Chavistas Debate Economic and Institutional Reform – Maduro Combats Smuggling and Currency Fraud

Frederick B. Mills, COHA Guest Scholar, Professor of Philosophy at Bowie State University

 The Bolivarian project in Venezuela has warded off the latest counter revolutionary offensive and is now engaged in a profound debate over the next phase of the revolution. Though the smoke over the barricades has settled, neither President Nicolas Maduro nor the popular sectors labor under the illusion that rightist hard-liners will now respect the constitutional order. The opposition, fielded by the coalition of the Democratic Unity Roundtable (MUD), is largely in disarray after divisions over the failed “exit” strategy of violent protest and the resignation of the coalition’s executive secretary Ramón Guillermo Aveledo. The MUD is, however, regrouping to continue what veteran Venezuelan revolutionary Julio Escalona has called a “permanent war” against Chavismo.ⁱ

It is in this politically polarized atmosphere and in the face of immediate serious economic challenges that many Chavista activists have been engaging in constructive critique. They focus on government policy and urge that grassroots organizations have more of an impact on government deliberations at the highest levels. Maduro has given clear indications that he is prepared to consider proposals for economic and institutional reforms that emerge from the organized expressions popular power (poder popular). He has also continued a dialogue with other constituencies, including the private sector, to address the immediate economic problems facing the nation.ⁱⁱ What follows is an attempt to comprehend and synthesize some of the basic features of Chavista reflections now underway in Venezuela as well as the government’s response.

No Chavismo Without Chavez

It is not possible to identify one authentic Chavismo profile because no single political party, faction, or social movement has a monopoly on faithfulness to the legacy of Hugo Chavez. To be sure, there cannot be Chavismo without the political testament (testamento político) left by Chavez himself as articulated in the Country Plan (Plan de la Patria 2013 – 2019). This was the platform of Chavez’s last presidential election campaign in October 2012 and was passed into law by the National Assembly in December 2013, despite objections by the opposition deputies. In the prologue of the Plan, Chavez states clearly, “This is a program of transition to socialism and of the radicalization of participatory and protagonistic democracy.” With regard to the Plan itself, Chavez added that “In presenting this program, I do this with the conviction that only with the protagonistic participation of the people (el pueblo), with the broadest discussion among the popular sectors (bases populares), are we able to perfect it [the program], setting free the people’s creative and liberatory potential.”ⁱⁱⁱ  Journalist Ryan Mallett-Outrim summarizes the five strategic objectives of the plan as “preserving Venezuela’s independence, building socialism, turning Venezuela into a ‘social, economic and political power’, promoting international multipolarity and preserving ‘peace on the planet and … the human species’.”^iv

Even where specific strategic objectives are spelled out in some detail by the Plan, there are reasonable differences over how and when to implement them. To complicate matters further, there are some disagreements within the Chavista ranks over what sort of political action is feasible given the current balance of class forces. Chavez urged decisiveness, writing: “We are obligated to pass the point of no return, to make the transition to socialism irreversible,” but he also cautioned that it is difficult to determine precisely when such a point will be reached and that the efforts made in this direction should be “sensible and well-directed (bien dirigidos).”

While the Plan provides Chavistas with a strategic compass, the urgent questions with which the Bolivarian project is now grappling abound. These include,

• Should the government implement market oriented reform or hold the line for more state intervention in the economic life of the country, or some combination of these two?
• How quickly should the state interface directly with high level communal structures at the cabinet level?
• What is the right balance between government accommodation, or co-existence with a large array of private interests, and meeting the demands of labor in order to have more control over the means of production and the productive process?
• How much oil rent should be dedicated to diversifying and incentivizing the development of the industrial base to replace imports?
• How can the currency exchange system be reformed in a way that curtails inflation and prevents currency fraud while not unduly restricting the private sector’s access to dollars?
• Should the government lift the huge subsidies on gasoline?
• Should the government raise the minimum wage?
• How aggressive should the government be in response to the ongoing economic war?

The debate on these and other issues is quite vigorous. Perhaps most important for the Bolivarian cause from a procedural point of view is the question: how can the United Socialist Party of Venezuela (PSUV) effectively contribute to the mediation of the relationship between the popular sectors and the government so that maximum consensus is reached with regard to the way forward?^v

The PSUV can most effectively mediate the relationship between the popular sectors and the Maduro administration by providing an inclusive democratic venue for informing government policy making. In Venezuela, historically, the very survival of Bolivarian revolutionaries in the state has depended on the readiness of the base to mobilize in defense of the revolution. If not for such a potential, the Bolivarian revolution would have been dealt a serious if not fatal blow during the short lived coup that briefly deposed former President Hugo Chavez in April 2002. Moreover, President Maduro would probably not have weathered the most recent extreme right “exit” strategy that tried to oust him. Not only the party faithful, but dissident leftist voices as well, are essential to the viability of the Bolivarian project because the latter generally express genuine concerns among the rank and file. Their inclusion in party deliberations is vital to the “radicalization of the participatory and protagonistic democracy.”

