Welfare state

Print edition : January 27, 2012

THE STATE-OF-THE-ART metro cable car line connecting the shantytown of San Sebastin in the hills in Caracas to the underground metro line.-JOHN CHERIAN

President Hugo Chavez has implemented a host of welfare measures to improve the standard of living of the poor.

LIFE in Caracas, Venezuela's capital, has been tough for the past couple of years, especially for the less privileged. This is mainly because of a change in the weather pattern. The rainy season, which usually ends in September, has shown no sign of ending. Rains continue to lash the capital, causing landslides and traffic jams. Last year, hundreds of people lost their lives owing to flooding. The government was at its wits' end trying to provide refuge to thousands of people from the barrios (shantytowns) dotting the hills in and around Caracas. Their houses, clinging to the steep hills, were destroyed by incessant rains and landslides.

In an unprecedented move, President Hugo Chavez ordered that the buildings housing key ministries be opened up for people left without a roof over their heads. Even a five-star hotel owned by the government opened its doors to families rendered homeless. Meanwhile, the government is building housing colonies for the poor in safe areas that are easily accessible from the capital.

The government is also trying its best to improve the quality of life of the large segment of the capital city's population residing in the barrios. More than half the population in the capital resides there. Caracas has been attracting migrants from the countryside since the 1920s, when the country's oil boom began. Today, most of the country's population resides in the capital, to the detriment of rural development and agriculture. The administration has ambitious plans to relocate people to more habitable places and provide them with decent housing and other basic amenities.

This correspondent was taken to one such development project, Cambea City, located around 50 kilometres from Caracas on a beautiful site astride the Caribbean Sea. As many as 602 families from the barrios have already been settled in fully furnished apartment buildings. Each family is given a two-bedroom flat and priority is given to big families. Among the facilities already available here are a primary health care centre, a school and an adult education centre. President Chavez selected the site two years ago. A township is planned to be built there within 10 years and 20,000 families are to be resettled.

The government launched the Bolivarian Missions to improve health care coverage and education and to eradicate illiteracy. Mission Barrio Adentro's goal was to provide free and high-quality health care. The government has succeeded in this mission by dramatically increasing the number of primary health care physicians and constructing several thousands of primary health care centres all over the country. In the past 10 years, infant mortality has been reduced by 20 per cent. The literacy campaign, known as Mission Robinson, run between the years 2003 and 2005 succeeded in helping over one million adults learn to read and write. Today the adult literacy rate in Venezuela is 95 per cent. The United Nations' agencies have classified Venezuela as a territory free of illiteracy for the past six years. Mission Ribas provided higher education to adults, helping more than 500,000 adults graduate in the first three years after it was established.

The project in the resettlement colony is managed by community councils, with the state playing only a supervisory role. All people residing in a community have a shared history of living together in the barrio. Those policing the community are drawn from within it. The teachers are also from the same barrios. Venezuelan doctors, trained in Cuba, live permanently within the community.

The government has also provided fair price shops, a modern kitchen and a bakery fitted with the latest equipment. The profits from the sale of food and other commercial activities will be ploughed back into the community's welfare kitty. It is people's power in action. The idea is not only to build homes but to speed up social integration, said an official. There are 150 similar projects being undertaken all over Venezuela. In 2011, Chavez launched a new housing programme called Mission Vivienda Venezuela under which two million homes are to be built between 2011 and 2017.

Temir Porras, the dynamic young ideologue and Vice Foreign Minister in charge of Asia, said that until Chavez came to power, the slums were excluded from the city despite the fact that the majority of the people reside there. One illustration of the Chavez government's hands-on approach to this problem was the installation of a state-of-the-art metro cable car line connecting the densely populated barrio of San Sebastin in the hills dotting Caracas to the underground metro line. Before the cable cars started operating in 2010, the residents had to walk 45 minutes downhill. There were more than 600 steps to the nearest metro station. The old, the infirm and the very young were forced to remain confined to their homes before the government embarked on this innovative scheme.

