts allocated to the different Social Missions is nowhere to be found.  It is difficult to ascertain whether the lack of data is due to insufficient monitoring and evaluation systems or whether the government is purposely withholding.  Either way, the complete lack of data is quite worrisome for anyone with a basic knowledge of program implementation in which data is crucial to ensuring the highest level of productivity and efficiency.

Without credible data explaining the number of people receiving services, the cost of said services or even the locations of where Social Missions are taking place one must resort to observing overall trends.  Given the fact that most of the Social Missions aim to alleviate poverty, one might begin looking by looking at the overall poverty headcount trends. As we can see, poverty levels fluctuated between 1997 and 2003 (World Bank: 2011). However, the peak occurring in 2003 coincides with the first Social Missions being implemented.  After 2003, when missions have become more established we can steady a drastic decline in overall poverty from 62.1% to 29% (World Bank: 2011).  Furthermore, we can observe a decline in the unemployment of the total labor force (World Bank: 2011).

Barrio Adentro Mission which purportedly brought about drastic changes within Venezuela with millions of low income families receiving inexpensive or free medical consultation. The impact of health services can not easily be captured within the limited data set provided by the World Bank (or any institution for that matter).  Again, we see that 2003 proves to be a turning point within the data we do have access to. Health Expenditures almost quadrupled between 2003 and 2009 (World Bank: 2011). This increase in expenditures can be linked to the decline or stagnation of the infant mortality rate (World Bank: 2011).

Again, limited by information actually being disseminated it difficult to ascertain if these declines in poverty, unemployment, and infant mortality rate are a direct result of the Social Missions.  However it is fair to assume that these missions are bringing about some positive change within Venezuela.  This can be assumed given Chavez’s long lasting political support especially that coming from the nation’s most impoverished.

Within more general indexes such as “likelihood” to achieve Millennium Development Goals as well as the GINI index it is clear that Venezuela under Chavez is making great improvements.  Venezuela has seen a markable decline in the GINI index from 50 in 1998 (World Bank) to 41 in 2009 meaning inequality is in decline throughout the country (CIA: World Fact Book).  Of the 8 MDGs Venezuela is “very likely” to achieve of the four of the goals and “possible to achieve if some changes are made” two additional goals.  The goals that Venezuelan is likely to achieve are very closely linked to the Social Missions described above.  The goals to “achieve universal primary education,” to “promote gender equality and empower women” as well as “ensure environmental sustainability” are all likely to be achieved by 2015.  Goals pertaining to education and equality can be linked to the Sucre and Ribas Missions.  It is possible for Venezuela to reach its goals for improving maternal health as well as combatting HIV/AIDS and the spread of other diseases, two issues that are directly addresses by Barrio Adentro Mission (MDG Monitor: 2011).

Conclusion

Venezuela, historically speaking, is not unlike many of the petro-states of the world.  She has endured oppressive dictators, political suffocation, and widespread corruption.  It is within the 21st-century that we see Venezuela change drastically from the other major oil producers throughout the world.  This change can be contributed to the political, cultural, and economic shifts brought on by Hugo Chavez.

Working within the primary difficulties faced by petro-states, namely, foreign control and lack of government transparency we can see that Chavez is making drastic progress against on these issues.  Chavez has always, and will remain, vehemently against Western-centric foreign policy.  This is becoming abundantly clear as Chavez fosters strong alliances with some of the West’s gravest enemies, Iran and Cuba.

By firmly taking PdVSA under the government’s control Chavez has effectively ruled out the possibility of foreign intervention within the industry.  This true nationalization, paired with “sow the oil” mentality provides hope for the country.  As illustrated above one can see that progress is being made in Venezuela, people are becoming healthier and better educated.  The endogenous development of Venezuela “appears” to be working.

However, to truly mark the efficacy of the Social Missions, to rule which ones are effecting positive change and which are squandering money requires more government transparency.  Oil is not an unlimited resource and prices are known to fluctuate drastically within a years time.  If Chavez’s “Bolivarian Revolution” plans grow and sustain drastic fluctuations in funding there must be a divulging of information and an establishment of transparent fiscal management.

If Venezuela can maintain its current global political position  and establish a “transparent social fiscal contract” it is very likely that Venezuela will see drastic declines in inequality, and more efficient political institutions.  Chavez’s Venezuela is undoubtedly revolutionary, the country’s take on “endogenous development” proves to be a viable option for all resource rich countries throughout the world.

