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Stephanie Pearce
This article originally appeared in the Summer 2013 edition "Chavismo After Chávez: What Was Created? What Remains?"
Countries in the “developing world” have, since the end of formal
colonialism, seen their ability to act autonomously systematically
constrained by a variety of factors. These include, but are not limited
to, macroeconomic policy conditions attached to World Bank and IMF
loans, poor terms of trade with the Global North, lack of effective
agency in international organizations, and the actions of multinational
corporations operating in their territory.
Venezuela’s regionally oriented foreign policy during the Chávez era
counteracted each of these dynamics, and in doing so opened up
autonomous policy space for other states in Latin America and the
Caribbean. The concrete achievements of a number of mechanisms,
including counter-trading and credit provision within the PetroCaribe
framework, and the recent establishment of a virtual regional currency,
the SUCRE, all played a part in this process.
PHOTO BY MICHAEL FOX
The first crucial action undertaken by Hugo Chávez as Venezuelan
President in protecting regional economies was to vociferously oppose
the proposed Free Trade Area of the Americas (FTAA) at the third summit
of the Americas, held in Quebec in 2000. The proposal represented the
perfect consolidation of U.S. economic power, and was designed, in the
words of General Colin Powell, to “guarantee control for North American
businesses...over the entire hemisphere.”1 After Chávez
voiced concerns, the Mercosur countries followed suit, stopping the FTAA
conclusively at the subsequent Mar del Plata summit in 2005. If the
FTAA had gone ahead, it would have resulted in the substantial economic
subordination of Latin America to U.S. corporate interests. Agricultural
sectors in particular would have suffered from an influx of low-cost
subsidized U.S. products. In addition, areas of the public sphere that
had previously avoided commoditization or privatization would have been
fair game for trans-national corporations. Under the FTAA, Amanothep
Zambrano, ALBA Executive Secretary, told me last August that states
would not have been able to “lead any aspect of economic policy, and
therefore their political capacity to solve social problems” would have
been heavily constrained.
Their shared opposition to these proposals encouraged Cuba and
Venezuela to form an alternative regional integration framework, the
Bolivarian Alliance for the Peoples of Our America (ALBA) in 2004. This
quickly matured from a bilateral socio-centric cooperation agreement to a
nascent regional bloc, or alliance, with the addition of
Bolivia in 2006. Bolivia’s newly elected president, Evo Morales, brought
with him the idea of a “Peoples Trade Treaty” (TCP), which extended the
ALBA’s self-identified principles of solidarity, complementarity
between economies, and respect for sovereignty, into a 23-point
agreement that systematically opposed the tenets of orthodox free trade
agreements. The TCP opened the possibility of pursuing economic policies
outside of the market fundamentalist approach of the neoliberal era,
for example by stating that people’s right to access healthcare should
be prioritized above protecting pharmaceuticals’ corporate
profitability. In the following three years, membership of the ALBA-TCP
grew to nine countries encompassing much of Central and South America as
well as the Caribbean.
During this time, the Venezuelan government also constructed
PetroCaribe, a framework designed to facilitate the supply of its oil
products to neighboring Caribbean states under preferential conditions,
which at the time of writing had 18 members. Through these two channels
the Venezuelan government has opened up autonomous policy space in the
region, to some extent overcoming the constraints identified above.
Venezuela has, largely through ALBA and PetroCaribe, become an important
source of funding in the region. Oil supply agreements, signed between
Venezuela and several members of both frameworks, permit countries to
defer payment on set portions of their oil bill and use the capital
obtained for government spending. Crucially this capital is obtained
without the macroeconomic conditionality and policy prescriptions
associated with World Bank or IMF loans.
PetroCaribe agreements, for
example, state that “member nations of the group are allowed to defer
payment of 60% of their oil bills to Venezuela for 25 years, at 1%
interest, in addition to a 90-day grace period on all payments, and a
two year initial grace period on the credit facility.”2
PHOTO BY DARIO AZZELLINI
This credit facility offers an alternative to IFI loans, while
maintaining small Caribbean nations’ ability for autonomous decision
making, which is considered critical in the post-colonial context.
Specifically, credit provision has enabled Jamaica and Antigua to delay
recourse to IMF loans, and put them in a better negotiating position so,
I was told in August 2011 by Norman Girvan, former Secretary General of
the Association of Caribbean States, “they were able to make an easier
deal.” Venezuela, under the current administration, has also purchased
billions of dollars’ worth of bonds issued by the Argentine government,
enabling the country’s early exit from all of its IMF debts and
associated policy prescriptions.