The critical left voices, both within and outside the PSUV, appear to share four major concerns at the present juncture: making the PSUV more democratic; advocating a more aggressive government response to the economic struggle; rooting out corruption within the state bureaucracy; and increasing the participation of popular power in the policy-making of state institutions. Here I will briefly consider each issue in turn.

Chavista Dissidents Urge More Democracy within the PSUV

The PSUV is the largest of the pro-Chavista parties and has played a prominent role in the coalition of parties and social movements that constitutes the Great Patriotic Pole (GPP). The total membership of the PSUV is more than 7 million. The PSUV estimates that there are about 2.5 million active members who participate in electoral campaigns and other party functions. There are more than 13,500 PSUV local chapters– Battle Units Bolivar-Chavez (UBCh)—that participate in both the formulation of proposals for consideration by the party and in selecting delegates to represent the rank and file at party congresses.^vi As journalist Arlene Eisen points out, deliberations prior to the Third National PSUV Congress (July 26 -31, 2014) were not limited to the UBChs because “other Venezuelans joined the discussions through forums, meetings, editorial pages and social media.”^vii These deliberations notwithstanding, both the party leadership and its critics on the left acknowledge that democratic reforms are clearly necessary and called for in order to promote the party not only as a stronger electoral machine but also as a vehicle for broader constituent participation in policy formation.

During the opening of the Third National PSUV Congress, Chavez’s vision for the founding of the party loomed very large over the Teatro Carreño in Caracas. In the famous Speech of Unity (December 15, 2006) in which Chavez  called for the founding of the PSUV, Chavez urged all revolutionary forces to unite under the banner of the new party. He warned against the anti-democratic nature of what he called “Stalin’s deviation” by proposing the party be characterized by democratic, open debate and that party leaders be elected from the base. “Enough of hand-picking” he declared. “It is better for them [the leaders] to come from the bottom, from the base.”^viii

Today, the echo of Chavez’s utterances in the Speech of Unity are being heard loud and clear, most prominently in the independent pro-government media (Aporrea) and in particular, the voices of the Marea Socialista, a current within the PSUV and one of the founding labor-oriented constituencies of the party. The Marea Socialista has provided a platform for those advocating that all PSUV delegates be elected from the base; that the directorate of the PSUV not only should meet on a regular basis but also  its members should submit themselves to a new election; that the voices and sensibilities of sidoristas (organized steel workers) and automobile workers be adequately taken into account by the government; and that the PSUV party leadership not only tolerate but welcome constructive criticism.

It was chiefly the Giordani affair that brought the issue of freedom of criticism within the PSUV into full relief in the days preceding the Third Congress of the PSUV. Long-time Chavez confidant Jorge Giordani wrote an open letter in June regarding his removal from his post as the Minister of Planning. In the letter, Giordani questioned the wisdom of Maduro’s leadership on economic planning and policy, but did not engage in criticism of his own record as minister. As the detailed account of the Giordani affair, authored by Federico Fuentes, points out, the letter triggered charges among some of the Chavista base and a number of government officials that Giordani was disloyal to the Bolivarian cause. Some of Giordani’s defenders themselves, including Hector Navarro, member of the PSUV directorate, were subjected to criticism as well as censure.^ix The appeal of pro-government radio political commentator, Vladimir Acosta, to cease attacks on the character of Giordani,^x  and President Maduro’s timely about face in a call he made for reconciliation, limited the fall out before it could spiral out of control.^xi The episode nevertheless intensified the discussion about the need for more democracy within the PSUV.

The issue of democratic participation extends to the determination of workers in some sectors to have more impact on government labor policies.^xii As preparations were underway for the PSUV Congress, Sidor steel workers and automobile assembly workers demonstrated for the government to uphold their labor rights and to take their recommendations for increasing productivity into account. Gonzalo Gomez of the Marea Socialista and co-founder of the Aporrea pro-Chavista website, argued that Maduro, himself a former union organizer, was not paying sufficient attention to the point of view of the Sidor workers with regard to the anemic production and contract negotiations at the state-owned steel plant in the city of Ciudad Guayana.^xiii To Gomez’s consternation, while Marea Socialista activists stood with protesting Sidor workers, the President of the National Assembly, Diosdado Cabello, reportedly met with Sidor management but not with union leaders and suggested that some of the protesting workers were associated with mafias that were impairing production.^xiv On August 11, the government went so far as to deploy the Venezuelan National Guard and to violently repress a sidorista demonstration.^xv This was followed by charges and counter charges about the motivations of some of the sidoristas and the appropriateness of the government response.^xvi The saga continues, but the lines of communication between the Sidor workers and the government are now open and efforts to ratify a contract between management and the somewhat divided sidorista labor union are underway.^xvii