“Si he robado algún dinero del erario nacional, entonces que se me quemen las manos.” –Rómulo Betancourt

Corruption in Venezuela 101: The Basics for Understanding the Phenomenon

By Aileen Almanzar 

 For Venezuelans, a conversation about corruption is as normal as eating a reina pepiada. Few can say that it has not affected their life in some way or another, considering that corruption has permeated deeply into society. Whether paying a policeman a couple hundred bolívares at a checkpoint just outside of Caracas, or watching socialism-touting Chavistas drive around the 23 de Enero parish in their red Hummers, Venezuelans everywhere agree that corruption has become a blatant reality—una realidad descarada. As the most corrupt country in Latin America, according to Transparency International’s 2011 Corruption Perception Index, Venezuela houses some of the most shockingly boldfaced corruption scandals of the hemisphere, affecting not just the country’s internal affairs but also those of the others in the region. What has led to this persistent corruption? How has it affected the way Venezuela functions? Why has it continued to the extent that it has? These are some of the questions I intend on exploring throughout this report.

In order for us to begin formulating solution-finding dialogue, we need to understand the complex dynamics of how corruption has taken such a root in Venezuelan society. We need to look at the historical components, but also the economic, political and social ones, since again, this is a highly societal issue. Because of this, I argue that public complicity must be taken into account just as much as government affairs, since it is both society and state which perpetuate this culture of corruption. First, I define corruption in general terms, then operationalize it for the specific case of Venezuela, because it is important to create a context that clarifies the issue that we are exploring. Second, I will briefly discuss the history of corruption in Venezuela, mentioning the political and economic factors that allowed for its rampant spread. I also point to the structural and social factors that have helped consolidate the presence of corruption.  Third, I will explore the kinds of corruption (grand, bureaucratic, systemic) that are present in Venezuela, giving illustrative examples of each type. Fourth, I will analyze the ways in which corruption has affected Venezuelan society, at an economic, political, and social level. Finally, I look towards the future, considering what is currently being done to fight corruption, and how viable (and credible to the public) this is to actually decrease its presence and influence.

What is Corruption?

Transparency International defines corruption in its broadest sense as the abuse of entrusted power for private gain (CPI 2011). More specifically, government corruption involves the ethical erosion and violation of the public interest for personal or partisan gain, including the use and abuse of political power to consolidate higher status or material wealth (Coronel, 2006). The climate of Venezuela’s political economy in the last forty years (neoliberal shocks, massive oil revenues, social welfare pressures, etc.) has shaped corruption to be defined as 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. It becomes easy to consider the magnitude and ramifications of the Venezuelan definition for corruption if we look at the realities of the country—huge petroleum profits, high demand for imports, extremely stratified society, and widespread poverty. These factors will be discussed in greater detail in the next section so that we can better understand the significance and scope of corruption in Venezuela.

History of Corruption in Venezuela

Before considering the developments that have supported the flourishing of corrupt activities, it is necessary to establish their historical-structural component. First, corruption maintains a constant presence throughout the historical timeline; second, it is a wide-reaching and meaningful social occurrence; third, it transcends society beyond quantitative indicators. Corruption has undoubtedly been present in Venezuela throughout its history—since the times of colonization, its independence, through dozens of military dictatorships, up until the present day socialist revolution. In fact, Simon Bolivar, the country’s great liberator, addressed the issue very early in the formation of the republic, declaring that any official that engages in corruption should be given the death penalty. The following excerpt of José Domingo Díaz’s memoirs characterize the republic’s early activities, describing the year of 1811, when the Congress was installed:

“During the initial days of Congress’ installation, massive public parties organized by the government took place. It suffices to say that 5000 pesos Fuertes were appropriated simply for decoration and ornaments. These lavish engagements and illegitimate spending made four million pesos Fuertes disappear by the end of the year. Irregularities in public administration were persistent throughout these years, particularly in customs and in those organisms designed to control and restrict contraband, which was considered a symbol of wealth and prestige.” (Carpio, 2011).

Corruption was still present by the time military dictators got a hold of the government, and most of it reflected the hacienda-style relationship between the state and civil society. However, many scholars say that this time of military authoritarianism saw decreased amounts of corruption, since power was more centralized and fewer people had access to decision-making and economic transactions (Coronel, 2006). Gustavo Coronel, an official of PdVSA in the seventies and now ardently anti-Chavez, particularly points out democracy as a factor that spurred the spread of corruption, because larger sectors of the population now had access to these processes. However, I argue that it is not necessarily “democratization” per se; I would rather consider it the “massification” of corruption, since the former falsely suggests that it is democracy as a form of government what is causing this phenomenon. I instead say it is the massification of corruption simply because incidents became more numerous, and the socioeconomic condition of the seventies brought these very close to the every day lives of private citizens.

The explosion of oil wealth can characterize the seventies in Venezuela, as international events made its oil ever more valuable and popular. Economic growth was high at 6.8%, and the account for balance of payments was registering large surpluses (Naim, 1993). It also marked Venezuela’s incorporation into the dynamics of world capitalism, along with the demands that this placed on the country’s organization (Carpio, 2011).  With oil prices rising from $2 a barrel to $14 and higher by the mid-seventies, the influx of foreign exchange proved almost impossible to manage and invest wisely (Naim, 1993).