Porras said that people had a fundamental right to own a home. The government has taken up this task in right earnest. Unlike in countries such as India, the government has kept private sector out of the housing sector. According to the Minister, Venezuela will use its substantial oil revenues for the social good. Until Chavez came to power, Venezuela was only pumping oil for the benefit of the rest of the world, he said. Porras said that the government faced tough challenges as we have to push forward in an atmosphere of freedom. He said it was a race against time to provide welfare for the majority. He emphasised that the government's thrust was to prioritise government investments into the social infrastructure. The oil industry, he said, was used to develop other sectors. We have inverted the situation there are more rich people than poor in Venezuela today. We have proven to be the least unequal country in the region, Porras said.

THE GOVERNMENT HAS provided fair price shops in the resettlement colonies for people from the barrios who lost their homes in landslips.-JOHN CHERIAN

Latin America is the most unequal region in the world.

The economic and social transformation that the Bolivarian Revolution could bring about was only possible after the events of 2002, the year in which the George W. Bush administration vainly tried to oust Chavez through a military coup. The Bush administration and the local elite were alarmed by the Venezuelan government's stated goal of taking control of the country's oil revenues and use them for the welfare of the people. Petroleus de Venezuela, SA (PDVSA), the state-owned oil company formed in 1948, had tried to model itself after American energy companies like Enron. It had virtually become a state within a state. Oil revenues currently account for 90 per cent of the country's export earnings. Earlier, little of these found their way into developmental projects. Deals with United States companies and the stock market were given top priority. Even after countries like Algeria and Libya extracted big concessions from Western oil companies in the early 1970s, the PDVSA preferred to maintain the status quo and provide the U.S. market with cheap oil.

According to Ivan Orellana Alcala, Vice Minister for Hydrocarbons, there were heated debates in Venezuelan politics in the mid-1970s about the subservient role being played by the PDVSA to the big oil companies. He pointed out that it was only in 1973 that the oil cartel, Organisation of Petroleum Exporting Countries (OPEC), first got together and decided to fix production quotas. The West retaliated by setting up the futures markets to take control of the pricing mechanisms. Venezuela and Saudi Arabia, the two main players in OPEC, were reluctant to nationalise their oil sectors fully. The Venezuelan government had finally to bow to public pressure and nationalise the oil sector in 1975. The President at that time, Carlos Andres Peres, however saw to it that the stiff conditions put forward by the American oil companies were accepted. These included hefty compensation and continued employment of Americans in the country's oil sector. The government also agreed to let the PDVSA run free of government control.

There was an agreement that PDVSA would not be politicised, said Orellana. Only two positions in the PDVSA's board of directors were reserved for government nominees. The Left parties challenged the President's decision and in 1975, got a law passed that was to bring PDVSA under state control. But there was a catch. To get the law implemented, a two-thirds majority in Parliament was needed.

The two parties that were dominant at the time started preparing the ground for reversing the nationalisation process. One step in this direction was to strengthen the relationship of PDVSA professionals with neoliberal U.S. academic institutions. Young professionals were sent to universities in New York and Chicago where they were politically indoctrinated. Special relations were established with Texan oligarchs, said Orellana. The Minister, who is now in charge of the PDVSA, had spent his entire professional life in the organisation. He was among the minority which opposed the creeping privatisation policies pursued by the PDVSA. The Minister said that the internationalisation of the PDVSA was proposed with the help of private investments.

The privatisation process was decisively reversed after the political upheaval in 1989, known as the Caracazo. The ordinary people of Caracas and surrounding areas reacted violently when the government implemented the International Monetary Fund (IMF)-proposed shock therapy by sharply increasing fuel prices along with the prices of basic commodities. More than 300 people lost their lives. That incident left the government shaken. It decided to go back and slow down the privatisation process.

After Chavez came to power, the PDVSA continued to be run by the so-called technocrats. The PDVSA board refused to consider the demands of the popularly elected government. It opposed the funnelling of oil revenues to the ambitious development schemes Chavez had in mind. The PDVSA top brass also did not take kindly to the decision to supply oil to Cuba on special terms. President Chavez, exercising his authority, reconstituted the board of directors in 2001 and passed a number of laws to strengthen government control. Rafael Ramirez, a close political ally of the President and a petroleum engineer by training, was appointed PDVSA Chairman in 2002. He has been the Energy Minister since 2005. The government got important decisions such as a national gas policy implemented despite strong opposition from the PDVSA. When the decision was first taken, the PDVSA had threatened to cut off gas supplies to the people.

