The Dismantling of the Oil Industry in Venezuela and the Defense of the Public Sphere


Human Wrongs Watch

By Miguel Denis and César Romero*

The subsidized price of fuels and the systematic looting of PDVSA have led Venezuela to an unusual situation: being an oil producing country, now it needs to import huge shipments of gasoline.
Empty barrels of gasoline in Maracaibo, Venezuela, december 2019| Humberto Matheus, Nur photos, PA Images.

16 July 2020 (openDemocracy)* — Venezuela is going through a general collapse of public services, which adds to the problem of hyperinflation, the low wages, and precarious living conditions. This context has motivated frequent protests in many communities affected by the lack of water, cooking gas, electrical power, or fuel across the country.

The precarious living conditions of the population seem to be reaching unbearable levels, and protest, unable to articulate social or political demands, becomes a survival mechanism rather than an instrument to demand rights.

The political and social crisis affecting the country has had several peaks of conflict in 2016 and 2017. However, as the government managed to overcome the pressure, the processes of social fragmentation deepened. The organizations that articulate trade unions, workers’ movements, community associations, students, etc., have weakened as much as the living conditions of the population.

Although the unrest levels may be very high (according to the Venezuelan Observatory of Social Conflict in April, an average of 20 protests took place throughout the country every day of April), the destructuring of the social fabric limits the collective articulation to spontaneous and contained episodes, generating a feeling of isolation and helplessness in the opposition majority. This has allowed the national executive to impose an agenda that turns out to be a kind of political totalitarianism with “partial liberalism” on economic matters.

As the country’s economy progressively collapsed, a network of informal and deregulated businesses emerged, tending to replace the roles of public companies devastated by corruption.

Part of the capital that has been raised from state corruption and criminal networks is reinvested to capture the few sources of accumulation that remain in the country: Remittances-based consumption, mining (gold, diamond) [1], food imports [2], among others; as well as the recent economic phenomenon of the bodegones (grocery stores where imported products are offered at prohibitive prices for the bulk of the population) that emerged in the second half of 2019, along with the de facto liberalization /dollarization of the economy.

Now, with the crisis inside Petróleos de Venezuela (PDVSA) reaching its final stage, legal mechanisms have been opened for further privatization of the company, as well as the restructuring of the fuel distribution system.

Historically, some people in power took advantage of the subsidized price of gasoline to smuggle it [3], giving rise to a mechanism of systematic looting that, added to negligence, corruption, lack of investment, and vast debts within PDVSA, ended up by destroying national production. This has led us to an unusual situation: being an oil country, we need to import huge shipments of gasoline.

As can be seen in figure 1, the Venezuelan economy has become more dependent on the international market, to the point that the import of mineral fuels and their derivatives, greatly needed to support the oil industry, went from representing 4.2% of total imports in 2001 to over 41% in 2018, while the import of cereals, which can be produced in the country, grew from 1.8% in 2001 to almost 10% in 2019. These data reflect the dismantling of the national productive structure and greater dependence on imports to sustain the functioning of society.

Figure 1. Total percentage of imports by category (2001-2019). Elaborated by CERLAS with data from UNCOMTRADE 2020

Faced with the shortage, gas stations were taken by the military to control the supply of fuel and ration it between the customers, privileging wealthier neighborhoods and people with political connections to the power. The dismantling of the institutional framework and the emergence and stabilization of informal dynamics fueled, in the first months of quarantine, a parallel market organized by the same subjects that controlled the stations, where a gallon of gasoline could cost between $ 11 and $15.

After three months, with a country paralyzed and subjected to a new routine of queuing, shortages, and smuggling, a modus operandi similar to the one who gave rise to the bodegones took hold: the legalization of the power groups that import and distribute the resources.

On May 30, the Maduro government announced a hike in the price of subsidized fuel to 9 cents of a dollar per gallon with a maximum quota of 32 gallons per month and the dollarization of 200 fill stations across the country that would charge $ 1.89 per gallon. This way, steps are being taken to privatize the Venezuelan oil and gas business, and part of the national oil industry begins to function as a mere intermediary and distributor of foreign fuel in the country.

This is the beginning of a historic process of formal transfer of PDVSA to transnational foreign capitals (Russian, Chinese, American, among others) and the abrupt dismantling of the public company that sustained the way of life of several generations of Venezuelans in recent decades.