This is one of the most important contextual components of widespread corruption; Venezuela’s transformation of wealth had been quick, artificial, and almost magical. The avalanche of money provoked an important and rapid shift in the behavior, going from a society that was mostly rural and agricultural to an industrialized one based on oil production (Carpio, 2011). Also important to mention, large volumes of revenue form petroleum exports were flooding the country, but the profits were not earned by the work of the majority of the population even though they were enjoying the benefits from it. This created a dependency of the population on oil and on industry officials who provided little to no transparency or accountability to that population (Marin Boscan, 2004).

Imported commodities also skyrocketed as a result of the increased circulation of money, and this only placed more demands in acquiring the wealth and power that allowed people to accumulate even more things. This is where excessive corruption really took root. From 1975 to 1998 Venezuelan corruption levels increased and stayed high. Particularly grave was the period of Jaime Lusinchi, 1984 to 1994. In her research on corruption, sociologist Ruth Capriles Méndez of the Universidad Católica Andres Bello estimates that some $36 billion was subject to misuse and dishonest handling during that presidency, especially through the foreign exchange controls program called RECADI. RECADI was an agency created to administer the newly established differential exchange rates in 1983. There was a preferential rate given to businesses claiming to be either importing necessary goods and services or using the cheaper foreign currency to pay interest on the foreign debt (Gates 2010). This soon proved to be almost a hoax, RECADI becoming synonymous with “magnet for corruption.” It was involved in scandals all throughout its six-year existence. Out of $34 billion that were authorized for preferential rates, it was reported that over $11 billion went to fund corrupt transactions (Gates 2010).

Everyone in society knew la movida: the agency workers handed over large amounts of money in return for a nice commission given by businesses. Customs officials and police were often bribed so that they would sign off on imports that were indeed not necessary so that they may still qualify for the preferential rates. The rates were also authorized for friends and family members of both high and low level officials. Large phantom companies were also created in order to obtain the rates, moving millions of dollars through to several schemers. In 1997, Pro Calidad de Vida, a Venezuelan NGO doing anti-corruption work, estimated that some $100 billion in oil income had been wasted or stolen during the last 25 years. Corruption has remained high even in current times; for example, about $22.5 billion has been transferred to accounts abroad by the Chávez government since 2004, according to the Venezuelan Central Bank, and bout $12 billion of that amount still remains unaccounted for (Coronel, 2006).

Motives for Corruption

Since the times of corruption’s explosion, several motives have been shown to perpetuate its presence and salience. The major one refers to the weak political and social institutions in Venezuela. Oil wealth induced very quick modifications to the fabric of society, and the government proved ineffective with dealing with such large revenues. Little time and opportunity was given for political and social institutions to become solidified as projectors of good governance. Civil society also had little opportunity to help build these institutions, as it was catapulted into a full-blown capitalist economy, which they had little experience with.

Another motive revolves around the uneven wages of government workers. Poorly paid bureaucrats must resort to petty corruption to in order to supplement their incomes. For example, low-level officials may ask for extra payment from the public to do basic tasks like passport or ID renewals. High-level officials may ask for commissions from private contractors. Many high-level officials also receive bloated salaries and mega bonuses. There is clearly a very large skew on how these public wages are determined. Bureaucratic turnover is also very high, preventing the consolidation of a stable organizational culture with a tradition of efficiency and honesty (Coronel, 2006).

There is also a lack of adequate administrative norms and judicial controls as well, so the punishment of these bureaucrats is seldom carried out. This kind of judicial impunity serves to reinforce the presence and intensity of corruption; if officials committing illegal actions remain unpunished, colleagues will obviously find reason to engage in their own illegal actions as well. Also, these crimes are justified through electoral legitimization, so there exists further incentive to “keep business as usual.” From here stems another motive, public complacency—and perhaps even complicity. People continue voting for the same politicians, so it feeds the cycle of impunity and legitimization. Many Venezuelans have admitted that corruption has become a way of life, and deeply ingrained in the post-1970s imaginary itself. Some scholars have explained that the individual citizens fails to consider themselves the victims of corruption, and instead consider these acts as perpetuated in defiance against the state (Carpio, 2011). Further, they consider the gains made by those officials that commit these crimes as well-deserved, since everyone else there is stealing too.

Types of Corruption in Venezuela

Grand Corruption This category refers to the corruption derived from major policy decisions by the highest decision-making levels of government, and for the case of Venezuela, refers to the president. Incidences of this kind are difficult to articulate, since they are so publicly well-known; but hard information and evidence surrounding it is seldom made available to public scrutiny. Details are very hard to come by. For example, it is rumored that the Chavez government’s expenditure of $17 billion between 2002-2006 was spent mostly on buying weapons and political loyalties around the world (Coronel, 2006). But because of the lack of transparency and systematic controls, it is nearly impossible to check just how much of this money actually went astray. The same response can be given to Argentina-suitcase scandal. Most observers agree that President Chavez was illegally donating $800,000 to Cristina Kirchner’s presidential campaign, but the investigation, filled with holes and incongruences, eventually resulted in an order for arrest of a Venezuelan scapegoat, who is currently “exiled” in Miami.

