ALBA: How Much of a Turn to the Left in Latin American Governance and Economic Policy?

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The Bolivarian Alliance for the Peoples of Our America (ALBA) was established on December 14, 2004 by Hugo Chávez and Fidel Castro. Tired of failed neo-liberal initiatives and Washington’s unfettered political leadership in Latin America, Venezuela and Cuba sought to create a regional alliance committed to social, political, and economic cooperation and equality. These changes were to add up to nothing less than a radical transformation in the way the region considers itself. Today, ALBA forthrightly promotes an anti-capitalist social and political agenda. Roughly based on the European Union organizational model, the new alliance proposes regional economic integration that is geared toward fighting poverty and social exclusion in its committed service to representing the public interests of the population.

Chávez has defined ALBA as a “flexible model for the integration of Latin America that places social concerns in the forefront.” It was created in direct response to Washington’s Free Trade Area of the Americas (FTAA) proposal, which is based on an agreement to eliminate, or at least reduce, hemispheric trade barriers (excluding trade between the U.S. and Cuba). Chávez, among other leaders, vigorously condemned the FTAA, calling it an imperialistic annexation plan engineered by Washington. After ALBA’s formation in 2004, countries other than Cuba and Venezuela began to affiliate with ALBA. Bolivia joined in 2006; Nicaragua, Dominica, Ecuador, Antigua and Barbuda, and St. Vincent and the Grenadines soon followed. Today, ALBA includes the aforementioned member states and such observer states as Grenada, Haiti, Paraguay, and Uruguay that are permitted to attend regional conferences.

Many question to what extent ALBA’s left-leaning ideology represents genuine broad-based popular interests. Although ALBA’s robust, anti-capitalist agenda certainly attempts to address some social problems, the organization is seen by some as a vehicle for Venezuelan petro-diplomacy and a way for Caracas to promote its oil reserve and advance its economic and political interests. Furthermore, there are different degrees of membership within the body. Unlike Bolivia and Nicaragua, the other members have not been as drawn by the Bolivarian ideology.

Bolivarian Ideology

Since the debt crisis in the late 1970s, pessimism and discontent have been spreading throughout Latin America. In this fluctuating habitat, a new left has emerged, creating a potential alternative social, cultural, and ideological order. Countries like Venezuela, Cuba and Bolivia, among others, employ Bolivarian philosophy and call for social solidarity and balanced trade opportunities to advance their societies. ALBA seeks to help the poorest countries overcome the challenges that separate themselves from the wealthier, more powerful countries, like the U.S. and Brazil.

ALBA challenges raw capitalist ideology, maintaining that the market cannot effectively and firmly facilitate regional integration. Rather, its goal is to link member nations through production, distribution, and consumption. “Open regionalism,” touted by ALBA, has not necessarily delivered widespread regional integration. States should consider local needs and the requirements of socio-economic well-being, while simultaneously utilizing relative productive resources and technology effectively. Just like Simón Bolívar, the man who liberated much of the American continent from Spain in the first quarter of the 19th century, and José Martí, a Cuban national hero who warned against U.S. imperialism and advocated his island’s independence from Spain, Chávez and Castro envisioned a united American continent. They based ALBA’s agenda on similarly shared economic, financial, judicial, and political “architecture,” with the entire region working in concert towards equality and social inclusion.

The Anti-Capitalist Agenda

The structural adjustment programs imposed as a pre-condition by the International Monetary Fund and the World Bank, beginning with the debt crisis of the late 1970s and lasting through the end of the century, proved devastating for South American debtor countries that had been forced to change their economic strategies in order to remedy trade imbalances. Structural adjustment programs brought economic crises, insufferable debt, and burdensome recession to these countries. Government spending was reduced, jobs atrophied, states lost their ability to provide public services, and public assets were privatized. Countries had to remove trade barriers and capital restrictions, while they struggled with inflation and adverse exchange rates.

ALBA’s agenda values economic cooperation over competition between countries and products. It takes an anti-imperialist position, attempting to rid the region of its over-dependence on high cost foreign investment. In ALBA’s founding document, Venezuela and Cuba agreed to engage in trade initiatives and collaborative programs that would be mutually beneficial, so that each nation could fulfill its economic and social destiny. Furthermore, ALBA seeks to monitor the different levels of development of each of its member states to ensure that each “nation is guaranteed a share in the benefits of the integration process.” The Bolivarian ideology maintains the state should be a regulator and, as emphasized previously, that the market cannot achieve true integration without being supplemented by other, more normative elements.

The official agreement between Venezuela and Cuba details ALBA’s modus operandi, the initiatives and agreements that it has reached, such as the formation of an international Latin American credit union in order to coordinate payments related to commercial transactions among member states. To solidify a sense of regional integration based on trade, ALBA has been working to establish a common currency, called the Sucre. The notion behind such a currency emphasizes that member countries carry out trade policy based on value, not market prices. This plan suggests that countries trade to fulfill human needs and not to profit, and these transactions must be ethical and politically regulated.

The ALBA agenda emphasizes the need for programs to eliminate illiteracy in member states. Cuba and Venezuela are currently working on collaborative education and health programs, such as professional training for doctors and nurses and providing access to health services in both nations. Cuba offers 2,000 university scholarships to Venezuelan students per year and has sent more than 15,000 medical professionals to the Bolivarian University in Venezuela to take part in the health care initiative, “Barrio Adentro.” During the last seven years, medical professionals have served millions of patients in an effort to eventually conduct upwards of 400 million medical consultations. Cuban doctors and nurses treat low-income and poor Venezuelan patients suffering from diabetes, administer vaccinations, and provide general medical treatment and rehabilitation services. Chávez has said, “Cuba is and will continue to be vital for us, and this is only possible with socialism.” Both nations have devised agreements involving tourism projects and technology transference in the energy sector.