The short-lived coup against Chavez in April 2002 came in the wake of the PDVSA's opposition to the government's nationalisation policies. The company, which was supposed to be state-owned, had made common cause with the opposition parties. Ninety per cent of the PDVSA staff were political eunuchs. They were easy to manipulate, said Orellana. After the coup attempt fizzled out, the government finally managed to retain full control over the country's hydrocarbon resources. Most of the recalcitrant PDVSA workers were sacked after they absented themselves from work during the strike. The entrenched PDVSA hierarchy, however, went down only after plunging the country into an economic crisis by embarking on a prolonged strike and acts of internal sabotage, which drastically cut down oil production. The country incurred a $17,000-million loss as a result of the strike in its oilfields and ports which lasted from December 2002 to March 2003, said the Minister.

Within a few months of the strike fizzling out, the government finally managed to get full control over the PDVSA, the lifeline of the country's economy. Whoever controls the PDVSA controls Venezuela. All the five coups in Venezuela's modern history were connected to oil, said the Minister. The PDVSA, which today is a leading global player, no longer looks solely to the West as a market. After Chavez came to power, transnational companies are not allowed to own more than 40 per cent of any given oil production site. Importantly, the government increased royalties from oil production from as low as 1 per cent to a minimum of 33 per cent. Increasingly, the exports are going to the East, especially China. India too has invested in Venezuela but its presence is small in comparison with China. India prefers to source most of its crude from its neighbourhood.

CHAVEZ AT A ceremony where houses built under the project 'Caribia City' outside Caracas were handed over to beneficiaries on December 30, 2011.-MIRAFLORES PALACE/HO/REUTERS

The government knows that global oil prices remain volatile. This factor has been taken into consideration while formulating the 2012 national budget. The budget is calculated at $50 a barrel of oil, though the current prices are more than double that. The Minister for Planning and Finance, Jorge Giordani, said that the low estimated price for oil was meant to act as a cushion against volatile global commodity prices. He gave the example of the precipitate drop in oil prices from $140 a barrel to $40 when the world was hit by a financial crisis in 2008. The non-petroleum sector provides 55.4 per cent of the income for the new budget. Luis Britto Garcia, one of Venezuela's and the continent's foremost novelists and essayists, who describes himself as an independent supporter of the Bolivarian Revolution, said that the government had accomplished most of the millennium development goals. As examples, he gave the eradication of illiteracy and the continuing emphasis on education by the government. Out of a population of 30 million, nine million people are studying in schools or colleges. He said that the poverty rate had been reduced dramatically from 80 per cent to around 5 per cent. Elections in Venezuela are among the most transparent in the world. Hundreds of international observers have been present during the elections and referendums that have taken place since Chavez was elected in 1998.

According Garcia, it was Venezuela that started the trend of politicisation of the masses. Venezuela, he said, had become a participatory democracy. Social movements have been in the forefront of the Bolivarian Revolution. The political longevity of Chavez would not have been possible without the support of the social movements. The establishment of the various missions and their integration with the social movements has stood the government in good stead. Most of the participants in the missions are women.

He readily admits that the government still faces important challenges. He said that the capitalist mode prevailed in the mixed economy of the country. Most of the consumer goods are imported. Retail business is still in the hands of a strong capitalist class. Chavez nationalised the country's telecommunications and power sector in 2005. The state is now playing a bigger role in agricultural, banking and other important sectors. Garcia blames profiteers for the rising inflation. All the same, he exuded the hope that the country was on the road to socialism. We have socialised our principal revenue earner oil. Our oil resources will be used to form a really productive and renewable economy, said Garcia. The writer predicted that the victory of Chavez in the presidential election due to be held in 2012 was a certainty. He said that more than 60 per cent of the population was solidly behind the President.

Latest official figures released in December 2011 reveal that Venezuela has had the largest reduction in unemployment in the continent. According to Venezuela's National Institute of Statistics, the unemployment rate is currently 6.2 per cent. Before Chavez assumed the presidency, it was more than double this figure. Inflation is an issue as prices of non-basic goods go up. But the inflation levels are lower than those witnessed in the 1990s and before. The government raises wages once or twice a year to match the impact of inflation. Venezuelans today have the highest minimum wage in Latin America.

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