Bureaucratic Corruption This category includes violations of laws, norms, and regulations by government employees or non-government accomplices. This type of corruption is perhaps the most well-known among the Venezuelan public and media outlets. It involves extortion, bribery, the stealing of public funds, abuse of political power, nepotism, and many other varieties of illegal or unethical use of public assets for private gains. Venezuelans mention that paying bribes to speed up or bypass bureaucratic processes is almost an institutionalized ritual. It is very common to hear about a friend’s father claiming their friend’s mother for company assured social security benefits. Many consider the “alternative way,” i.e., the illegal way, is sometimes more efficient that the legal, since the latter has weak structures for control and accountability.

An important aspect sector that sees high amounts of corruption is in government contracting, because it is mostly conducted without following existing bidding regulations. Transparency International identifies this as one of the main causes of corruption in the world, but especially in Venezuela, since 95 percent of all known public contracts are awarded without bidding. There are also very blatant forms of corruption at the National Electoral Council. The electoral registry consists of 17 million voters, a statistical improbability since the population is estimated at 26 million, 60 percent of whom are too young to even register (Coronel, 2006). There are also 39,000 voters who are over 100 years old. The Supreme Tribunal of Justice is also not immune to the presence of corruption. The case of Justice Afiuni illustrates the partisan and biased demands made by much of the government instead of purely “judicial” demands. Afiuni was demoted for not complying with Chavez’s opinion on, interestingly enough, another corruption case involving bankers. Chávez dismissed her stance as being “unfair and biased,” claiming that she was not apt to make a sound, impartial decision. Afiuni was subsequently imprisoned on the grounds that she was as corrupt as those accused in the case.

Systemic Corruption This category describes the interface between the government and the private sector. It involves both large amounts of money and small favors, which are commonly referred to as “petty corruption.” The most visible engagement of this kind can be seen in the state-owned petroleum company, PdVSA. It is internationally renown for having little transparency in its affairs; it ceased publishing its consolidated annual financial statements in 2003. This may be due to the conflict of interest inherent in having a company that is politically aligned with socialism but also has a legal duty to produce profits. The public has little to no source of credible or legitimate data on just how much money is circulating the company, and even less on how much of it is being stolen or misused. Transparency International’s Promoting Revenue Transparency Report on Oil and Gas Companies found that PdVSA is one of the lowest performing National Oil Companies in reporting anti-corruption strategies; it scored 28 percent, compared to Petrobras at 64 percent (2011).

Another example of systemic corruption that must be discussed is the presence of government-controlled or influenced corporations. There have been many occasions where government officers own or buy companies, but conceal this by working through private intermediaries (Coronel, 2006). It can be seen in the PROAREPA group, the main supplier of food to the government handout program, which is rumored to not only be owned by Chávez’s brother Adan, but also run by other relatives and friends of high-level government officials. Again, a conflict of interests arises in this sort of unclear partnership, and corruption is very likely to occur in an obscure, smokescreened manner. For example, investigations into customs-related offenses and questionable distributions surrounding PROAREPA activities have been quickly terminated with no explanation. No answer has been given either to those who questioned the brother of Minister of the Interior Jesse Chacón, Arne Chacón’s $10 million purchase of the dairy-processing company, INDULAC.

The lack of transparency and systematic controls has allowed many of these government-influence private companies to continue masking any illicit activities that might be taking place. It has resulted in creating a new phenomenon in Venezuela where these company owners and officers rake in massive amounts of unaccounted profits. Editor of Venezuelan publication, Descifrado, Juan Carlos Zapata has described this new power structure emerging from the contemporary government; he posits that the revolution has been more successful in creating an instant class of the new rich instead of solving the problems of poverty in the majority of the population. Many describe this new class as a new revolutionary bourgeoisie, but one that replaces political loyalty and ideology with an insatiable desire for wealth (Coronel, 2006). Articles in El Nuevo Herald and the New York Times also agree that the great amount of oil income freely used by the government has created a new bourgeoisie in the country: “They drive Hummers and Audis; use Cartier watches and Mont Blanc bags. They buy luxury apartments and fly to Miami in private jets. And they always pay cash…This sudden wealth can only be explained by the close association of these new rich with the government [Considering that most salaries simply do not pay the quantities required for this kind of lifestyle],” reads the El Nuevo Herald report written by Steven Dudley (2006).