The outrage with the general increase in the price of gasoline in private filling stations has swept through the country, triggering discontent and spontaneous protests among the people queuing when the promised subsidized gasoline does not arrive at the site. The government has updated all the price scales to a dollarized economy, except for the minimum wage, which amounts to less than $ 5 a month.

On the other hand, to stimulate imports in the framework of the liberalization of the economy, the national executive has placed a tax exemption on some sectors, from imports – including fuel – to international investments, and even the entire dollarized economy does not have any fiscal regulation yet.

However, the VAT remains at a high 16%, generating more income to the national budget than the Income Tax. A dollarized economy has been unleashed, managed by the power groups that have flourished around the state administration, while small consumers are left with the fiscal burden that feeds the structure.

A corrupted and indolent administration has ended up destroying public services and has been reduced to a machine of clientelistic distribution to allocate the few resources it has (bonds, food rations [4], state wages).

More than a statist archetype, the government has opted for a model of expansion and looting of the State, which now reaches an impasse. The same dynamics of dispossession has produced a restructuring of the country towards a model of general privatization, based on capitals and investment dispensed by sectors associated with the structural corruption that have plagued the institutions and the national government.

A new economic elite is taking shape. New power groups that, with the consent of the central government in exchange for unconditional loyalty, gain access to the meager resources of the State and act as a private sector, constituting a sort of “new bourgeoisie” as the totalitarian nature of the central government consolidates.

It is a regressive transition, a trend that has been viable to the extent that the government has been able to maintain control over the population under a mix of strategies of violence, patronage, and authoritarianism. The logic of looting that has led us to the crisis is that of a machine of voracious extraction of human and natural resources, a process of accumulation by destruction that managed to install itself in the codes of political power.

But these dynamics of power accumulation have gaps in the form of solidarity and autonomy-based resistance, which could produce social and, as far as possible, institutional counterweights against the current rule. Thus the need to defend the public sphere, understood as what is “common” to all of us, which, under the context described, can be opposed to the state and bureaucratic controls.

The counterweight begins when the private extraction of resources is limited by the common administration, which in our society is expressed both in the dispute over the value of labor and over democratic institutions and political rights.

Translation from its original in Spanish by José Rafael Medina for Hearts on Venezuela

Notes:

[1] In 2016 the Global Initiative against Transnational Organized Crime (GIATOC) reported that 91% of the gold produced in Venezuela was illegal. This figure coincides with the decrease in production and weakening of the state gold industry and the rampant expansion of small and medium-scale mining in southern Venezuela. https://globalinitiative.net/organized-crime-and-illegally-mined-gold-in-latin-america/

[2] Encouraged by the exemption from import taxes of more than 1000 products for final consumption, imports of these goods rose in 2019, mainly to fuel the economy of bodegones, dollarized grocery stores that offer basic food items in addition to other luxury food products and miscellaneous goods. https://www.noticierodigital.com/2020/03/torino-economics-productos-importados-de-consumo-final-duplico-su-valor-en-2019-a-41-millones/ At the same time, it should be noted that the CLAP food distribution program has also reproduced a system of massive food imports of food since 2017-2018, which has been deemed fraudulent. News site Armando.info has conducted several investigations into the import networks around CLAPs: https://armando.info/Series/Details/24

[3] Conservative estimates indicate that more than 45 thousand barrels of fuel are lost every day in Venezuela due to smuggling. This figure represents 15% of the daily consumption of gasoline in the country. Source: https://haimaneltroudi.com/venezuela-el-por-que-y-el-como-aumentar-la-gasolina/

[4]The CLAPs (Local Committees for Supply and Production) are food distribution committees created four years ago as an emergency palliative in the face of the food shortage crisis that erupted in 2016 in Venezuela and, as admitted by Nicolás Maduro, as a remedy to correct the flaws in Misión Alimentación, which until then governed the distribution of subsidized food. They were conceived as a transitory measure while the import capacity of the Venezuelan State was recovered, given that the national productive apparatus was so deteriorated that a short-term recovery was not possible. https://efectococuyo.com/especiales/clap-cuatro-anos-de-paliativos-para-una-pandemia-llamada-hambre/

Translated by: José Rafael Medina for Hearts On Venezuela

*Miguel Denis forma parte del equipo de política y activismo social – Centro para la Reflexión y Acción Social (CERLAS) en Venezuela.

*César Romero forma parte del equipo de política y activismo social – Centro para la Reflexión y Acción Social (CERLAS), en Venezuela.

*SOURCE: openDemocracy. Go to ORIGINAL.

2020 Human Wrongs Watch

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