Friday, 9 March 2018


The Political Crisis of the Bolivarian Democracy in Venezuela: a necessary revision
By Blas Regnault regnault@iss.nl [1]
09 March 2018
The Venezuelan Democracy is experiencing a complex crisis, in which the legitimacy of the political system and the economic model are at a cliff’s edge, creating a situation with few solutions in sight. This two-dimensional crisis has consequences on multiples levels for political representation, participation of social movements, the exercise of the right of equality before the law and people’s access to food and medicines. Consider the historical and political dimensions of the crisis.
1. Unachieved Participatory Democracy (1999-2013) and the Authoritarian Twist (2013-2018)
Participatory Democracy and its challenges. In 1999 Venezuela inaugurated a new Democratic Constitution, perhaps one of the most inspiring political models of the last 50 years in Latin America: Participatory Democracy. Previously, popular participation had been marginalized in the 1961 Democratic-Liberal Constitution. Once Chavez won the Presidential elections in 1998 and proposed the Constituent Assembly to "re-establish" Venezuelan democracy, his popularity was guaranteed.
It is important to note that the 1999 Constitution and its Participatory Democracy model never privileged “real socialism” as an economic and political model. However, the operationalization of Participatory Democracy never actually took place. At the end of 2012, few laws[2] had been passed to give substance to this democratic model.

From “Participatory Model” to “Twenty First Century ‘Real’ Socialism”. In 2007, after two unsuccessful coup attempts (2002 and 2003), two presidential election wins (2000 and  2006) and a defeated recall referendum (2004), Chávez proposed a constitutional reform process. The aim was to promulgate the socialist character of the Constitution. This referendum was the only electoral process that Chávez lost. The attempt to establish a Communal Socialist State was frustrated by the outcome of this popular election. Despite Chavez’ struggles to lead the model towards a more conventional socialist system, the Constitution of the Bolivarian Republic of Venezuela remained formally untouchable. From 2007 until the announcement of his illness in June 2011, Chávez attempted try to “keep the peace in the party ”, consolidating even more the centralized style of leadership. As a leader, he left two uncompleted tasks: the institutionalization of Participatory Democracy model of 1999, and deconstruction of the Liberal State founded in 1961. These two unfinished tasks created a political and institutional limbo that paved the way for the authoritarian twist that took place after 2013.

The Authoritarian Twist. With the death of Chávez (5 March 2013), and the rise of Nicolás Maduro to the Presidency, political forces (into and out of Chavismo) reconfigured themselves, with the military taking an increasingly prominent role. The ruling party founded by Chavez (Partido Socialista Unido de Venezuela –PSUV)[3] weakens. This undermines the chances of generating consensus for an economic policy strategy to cope with falling oil rents since June 2014, and falling oil production since 2015.  

In December 2015, the opposition won two-thirds of the seats in the National Assembly, radically changing the configuration of political parties within the institution. The elected National Assembly would elect the National Electoral Council (CNE), the General Attorney of the Republic (FGR) and the Supreme Court of Justice (TSJ). However, to forestall this, the outgoing members of the government, in a fast track mode, elected a new Justice of the Supreme Court (TSJ) just before the new National Assembly was installed. Thus, the TSJ remains in the hands of central government, and the party, and has systematically overturned the policies of the new National Assembly.

State of Exception and Economic Emergency. In February 2016, the TSJ authorized the President to move forward and open up the oil sector to international investment. TSJ also empowered him to declare a State of Exception and Economic Emergency, violating the constitutional framework. In March 2017, the TSJ declared that the National Assembly was in contempt, despite having been elected by the population in 2015, and transferred the National Assembly’s its powers to central government (Rulings 155 and 156 of the Constitutional Chamber of the TSJ). In this way, the Supreme Court becomes the supreme national body, lending a "legal" gloss to the authoritarian actions of central government.
Protests 2017. In April 2017 a new wave of protests began, which ended in July with young protesters either dead or in prison.

New Constitution? The government of Maduro called for elections on 31st of July 2017, to set up a new National Constituent Assembly, parallel to the National Assembly elected in 2015. This National Constituent Assembly was to draft a new Constitution. Unlike what happened in 1999, little is known about this new national political contract. The Constituent Assembly has served to ratify the power of a new General Attorney of the Republic (FGR) and the National Electoral Council (CNE).

The Dialogue in the Dominican Republic: towards a Transition? From October 2016 to February 2018 several meetings have been held in the Dominican Republic between the visible opposition (mainly established in the Constituted National Assembly) and the Government. The aim of these talks was to re-establish political consensus and end the political violence. Some international mediators have participated in these discussions. Unfortunately, these negotiations had no positive results, and constitutional order is not yet re-established. On the contrary, it seems these dialogues contribute even more to delegitimize the political forces in power around Maduro. At the time of the writing in early March 2018, presidential elections are planned for 20 May 2018. The visible opposition has decided to call for a boycott of these presidential elections, since there is no confidence in transparent and fair electoral processes.