As a result of this mechanism, PetroCaribe funding to the Caribbean
now exceeds both EU and U.S. aid by a wide margin, with only remittances
from the Caribbean diaspora exceeding it in funding to the signatory
states.3 For Dominica, Venezuela is now the “single largest
creditor...surpassing traditional sources of credit such as regional
development banks and the IMF.” Venezuela is owed 27.7% of the country’s
total debt, which grew 12.6% in 2011 alone, to $8.8 billion.4
Such figures inevitably raise concerns that the agreement is increasing
debt levels in the region and developing dependence on Venezuelan
largesse. Barbados’s Prime Minister, Owen Arthur, has stated that his
country would not join because he “would not permit the present
generation of Barbadians to consume oil now to be paid for by succeeding
generations of Barbadians.”5 However, the deferred portion
of the bill does not constitute debt in the orthodox sense, as it is
kept by the Caribbean partners and can be spent as capital towards any
project deemed socio-productive, or saved to accrue interest to offset
the bill, as has been the case in Guyana. The domestic opposition sees
the PetroCaribe scheme as Chávez “giving away” oil irresponsibly.
However, the amount is relatively small and sustainable. Supply to
PetroCaribe members, including Cuba, peaked in 2009 at an average of
196.4 thousand barrels daily, which constituted only 7% of total
Venezuelan oil exports that year, and operates under market prices in
accordance with Venezuela’s OPEC membership.6
Due to a high level of dependence on imports, Venezuela has also been
uniquely able to position itself as a regional alternative to North
American and European markets. This dynamic has, again, been apparent
within both ALBA-TCP and PetroCaribe. In 2008, the PetroCaribe framework
was augmented with a “compensatory exchange mechanism” via which oil
bills from Venezuela could be offset by the export of domestically
produced goods and services. The Venezuelan market is particularly
important for Caribbean countries who suffer from poor terms of trade
with the North due to dependence on primary commodity exports, the
continued use of tariff and non-tariff barriers by developed nations,
and the erosion of colonial trade preferences. For example, up to 90% of
Guyanese rice exports per annum were going to EU countries when, in
2000, the Overseas Territories (OCT) loophole was closed, resulting, I
was told by the Guyanese Ambassador to Venezuela, in a “50-60%” drop in
prices. When the compensation mechanism was announced, the
then-president of Guyana, Jagdeo Bharrat, actively sought a better deal
with Venezuela through the PetroCaribe framework. The resultant export
of both rice and unprocessed paddy has seen Venezuela become the single
largest importer of Guyanese rice, replacing Portugal.7
In the case of ALBA countries, a strategic reorientation towards
intra-regional trade, and particularly export to Venezuela, has reduced
dependence on the United States and subsequently its ability to
constrain autonomous action. For example, when Bolivia expelled the U.S.
ambassador in 2008 following his alleged involvement in separatist
actions in the Santa Cruz Department, Washington retaliated by excluding
Bolivia from the Andean Trade Promotion and Drug Eradication Agreement
(ATPDEA). Bolivia lost its U.S. tariff advantages, which was a
particularly painful blow to its textile industry. Chávez immediately
offered them a market under “the same or better conditions” that Bolivia
had enjoyed with the United States. As a result, says the Bolivian
Ambassador to Venezuela, in 2010 Venezuela “imported almost 50 million
dollars in textiles alone, or nearly double that which [Bolivia] used to
export to the USA” annually.
The purchase agreement was supported by initiatives by both
governments to facilitate small and medium sized businesses’ entry into
the regional market. A fund was established in the Bank of ALBA to
provide short-term interest-free credit to Venezuelan importers in order
to purchase Bolivian textiles, paired with a fund in the Bolivian
national development bank to provide small textile producers credit to
purchase raw materials. This agreement therefore not only minimized the
impact that U.S. market sanctions could have over autonomous decision
making by the Bolivian government, but also created direct relations
between regional producers and consumers.
These patterns are part of a wider renewed focus on South-South
trade, both within the region and with extra-hemispheric partners.