How Corruption has affected Venezuelan Society

All of these types of corruption show that it is a problem both at the level of the state and the level of society (Gonzalez Urdaneta). It can be considered a major obstacle to the support of democracy and the institutions it is supposed to engender. Venezuelans are largely discontent with how its democratic government functions. Although few studies actually show the concrete causal links between corruption and democracy in Venezuela, citizens undoubtedly agree that blatant corruption has made them highly skeptical, and some disillusioned, about the intentions, efficiency, and capabilities of the government. According to the 2010 Latinobarómetro Report, 52 percent of the population believes that government decisions privilege a few interests as opposed to the greater majority of the population. Only 40 percent believe that the governance is exercised for the benefit of the majority.

Source: Latinobarómetro 2010

 In all of Latin America, Venezuela also houses the second highest percent of people that are unsatisfied with the state of its democracy, preceded only by Bolivia. Clearly, the intense corruption present in the country is almost invalidating the potential benefits that can come from a democratic form of government. The only process that citizens can observe are the instances where public policy deviates from its original purpose and produce unexpected outcomes, which makes them believe that it is the institutional design what is failing to operate efficiently (Gonzalez Fabre).

In terms of the economy, its growth and development can be severely hindered by the continued presence of corruption. It can discourage investment, both foreign and domestic, by making investors wary and unsure of exactly how their money is going to be managed. If the only transparent activities concern the rich government and company officers getting richer while the impoverished are getting poorer, there is little incentive for any economic investments or even productions to take place (Gonzalez Fabre). Education and culture are also affected by corruption because the conditions surrounding it create incentives that perpetuate it in the Venezuelan imaginary instead of deter or reverse it. It is obviously much easier to engage in black market activities than to take the time to become educated in how to surmount it. As a police officer that illegally stopped me in La Guaira explained, extortion and bribery gave him much more money than his abandoned education studies would ever have afforded him. Clearly, social capital is destroyed by corruption as well as the confidence that might build the path to move away from it.

Plans to Combat Corruption

There is a general consensus that the systemic culture of corruption has become a major obstacle to the efficient governance of Venezuela. Many speeches have been given by a plethora of politicians, and most visibly by President Chávez, vowing a commitment to punishing those who commit these illegal and “unpatriotic” activities. In 1999, the then Minister of Foreign Affairs, José Vicente Rangel, put forward what was considered the official position of the new government on corruption (Coronel, 2006). It included fighting against confidentiality and lack of information from banks, financial corporations, and the judicial system. He also solicited the involvement of all society and citizens, along with the state, academic institutions, the media, and religious institutions in order “to reverse the effects of corruption and to allow for the rebirth of moral and ethical values.”

This ethos of anti-corruption has continued in the past decade, but in the wake of the current precarious international economic situation, the government has launched an offensive against corruption as part of an austerity drive (Fuentes, 2009). The public prosecutor has initiated many court cases against former and current officials for alleged acts of corruption. In 2009, nine ex-mayors were convicted for corruption charges—five were pro-Chávez and four belonged to the opposition. The government also announced that it was going to cut down superfluous expenses and bloated salaries, commenting that particular “mega salaries and bonuses” were simply unsustainable. Rafael Ramirez, president of PdVSA, announced a cutback of the 2009 budget by reducing executive salaries by 20 percent and freezing the awarding of executive bonuses (Fuentes, 2009).

These actions show tangible prospects that some headway is being made in the fight against corruption, but many members of the population remain skeptical. Only 7 percent of the population actually believes that corruption has decreased in the last two years; 86 percent feel that corruption has even increased in the last three years; and only 7 percent feel that the government’s actions against corruption have been effective—65 percent believing that it has been ineffective (Latinobarómetro 2010).

Final Thoughts

It is difficult to conclude this discussion on an optimistic note, considering the skepticism surrounding the state and the fate of corruption in Venezuela. When speaking to Venezuelans about the issue, it is important to make a distinction in regards to the individual’s socioeconomic context; middle to middle-high income dwellers share a relatively positive view that improvements are being made, especially in the area of tax reform. But lower income citizens living in the barrios might disagree, questioning where (and to whom) their taxes are actually going. Persistent disagreement will only perpetuate if corruption remains rampant, benefiting a powerful few, and disenfranchising a poor majority. One fact remains clear: further rigorous study is necessary to uncovering the governmental dynamics in dealing with corruption, and these need to become more transparent so that the population can actually begin to feel a responsibility to hold their politicians accountable. From here, corruption in the private sector can also experience decreases if government regulations start demanding the same transparency. Venezuela must accept that fighting corruption is a huge endeavor, and any hope for success requires the full efforts of society as a whole.