The Economic War

On the heels of the PSUV congress and in the midst of this period of internal debate, the government has launched a counter offensive in the so-called economic war. The term “economic war” refers to a politically infused concept. The opposition argues that it has been the mismanagement of the economy by the administrations of former President Hugo Chavez and current President Nicolas Maduro that has caused the bulk of the economic problems now facing the nation, including shortages of some basic goods and high inflation. No doubt the government has committed its share of errors and economic reforms are in order, but here I will use the term “economic war” to refer to the smuggling operations and currency fraud that have exacerbated the shortages and inflationary trend. In this regard, the state is responsible for implementing counter measures and it appears that Maduro has gotten serious about fighting back against the smuggling of contraband, hoarding, and the illicit use of foreign currency.

 On August 12^th, President Maduro created the National Commission for the Struggle Against Contraband to combat large scale smuggling operations that transport staple food products and gasoline from Venezuela into Colombia for sale on the lucrative black market. This newly formed body began work immediately and has been tasked with coordinating the activities of state anti-smuggling commissions. According to the Maduro administration, contraband accounts for about 30% of food and other products that were intended for sale or distribution in the local market.^xviii The illegal smuggling of gasoline (which is heavily subsidized in Venezuela) into Colombia has reached an estimated equivalent of 100,000 barrels of petroleum per day.^xix This means cross boarder smuggling is a Colombian problem as well. The government of Colombia loses out on tax revenue from the illicit sale of Venezuelan gasoline. For this reason Venezuelan President Nicolas Maduro and his Colombian counterpart Juan Manuel Santos met on August 1 in Cartagena to address, among other issues, the contraband problem along their common border.^xx

In a show of force, beginning August 11^th, Venezuela has reportedly deployed more than 17,000 soldiers under the command of General Vladimir Padrino López, head of the Operational Command of the Bolivarian Armed Forces, along the frontier zone. This operation has already resulted in the confiscation of hundreds of tons of foodstuffs and tens of thousands of liters of gasoline.^xxi For example, on August 21^st Globovision reported that in the Municipio García de Hevia in the state of Táchira, about 10,000 liters of gasoline was discovered hidden in the forest.^xxii In Zulia state alone, the government reports the confiscation of “55,000 liters of fuel and lubricants; 7.3 tons of eggs, 2.5 tons of meat, corn flower, cooking oil, and rice, and 300,000 pills of Diclofenac and Amoxicillin, among other items,” since the start of operations there.^xxiii This get-tough policy on smuggling was just made tougher. On August 20th, Maduro ordered the confiscation of vehicles and other property used in the smuggling traffic.^xxiv In short, Caracas has promised an intensive and sustained effort to eradicate these smuggling operations.

In concert with the anti-smuggling operations, Caracas has announced plans to implement an optical system to track the movement of both imported and domestically produced commodities from point of origin to point of sale. Also, Maduro has announced that there will be penalties for any public official involved in the export of foodstuffs that are part of the Venezuelan basic diet, “because these products are for [Venezuelan] consumption, and in any case, we import a part of it.”^xxv Since a great deal of contraband originates at the point of sale, the government plans to deploy biometric devices that register the finger print of shoppers and the type and quantity of their purchases, beginning November 30^th, in both private and public stores. The goal of this measure is to deter multiple purchases of commodities for their illicit resale at inflated prices. Some critics have argued that biometric monitoring of consumers amounts to the rationing of products and the undue restricting of the freedom of consumers who may have different requirements.^xxvi The Superintendent of Just Prices, Andrés Eloy Méndez, argues that this system will prevent the diversion of products to the frontier zone, products that should be “destined for Venezuelan families.”^xxvii Méndez also reports that the pilot sites that are using biometrics have reduced the size of queues and significantly increased the duration of the availability of some basic foodstuffs and personal hygiene products. Perhaps more popular is the government effort to address the problem of frustrating lengthy queues, Operativo Mata Cola, by fining businesses that understaff their cash registers.^xxviii For all of these measures to succeed, Executive Vice President Jorge Arreaza urges that the work of the recently formed National Commission for the Struggle Against Contraband, which he heads, requires the combined vigilance of the security forces and the grass roots to weed out corruption.