The language routinely used in ALBA documents is not similar to language traditionally associated with bilateral trade agreements. It emphasizes social concerns and cooperative efforts that address economic and social needs of member states.

Chávez, ALBA, & Oil

While Hugo Chávez has been demonized in many respects in the U.S. press, he has invested in food subsidies and in accessible health care. He has helped to reduce rampant social inequality in his country as well as in many others. Venezuela’s private sector has grown despite Chávez’s nationalization of a number of large companies. Venezuela was able to witness growth after nationalizing its oil industry in 2003. Furthermore, it has expanded access of health care and education to the poor. Economist Mark Weisbrot of the Center for Economic and Policy Research in Washington confirms that Venezuela has used some of its oil revenues to donate funds to relief and reconstruction efforts in Haiti and also has donated tens of millions of dollars annually in the form of discounted heating oil to low-income U.S. citizens. As recent as June 4, 2010, Chávez stated, “Venezuela is one of the few countries in the world that, if it wanted, it could pay all of its external debt now.” Weisbrot contends that Venezuela’s public debt, as a share of GDP, is significantly lower than that of the U.S.

ALBA coordinates its efforts with other regional initiatives such as Petrosur, PetroCaribe, MERCOSUR, and the South American Community of Nations (UNASUR), all of which are alternatives to some features of the FTAA. To see how ALBA works and how other regional alliances and Chavista economic policy come together, one must examine Venezuela’s trading patterns in relation with other nations. Thirteen countries in the Caribbean import Venezuelan oil and receive a 40% discount from its international market price. Venezuela sells as many as 100,000 barrels of oil per day to Cuba, at nearly a 40% discount. As members of Petrosur, Bolivia and Argentina exchange soybeans and cattle, respectively, for Venezuelan oil. These trade relationships go beyond the very logic of capitalism and deserve to be considered legitimate alternatives to the FTAA model.

What Bolivarian rhetoric does not explain is ALBA’s extremely close relationship with Venezuelan oil exports. Michael Magan of Foreign Policy magazine purports, “ALBA is nothing more than PetroCaribe.” Chávez uses ALBA as a vehicle for selling Venezuelan oil at below market prices to PetroCaribe and Petrosur member states in exchange for goods and services that tackle poverty reduction issues. ALBA is primarily financed by Chávez’s subsidized oil exports, with this relationship being too close to be coincidental. Chávez has engineered ALBA so that he can ultimately sell more oil. In terms of Venezuela’s relationship with the U.S., it is clear that no matter how much their ideologies differ, the two nations are mutually dependent in a trade bond. Even though Venezuela episodically has threatened to cut off its oil exports to the U.S., these threats will never become a reality; Venezuela would never stop selling oil to the U.S. because these purchases add up to approximately 60% of Venezuela’s total oil exports. Venezuela is one of the top four petroleum suppliers to the U.S. Furthermore, the U.S. is too reliant on foreign oil and the Venezuelan economy would take a serious hit if the countries stopped trading with each other. Thus, Chávez’s commercial interests and its economic facts of life will continue to prevail over the rhetoric that each side uses to reach the pueblo in Venezuela.

It is clear that the success of ALBA depends on the stability of the Venezuelan economy. Even though its agenda promotes economic and social integration, trade between some Caribbean countries and Venezuela may in fact have negative consequences for inflation rates, poverty, and debt. By now, Honduras accumulated $80 million in debt to Caracas. Magan warns, “By 2015, CARICOM [Caribbean Community, an organization with fifteen member countries] nations will owe one-third of their total external debt to Venezuela.” The implications of Venezuelan economic power are enormous. Caribbean nations are in a precarious situation should Venezuela revise its oil prices or reduce its oil shipments. Without reduced-price Venezuelan oil, PetroCaribe and ALBA member states would be forced to struggle to pay off their additional debts.

An Unsustainable Future

Critics argue that ALBA’s future does not appear to be sustainable. For example, Venezuela has the highest inflation rate in Latin America and has accumulated $20 billion in debt to China alone. Because of its close link to the Venezuelan economy, the very success of ALBA is dependent on continued Venezuelan oil sales at stable prices. If oil revenues fall, the Chávez Administration is sure to be jeopardized. Ultimately, ALBA’s funding is based on a non-renewable resource that will only become more costly and difficult to extract. While Chávez’s Bolivarian rhetoric is appealing to those who are tired of policies that exclude the poor, his economic policy may have to become a bit more flexible, if Venezuela hopes to simultaneously recover from high inflation rates, pay off its external debt, and develop a sound, logical policy.

Fernando Mires, a Chilean historian and philosopher once said, “Yesterday it was Mugabe or Castro; today it’s Chávez… [Many leftist leaders] are emerging from political frustration and see a chance for their ideas in an impoverished country that has been democratized through intimidation.” Bolivarian ideology is very appealing in countries where more than half of the population lives under the poverty line and has been largely left out as they watch the rich get richer. This rise in inequality has demonstrated how neo-liberal policies and a Washington Consensus have failed the poor, ultimately creating a heightened anti-capitalist, socially motivated consciousness in the region.

If ALBA and CARICOM nations become weaker, more indebted and unstable, it is not clear how they will be able to bring themselves out of poverty. Perhaps top-down income distribution methodologies are not the entire solution; impoverished nations must have safety nets in place and social programs aimed at poverty alleviation. To ALBA’s credit, it has constructed many positive social programs and collaborative regional initiatives, designed to mutually fulfill the economic and social needs of its member states. Yet, the free market should not be rejected outright. There still might be room for enterprise-driven growth to allow for citizens to pursue bona fide economic opportunities aimed at improving their standards of living.