Venezuela and Cuba: a Relationship to Observe

By Jorge Davila

Chávez’s government and movement has been the most significant presence of the left in Venezuela and Latin American after Castro took control of Cuba in 1959. The pinnacle of this movement was the victory of Hugo Chávez in the presidential elections of 1998. Along with his presidential victory, the Chavismo has become a force of the left at a regional scale with alliances and foster bilateral relation with the left governments of the region. As Sánchez notes, the ‘Bolivarian Revolution” is the first social experiment in Latin America that has relied on a strong and self-sustaining economic bedrock financed by the revenues of a steadily increasing international oil price (2008).

Chávez have been able to develop a powerful political machinery that it has given him elections and keeping him in power. Moreover, while Chávez’s democratic legitimacy might look solid due to the high levels of political support he enjoys. The revolution’s commitment to democracy values have been criticized by the opposition, foreign governments, international organizations, and scholars.

The left in Venezuela before and After Chávez 

Although, the Bolivarian Revolution is the most important event in Venezuela’s politics in the last decades. It is important to analyze the          left parties movement in the country before Chávez, and their relation with Hugo Chávez’s electoral victory in 1998. Sánchez emphasizes, three leftist electoral organizations played an important part during the demise of the stronghold of Acción Democrática-Comité de Organización Política Electoral Independiente (AD-COPEI) in the 1990s (2008).

First, the Movimiento al Socialismo (MAS), was the only political party that represent an electoral alternative in the bipartisan context of the 1980s and 1990s. The MAS was never an important electoral force before the 1990s, but it had a stable presence in the Venezuela’s political arena. MAS began to strength its presence, winning elections at the regional and local levels during the 1990s. Accordingly to Chaves, Its success, were influence by the political decentralization process that transferred more power to the sub-national authorities (2008). It allowed MAS to develop regional leadership. Though, MAS’ regional successes failed to develop a viable progressive alternative to the deteriorating status quo, because some of the local and regional leaders copy the clientelism pattern of its AD-COPEI counterparts.

MAS’ pragmatism led to team up with political competitors with different political views in exchange for positions in government or political influence. MAS was an important key in the chiriprero. It was a coalition of small political parties that supported COPEI’ candidate Rafael Caldera to win the presidency in 1993, and it was also an important political contributor in Caldera’s administration. By the end of Caldera’s term the MAS was divided. A large portion of its electorate wanted change and saw in Chávez the opportunity for it, but parts of the MAS leadership was suspicious of him. MAS ended supporting Chávez, who openly criticized Caldera’s government that MAS had sponsored.

La Causa Radical also known as Causa R, It was another left party movement in Venezuela during the 1990s. At the local level, the main success of Causa R was limited to the state of Bolivar, where the union movements sponsored by the party enjoyed success during the 1980s. The party’s strategy was to organize the masses to participate directly in government. By 1992, Aristóbulo Istúriz member of the Causa R was elected mayor of Caracas. As mayor, he initiated a process of citizen participation. Although, it was cancelled after his term ended in 1995; it would later influence the Bolivar Revolution. The election of Istúriz as major of Caracas, gave the party a national recognition. Following these partial successes, in 1993, the party broke into the national political arena with a candidate for the presidency of Venezuela. Its candidate, Andrés Velásquez came close to win the presidential election. After this failed attempt, Causa R manage to keep significant political presence in Bolivar and won the Zulia governorship with Francisco Areas Cárdenas as candidate. Areas was a former military coup.

Following the alliance in Congress with COPEI and MAS in the late phase of Caldera’s term, Causa R fell into greater disgrace. The party split into two different movements in 1997. Some of its leaders decided to create a separate organization named Patria Para Todos (PPT).

Last, and most important were the consolidation of Chávez’s presence in the political arena, and the transformation of MBR-200 into Movimiento Quinta República (MVR). By the middle of the 1990s, MBR-200 attempted to increase its size to become a nationwide movement base on Chávez’s popularity. MBR-200 focused on criticizing and confronting the democratic rules. The movement main proposal was the adoption of a constituent assembly. The organization typically called for abstention as part of its strategy, except for the candidature of Francisco Arias Cárdenas for governor of Zulia under the Causa R party in 1995. Arias Cárdenas’ victory helped to convince MBR-200 that elections were the path to attain power. The idea gained momentum when the possibility of a strong victory in the 1998 presidential election become achievable. It was then that MBR-200 fused into MVR.