Corruption within the State Bureaucracy

In addition to combatting contraband and tracking the movement of commodities, President Maduro has appointed a special commission to investigate foreign currency fraud and, in particular, the illicit use of dollars obtained at preferential rates through the state’s exchange system from 2011 to 2013.^xxix This criminal activity infamously has resulted in the siphoning off of more than 20 billion dollars by fictitious companies and a multitude of scams related to currency speculation. Such corruption involves not only private parties but reaches into the state bureaucracy.

Perceived foot dragging by the Maduro administration regarding tackling corruption within the state bureaucracy has drawn severe criticism from both the opposition and the Chavista base. Now Caracas is trying to get out in front of this scandalous situation. Over the past two weeks, the attorney general’s office has published the names of scores of businesses (some fictitious), including distributors, traders, importers, and individuals who are under investigation or already are being adjudicated for such crimes.^xxx The government has also tightened oversight of the currency exchange system.

There are some currents within the PSUV, including the Marea Socialista, that are not completely satisfied with the government’s campaign against currency fraud and are calling for a public audit. They also want to see the publication of the names of all state functionaries, former and present, under investigation for complicity in the currency fraud, the names of those persons who are representatives of those companies appearing on these lists, and the amount of currency involved in each case.

Whatever the shortcomings, there are clearly a number of serious efforts underway to combat corruption. If the government is able to sustain the combined effort of negotiating with the private sector to augment the distribution of foodstuffs to the market; increasing domestic production; stepping up contraband interdiction; tracking commodity movement; and rooting out currency fraud; it will likely ameliorate the shortages of some basic products and as a result improve Maduro’s standing in the polls.

Popular Power and the State

Despite differences within the tent of Chavismo over tactics and strategy for advancing the transition to socialism, Chavista currents within and outside the PSUV generally claim tenacious fidelity to the legacy of Hugo Chavez. Chavez himself insisted, both in the Plan de la Patria 2013 – 2019 and in one of his last addresses to his cabinet (Golpe de Timon, October 20, 2012) that a critical ingredient of the next phase of the revolution is the acceleration of the formation of communal structures and their associated production units, as these are crucial organized expressions of popular power.^xxxi The organic laws that pertain to these structures are very clear about the relationship between public and popular power: the state gradually but ultimately transfers power to the communal structures in order to bring into existence the communal state, a process that the opposition generally takes to be unconstitutional.^xxxii The Maduro administration had already made facilitating the acceleration of the formation of more communal structures a top priority (August 2013).  Now Maduro may be planning to go even further.

Last week Maduro requested and received the mandatory offers of resignation of all his cabinet ministers and vice presidents, signaling the beginning of what could be a shake up in the government. There is speculation that Maduro may move to include the communes more directly in co-responsibility for the policy making of state institutions through the interface of the nascent National Communal Council and the Presidential Council of the Government of Communes. The country’s peasant movements have also asked for high level input, calling upon President Maduro to set up a Presidential Council of Popular Governance of Peasants.^xxxiii Such moves would accelerate popular participation in the governance of the country at the highest levels and perhaps energize the base prior to the parliamentary elections to be held in 2015.

The Way Forward

While those who support the Bolivarian project deliberate on the way forward, the opposition MUD coalition is regrouping to hammer out its own political strategy. The MUD, which at this time does not project any clear devolution of leadership, arguably does not present an alternative project that appeals to the interests of the popular sectors. Some of the hard-liners of the MUD were part of  the unpopular attempt earlier this year at extra-constitutional regime change while more moderate elements are generally identified with an attempt to rehabilitate the neoliberal regime and to subordinate the nation to transnational corporate interests. This does not mean that one can discount those in the opposition, such as perennial presidential candidate Henrique Capriles Radonski, who seek an electoral path to power by trying to build a populist movement that reaches out to independent voters and the popular sectors. Capriles, however, retains the stigma of golpismo, so it is not certain if he can play the role of a “come back kid” by recasting himself as a populist. In any case, if the opposition manages to pull off electoral victories and retake the state, the popular struggle for a society built on the values of solidarity and humanism will no doubt endure, though perhaps under conditions of even greater adversity.

The Bolivarian project is still viable, despite the formidable economic and political challenges facing the nation. This viability is based on the continuing engagement of the popular sectors in the culture and politics of the Bolivarian revolution and the measures being taken by Maduro to address the renovation of his cabinet, fight corruption, and aggressively push back against the economic war. Maduro can only succeed in the electoral arena if he rallies the Chavista base through participatory democratic procedures, continues the dialogue with the private sector, and appeals to independent voters who are less ideological and more pragmatic. Most important, the Maduro administration can consolidate the significant social gains of the past decade through timely and substantial progress in addressing the country’s urgent economic challenges.

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Institutional affiliation is for identification purposes only and all opinions expressed are the author’s own. 

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