However, the United States remains the region’s single most important
trading partner. The objective is not to be “anti-American,” rather to
reduce the U.S. ability to exert controlling influence over its Latin
American and Caribbean neighbors by creating alternatives to the dollar
in international trade. One way in which this was achieved was through
the PetroCaribe mechanism and similar counter-purchase agreements with
other regional allies. As direct non-market transactions, they
circumvented the use of the dollar, thereby avoiding its automatic
privileging in international trade, and avoiding the transaction costs
associated with its use.
This concept was extended by the ALBA’s virtual common currency, the
Unified Regional System for Economic Compensation (SUCRE). The SUCRE is
essentially a series of clearing accounts between Cuba, Bolivia,
Venezuela, and Ecuador that allow the countries to trade freely without
transaction costs. Accounts are balanced every six months with one hard
currency transfer. The value of trade conducted via the SUCRE in its
first year of operations, 2010, was just over $8 million. It grew
exponentially, to almost 100 times that the following year
($172,905,344).8 Though the SUCRE’s value was originally set
against the dollar ($1 to XSU1.25), and it is typically used as the
convertible currency to make balancing payments, in the long term the
intention is to no longer use the dollar at all. The direct and
deliberate countering of U.S. economic hegemony that the SUCRE
represents has been of particular importance to Ecuador, whose
macroeconomic policy options have been constrained by a prior
administration’s decision to dollarize the economy in 2001. In fact, the
mechanism was largely designed by Ecuadoran economists, and of the $170
million traded in 2011, $140 million was for Venezuelan purchases from
Ecuador (mainly tuna).9
As we have seen, Chávez’s time in office saw an unequivocal
reassertion of the state as economic actor throughout the region. This
dynamic was particularly felt in the crucial energy sector. In
Venezuela, governmental control of the state oil industry was
consolidated, while both Bolivia and Argentina nationalized hydrocarbons
with investment and technical assistance from Petroleos de Venezuela
(PDVSA), via agreements with YPFB and Enarsa, state owned gas and oil
companies in Bolivia and Argentina respectively. Even in centrist or
center-right Caribbean nations, Venezuelan investment has enabled
state-owned oil companies and agencies to supply oil products directly
to their population, “to effectively intervene in their markets to
minimize retail prices” in the energy sector which had previously been
“dominated by foreign companies.”10
Where state energy companies or agencies did not exist prior to
PetroCaribe, they have been formed to facilitate the direct import of
oil products from PDVSA. These can take the form of joint ventures with
the PDVSA subsidiary PDV Caribe. Venezuelan credit and grants have also
been used to fund improvements in energy infrastructure; that is namely
the capacity of the member countries to store and refine oil, and in
turn to generate and distribute energy. Central to this scheme has been
investment in the Cienfuegos refinery in Cuba and at the Kingston
refinery which now almost exclusively refines Venezuelan crude. The
refinery is run by Petrojam Ltd, a mixed state enterprise in which
Jamaica Oil Company owns a 51% stake and PDV Caribe 49%. This
reassertion of state control over energy resources is seen as a
fundamental facet of PetroCaribe’s “new oil geopolitics…at the services
of our peoples not at the service of imperialism and big capital.”11
The right and power of multinationals to dictate domestic policy has
been systematically undermined, both through a reassertion of the state
as economic actor and in the tenets of the TCP which we briefly touched
on earlier. This offers a stark contrast to the World Trade
Organization’s policies such as Trade Related Intellectual Property
Rights (TRIPs), which consistently privilege corporate interests, and/or
offer beneficial “loopholes” for developed nations. This has been
possible through the creation of new regional forums in Latin America
and the Caribbean, in which members’ interests are not subordinate to
those of more powerful nations. For example, in the TCP, economic
asymmetries between members are recognised and therefore tariff
reductions do not have to be reciprocal, disregarding the “most favored
nation” principle. In addition, ALBA has no supranationality; it is best
described as a framework for cooperation rather than an integration
body in the orthodox sense. All programs and agreements are optional,
flexible, and voluntary, thereby protecting the national autonomy of
members.
Though statist in its organization, ALBA facilitates continual
dialogue through presidential and ministerial summits, which have also
been attended by international observers. Non-member countries are also
represented in the council for social movements, whose proponents
include groups such as the Brazilian Landless Workers’ Movement. ALBA
proved to be the first in a series of new regional spaces, catalysed by
massive rejection of the FTAA proposal—a rejection led by Chávez—and
culminating in the formation of the Community of Latin American and
Caribbean States (CELAC), which was put together as an alternative to
the Organization of American States (OAS), and includes all the
countries of the Americas except the United States and Canada. In this
way, lessened economic dependence has resulted in increased diplomatic
autonomy from the United States.