In 1998 Chávez was elected President of Venezuela. For the first time in Venezuela’s political history a presidential candidate who openly sympathize with the left, and did not belong to a traditional party was elected president. From the moment Chávez assumed the presidency, the Venezuela’s left tied to Chávez and his movement. Sánchez declares, the political left movement supported him, and contributed to improve Chávez’s image. However, they aimed primarily in taking Chávez to office, and later to relying on him as his political organization once in government (2008). Molina and Pérez argue about Chávez’s voters support:

It is incorrect to argue that voters supported Chávez only because they had moved to the left of the political spectrum, and he represented their views better that any other candidate. It would be also be incorrect to depict the Chávez phenomenon as an expression of the retaliation of impoverished masses against the ruling elite, at list when describing the 1998 and 2000 elections. (qtd. Sánchez 2008: 179)

The primary element in Chávez’s campaign was his antiestablishment position. Chávez advocate for a role for the military in the Venezuela’s society, helping in the fight agains poverty. Chávez raised concerns among the opposition, because his personal ties with Fidel Castro. Sanchez suggests, the prevailing tone of Chávez’s campaign evidenced a moderate and reformist left, despite Chávez’s promise to deliver a dramatic change to the Venezuela’s government (2008). The tone of Chávez’s campaign, persuade undecided center voters to support his presidential bid and later changes.

MVR form an alliance with the left parties; the MAS, the PPT, and some minor left political parties grouped under the name Polo Patriótico between 1998 and 2000. The three movements were from the left, however, the alliance was not ideologically motivated. Polo Patriótico turned out to be a weak coalition, but it helped Chávez to be elected in 1998, and provided support for the process leading to the creation and approval of the new constitution in 1999.

In the end, Chávez owed little to the left’s ideological contribution. His persona helped him to get elected. His personality and virtual monopoly of the political scene were the critical factors behind his victory (Sánchez 2008). Several left leaders saw in Chávez’s no intention to implement the agenda of the left. Consequently, it raised concerns in the left, and it feared that they would become submissive actors in Chávez’s political system. Finally, some sectors of the Venezuela’s left joined the Chavista movement, specially the MAS which offered their local and regional platform to mobilize voters. The Chavismo also received the support of professionals allied with the left, who eventually were appointed by the new government to elite positions in the government.

Over View of Cuban-Venezuela Relationship and the Lunched of the ALBA.

The bilateral cooperation between Venezuela and Cuba stand, on one hand, for a relationship between two peripheral countries. In other words, the dependency of Cuba’s economy largely relies on the generosity from part of Chávez’s government. On the other hand, their economic, social and political relation among both countries represent more that a commercial relationship. Chávez’s agenda to propagate what he calls “socialism for the twenty-first century” and the Bolivarian movement needs the logistic of Cuba. The hight prices of the crude have been a crucial element for Venezuela to be able to poured millions in Cuba’s economy. Capital needed by Cuba, specially after its economic crises at the end of the 1980s, as result of the Soviet Union collapsed. Venezuela has prioritized cooperation with Cuba to build a foreign policy independent from the United States.

Cuba and Venezuela have been growing steadily over the last decade. They have been expanded their economic relation, especially after the lunched of the Bolivarian Alliance for the People of the America (ALBA). It was founded by the two nations on December 14, 2004, as an alternative to the free trade of the Americas (FTAA) proposed by the United States. In the beginning, The Cuba-Venezuela agreement signed by Hugo Chávez and Fidel Castro was a bilateral exchange of medical, education resources and petroleum between both nations. Since then, other Latin American and Caribbean states have entered into the People’s Trade Agreement which aims to implement the principles of the ALBA.

The ALBA is a cooperative organization based on the principles of social, political, and economic integration. It has been attempted to integrate the economy of the region based on a frame of social welfare, bater and mutual economic help as an alternative of the neoliberal ideas of free market. It has been associated with socialist and social democratic states. Nowadays, the ALBA has as members Venezuela, Cuba, Bolivia, Nicaragua, Dominica, Ecuador, San Vicente and the Grenadines, Antigua and Barbuda.

Stages of Cuba-Venezuela Relationship

Accordingly with Romero, the relationship between Cuba and Venezuela can be divided into two periods. The first one started when Chavez was elected President of Venezuela for the first time in 1999 until 2004, and it was fundamentally a bilateral relationship. The second goes from 2004 until today, in the context of the Bolivarian Alliance for the Peoples of Our America, ALBA (2010).

During the first stage, the interest of both nations was to bring together and protect two similar ideological and political ideas. They also were looking to cooperate in economics and commercial projects that would lead to the creation of a common identity in the region. One of the most important priorities were to get around the United Sates economic embargo of Cuba and supplied oil to the island to overcome its crisis. The interest from both parts to promoted the left movement globally, and raised Chávez into the face of the left movement in the region. The Integral Cooperation Agreement signed in 2000 helped to re-enforce economic and commercial ties. The purpose of the agreement was to promote the exchange of good and services in a cooperative condition. Romero reports, that as result of the agreement, Venezuela sell oil to Cuba at a fixed price of US$ 27 a barrel (2010). In exchange for it, Cuba sent approximately 13,000 of workers to Venezuela that preformed jobs mostly but not limited in et health, sport and educational sectors. The program started as a form of barter, and since 2003 in payments for professional services.