2. The present state of Democracy in Venezuela

Basic rights: Venezuela is falling behind. Access to basic goods is no longer guaranteed for most Venezuelans. There is an increase of dependency on direct subsidies through the so-called CLAP, a box with food provided by the central government. This is only for those registered for a consumption card called the “Carnet de la Patria”. Other social consequence of the food crisis are cases of malnutrition which are even preventing children from attending school (UNICEF, 2018)[4].

Inefficiency in public management, unsustainable exchange rates.  Misguided economic policies create profound distortions throughout the whole economy.[5] Exchange rate parity means drastic reductions in foreign currency and a deterioration of the productive sectors, with damaging effects on the ability to import, and crises in production and distribution of medicines and food. In the case of medicines, the population is having enormous difficulties in treatment of chronic diseases such as high blood pressure, cancer, diabetes and renal dialysis.

Hyperinflation. In 2017, non-official figures indicate that inflation was near 2,616 per cent! For instance, by February 2018, a person that earned the basic minimum wage (basic salary plus food allowance) had the capacity to buy around 10 per cent of the food basket required and 8 per cent of a basic family food basket. A public sector graduate could acquire just 19 per cent of the food basket and 13 per cent of the basic family basket, with their average salary.

Forced migration. The number of people leaving the country is growing. The main reasons for migration are the low wages relative to living costs, and the general critical situation of shortages. Unofficial figures estimate that up to 4.5 million people have emigrated in the last 5 years[6]. People have started to move to neighbouring countries such as Colombia and Brazil. Other important contingents of people are migrating to other Latin American countries, including Ecuador, Peru, Argentina, Chile, Bolivia, Panama and Costa Rica, as well as to European countries such as Spain, Italy and Portugal. Many migrants to Europe are descendants of refugees who arrived in Venezuela after the Spanish Civil War and The Second World War.

In conclusion, this crisis of democracy in Venezuela is fundamentally due to two historically unsolved puzzles. On the one hand, a frustrated “Participatory Democracy” has been pending since 1999. On the other hand, misunderstandings of the oil economy, and its consequent mismanagement, has resulted in the squandering of oil rents. To solve these puzzles, politicians and social scientists should pay much more attention to the social and economic history of such this diverse and specific country, Venezuela.

References and Sources
-   García Guadilla, María PIlar (2018). Exclusionary Inclusion: Post-Neoliberal Incorporation of Popular Sectors and Social Movements in New Left 21st Century Socialism: the experience of Venezuela. https://www.academia.edu/23713466/Exclusionary_Inclusion_Post-Neoliberal_Incorporation_of_Popular_Sectors_and_Social_Movements_in_New_Left_21st_Century_Socialism_the_experience_of_Venezuela   
 -       UNICEF (26th January 2018) https://www.unicef.org/media/media_102501.html




[1] Blas Regnault is a Venezuelan Sociologist, devoted to the study of global oil price cycles and its impact on the sustainable development in oil exporting economies.
[2]  The Organic Law for Potable Water and Waste Service is one of the law. However most of the set up policies were Presidential decrees, or voluntary wishes expressed by Chavez during his allocutions in “Aló Presidente” (García Guadilla, María PIlar, 2018).
[3] On 5 February 2018, Nicolás Maduro registered a new political party with the National Electoral Council (CNE). This new party is called “Vamos Venezuela”, and is set up as if it were separate from the PSUV.
[4] Statement published the 26 of January 2018 in New York https://www.unicef.org/media/media_102501.html
[5] Since February 2018, the official exchange rate changed from 10.00 to 30,000.00 bolivars per dollar, while the parallel dollar parity, which has a significant impact on the pricing, was 230,000.00 bolivars per dollar on 23 February 23, 2017.
[6] According to the last Census, in 2018 Venezuela reach 32 Million of people.

Monday, 5 March 2018



The oil rent and the economic crisis in Venezuela

By Blas Regnault regnault@iss.nl [1]
March 2018

The Venezuelan economy is experiencing a very complex crisis. Common sense invites us to draw hasty conclusions, explaining the problem trough the so-called resource curse. In my opinion, the oil rent is neither a blessing nor a curse. The oil rent is just a peculiar income that deserves a different conception into the national accounts in order to understand the performance of these oil-exporting economies. Deconstructing the “curse” argument and taking into account some peculiar aspects of the global oil business can give us initial answers to understand the Venezuelan crisis.