After the creation of the ALBA in 2004, the relationship between both nations got a more regional status. The expansion of the Integral Cooperation Agreement in 2004 consolidated a new phase of economic complementary relationship beyond energy cooperation and exchange of human resources. Late that year, Bolivia become a member of the ALBA, Nicaragua in 2006, Dominica and Honduras in 2008, Antigua, Barbuda, Saint Vincent, The Grenadines, and Ecuador in 2009. This block of nations allows trade of goods inside member countries without tariffs. In addition, these countries have access to their internal currency named the Unified System for Regional Compensation (SUCRE). Also, the alliance promoted the initiation of several ALBA’s companies and projects such as: Constructora Alba, PDVSA-Cuba S.A., the Alba Steel Mill, Cuba’s share in TeleSUR, Telecomunicaciones Gran Caribe, S.A Company, sugar industry projects, Cuban’s housing Projects, Cuba-Venezuela project for the agricultural development of Cienfuegos, transportation projects, joint ventures in the technology sector, foreign exchange financing agreements through Banco Industrial de Venezuela and Banco de Comercio Exterior de Venezuela, tourism projects, maritime services, open skies status for Cuban airlines over Venezuela, and a project to build an international airport in Saint Vincent and the Grenadines.

Trade Between Venezuela-Cuba

The trade relations between Cuba and Venezuela grew from US$388.2 million in 1998 to US$8.1 billion in 2009. In 2009, the trade totaled almost US$2.7 billion in goods and US$5.4 billion in services. Accordingly to Romero, the total aid to Havana from Caracas in 2008 was about 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$27.0 and US$1.87 billion in other bilateral cooperation projects (2010). Currently, Venezuela is Cuba’s main trading partner. On December 12, 2009, at the 10th Cuba- Venezuela Intergovernmental Meeting, both countries declared that they had signed 285 new commercial, economic, oil and social cooperation projects that will cost more than US$ 3.185 billion. Romero notes that in terms of social cooperation, in late 2007, Cuban authorities said that there were 39,000 Cuban workers in Venezuela, 31,000 of which were health workers. The wage paid to each worker in Venezuela represents only 18% of the payment made directly to the Cuban government for each one. Social cooperation between Venezuela and Cuba is expected to continue in 2009 with 137 ongoing and 48 new projects, an investment of US$2 billion (2010). Cuban cooperation also benefited 3,389,809 athletes with the Barrio Adentro Deportivo program.

Military Relationship 

The cooperation between both countries is also in the military field. Venezuela and Cuba examine the need to propose a regional block contrasting from TIAR, with the inclusion of Cuba and the exclusion of the US and helping revolutionary governments and movements in the region. Venezuelan Military has provided humanitarian assistance in Cuba, associate with natural calamities. Official visits from part of the Venezuelan Military to Cuba to participate in study groups, perform professional exchanges and military training has been increasing. Accordingly with Yanes, Chávez have reconstructed the country’s military doctrine in what is called “doctrine of the asymmetrical war” which assumes a military conflict with the United States or any of its allies in the region (2005). Since 2007, Venezuela has a military attaché in the island. Romero notes, rumors exist about the possibility of Cuban officials in key posts in the Venezuelan Bolivarian Armed Forces or the Venezuelan public institutions (2010). Until now, no dependable information can be found about a military treaty, arms trade, or joint military exercises between Venezuela and Cuba. In April, 2008, ALBA member countries signed an Agreement for the Implementation of Programs and Cooperation in Sovereignty and Food Security as well as the Agreement for Support and Solidarity with the People and Government of Bolivia.

Final Thoughts 

In the 1980s the draw back of the left in Latin America and the Soviet Union reduced influence in the region, reduced Cuba’s influence and stopped being a strategic concern. This left Cuba with less power to spread his left movement in the Latin America. Later, an increase criticism of its social model, as result of Cuba’s economic situation. Its economic crisis intensified during the 1990s due to the hardening of US economic embargo stablished in 1962.

The Beginning of the twenty-first century gave Cuba the opportunity to relate its own experience with the newly emerging left in Latin America and the Caribbean. This reborn left movement began to blossom first in Venezuela and later in Brazil, Bolivia, and Ecuador and recently in Argentina and Peru. The debate about Cuba as a security treat or a model to be follow emerged in Latin America. This has generated a discourse in the region about revolution, interference of left movement countries in the internal affairs of other countries, and the probability that Venezuela follows the Cuban model. In reality, since 1999, Cuba has had a very important economic, political and social partner in Venezuela. The expression “Cuba and Venezuela, two flags, one revolution” indicate the increase relationship between both nations. Their joint participation founding ALBA, the expansion of an important socioeconomic exchange, the development of a complex cooperation process in many areas, and the promotion of socialism are some examples of the relation that deserves to be monitored because of its influence in the region.

References

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Title page image source:

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Data from: http://www.alianzabolivariana.org/

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