What is the oil rent? What is the oil price? The oil rent is a fluctuating income, linked to the global productivity of the oil wells in the world market (Differential Rent or Ricardian Rent). In nowadays, the global productivity of oil wells is due to the traditional natural conditions and to the emergency of new technologies, such as “Shale Oil” in US. Thus, the price of a barrel, after pay wages and profits, depends on the production cost of the least productive well, creating a differential of costs that the most productive regions have taken advantage.

Oil rent at stake. Thus, the oil rent is a widely accepted, inevitable and a specific remuneration into the oil business. In historical terms, National Oil Companies (NOC), Major Oil Companies (MOC), oil national states and private owner (only in US) have been fighting to taking advantage of the oil rent. In Texas, Alaska, Saudi Arabia, Kuwait, Norway, UK, Nigeria or Venezuela the property rights regime represents the main legal tool to keep part of the rent. In the last 100 years, Venezuela developed a specific fiscal regime that inspired the foundation of the Organization of Petroleum Exporting Countries (OPEC), an organization made it to fight for the oil rent from the supply side.

What is the problem with the oil rent? Even if the oil rent has been a historically and recurrent income for the Venezuelan economy, the uses of the oil rent rest unsolved. Indeed, the problem with the rent starts when a country, an entire economy, makes policies (both, in the oil and non-oil sectors) counting on the oil rent as if it was a stable and an inexhaustible income over time. Indeed, one of the ideological risks with the oil rent is to suppose the fiction of having that income in the future, committing the majority of the time to the country with external debt. This was the case of the origin of the external debt during the 80's and it is what is happening now.

Why the falling of oil rent is the crisis of the national economy? The crisis in an oil rent dependent economy occurs when oil prices fall below the commitments made in the national budget. If the economic system did not save funds aside for the low prices periods, if the economic system is not prepared for the fluctuations of the oil rent, a crisis ensues, whose dimensions will always have the size of the commitment acquired.
However, the current Venezuelan crisis has three additional characteristics:
· The national oil industry has suffered a significant deterioration in its productive capacity[2].
· The non-oil sector devoted to food production (dependent also on the oil rent), has suffered very serious consequences in its productive capacity.
· The inefficiency in the internal fiscal accounts and the unsustainable exchange rate parity creates profound distortions throughout the whole economy.

This also causes a drastic reduction of foreign currency and a generalized deterioration of the productive sectors, having a hyper-inflationary effect on prices

Non-productive solution for the massive economic crisis. The national government is still far from initiating a plan of economic reactivation oriented to the national production. On the contrary, the fall of the oil rent has led the government to look for other sources of rent, exacerbating the extractive condition of the economy. At present, the government is trying to recover revenues through indebtedness with a cryptocurrency called Petro, committing future barrels of oil in private hands and reversing rights obtained in 2001 with the Hydrocarbons Law. Petro will undoubtedly has a direct consequence on national sovereignty. In addition, government has created the Orinoco Mining Arc, for the exploitation of gold and other minerals, placing more than half of the southern province of Guayana at the disposal of large transnational mining corporations.

What to do with the oil rent? In Venezuela, the public discussion about the uses of the oil rent in the national development starts in 1934, and is still on going. However, the ambiguous conception of the oil rent since 1976 has prevented a consensus on the uses of oil rent, leading the economy indebtedness and to the mismanagement of the oil rent.

Building accountability for the oil rent. Oil exporting economies have to deal with the oil rent as inevitable part of its national income. The main challenge is how to build a national account system and institutional framework oriented to the accountability of this oil rent, in order to prevent the historical mismanagement that this country has witnessed.


References and Sources
-   Mommer, Bernard (1989). ¿Es posible una política petrolera no rentista? In Revista BCV: Caracas, Volumen 4 – No. 3 – 1989; pp. 56-107
-   Murshed, S. Mansoob (2004) ‘When Does Natural Resource Abundance Lead to a Resource Curse’, IIED-EEP Working Paper 04-01, www.iied.org
- OPEC (2018) Monthly Oil Market Report, 12th February 2018. Available in http://www.opec.org/opec_web/en/ 
-  Regnault, Blas (March 2018). “Synchronicity between recent transformation in liberal institutional frame in Venezuela and the new challenges of a ‘green’ global oil business”. MIMEO.


[1] Blas Regnault  is a Venezuelan Sociologist, devoted to the study of global oil price cycles and its impact on the sustainable development in oil exporting economies.
[2] According to the OPEC, the Venezuelan Oil production losses 604,000 barrels per day since 2016 (2,373 MBD 2016/ 1,769 MBD Jan 2018).