There are those who argue that Venezuelan projects in the region
created new constraints, replaced one set of dependencies with another.
But this is not the case. Though he was a catalyst for and investor in
regional development, Chávez avoided constructing a position of power or
privilege for Venezuela. This is evident in the lack of conditionality
attached to credit mechanisms and the fact that the controlling stake of
each mixed state enterprise was maintained by the partner country.
Though oil wealth put Chávez in a unique position to invest in regional
projects, these were not unilaterally devised or constructed; the TCP
came from Bolivia, SUCRE is an Ecuadoran concept, and of course ALBA
social programs were exported from Cuba. However, these ideas were made a
reality by the capacity for rapid implementation that oil largesse
afforded. Such apparently altruistic actions led many to question
Chávez’s motives. It is important to point out that these frameworks and
counter-purchase agreements have also helped reduce Venezuela’s
dependence on the United States as a market and refining destination for
oil. The volume of Venezuelan oil exported to the United States
decreased from 1,500,000 barrels per day in 2008, to 1,166,000 bpd in
2011, a drop of 334,000 barrels per day. This can, in part, be
attributed to the diversification of markets in Latin America (190 bpd
to PetroCaribe, plus supply agreements with Argentina among others).
This is in addition to securing crucial imports without financial
outlay, specifically agricultural commodities, which are often then
provided to the Venezuelan population at low cost through state owned
agencies such as the supermarket chain Mercal.
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Under the last ten years of Hugo Chávez’s Presidency, Venezuela’s
foreign policies resulted in an opening up of autonomous policy space in
Latin America and the Caribbean. What was begun in 2004 with the
rejection of the proposed FTAA continued into the post-crisis
conjuncture, when Chávez was instrumental in creating a new regional
financial architecture to limit the power exerted by Washington-based
IFIs. PetroCaribe credit provided funds for capital expenditure, without
imposing macroeconomic conditionality. In addition, guaranteed oil
supplies allowed the small and energy dependent nations that made up its
membership to move beyond reactive policies and look to longer term
socio-productive investment.
Venezuela’s concurrent strategy of sourcing imports from the region
offered primary-commodity-dependent economies some opportunity to
diversify their markets and baskets, with better terms of trade than
offered by the United States or ex-colonial metropoles in Europe. Chávez
also took the bite out of attempted control via market sanctions, as
was clearly demonstrated in the Bolivian example.
These regional imports often took the form of non-market exchanges
and counter-purchase agreements within PetroCaribe, ALBA, and beyond.
Combined, they arguably represented a strategic de-linking from
international trade and finance systems, specifically from the U.S.
dollar. As such, these frameworks have lessened both the dependence on,
and influence of, the United States in the region, protecting countries’
ability to act autonomously and not follow the dictates of Washington.
Chávez effectively undermined U.S. economic power by offering
alternatives to the hegemony of the dollar, with the SUCRE in particular
offering a concerted challenge. Lessened economic dependence in turn
allowed for greater diplomatic autonomy from Washington, demonstrated in
its strategic exclusion from the newly formed CELAC. The various new
regional initiatives provide space to build development strategies and
devise economic policies, beyond the constraints of “market-friendly”
logic. This allows for a reassertion of the state as an economic actor
and service provider, within a culture of regional cooperation. Though
the Venezuelan state is not operating outside of capitalism per se, from
the initial rejection of the proposed Free Trade Area of the Americas
in 2001 the Chávez government demonstrated that there are alternatives
beyond the policy prescriptions of the neoliberal era, and what’s more,
facilitated their use throughout the region to mutually beneficial ends.
1. Colin Powell cited in Katharine Ainger, “Trading Away the Americas,” New Internationalist, Issue 351, November 1, 2002, available at newint.org
2. “Venezuela: Two Countries Hold Out Against Cheap Loans and Barters,” Countertrade & Offset, 26:15 (2008)7
3. Sir Ronald Sanders, “The Chavez Effect: A life belt for the Caribbean,” Kaieteur news online, July 27, 2008, available at kaieteurnewsonline.com
4. Andrés Rojas Jiménez “Deuda dominicana con PDVSA aumentó durante 201,” El Nacional, February 16, 2012, available at elnacional.com
5. Wendell Mottley, Trinidad and Tobago’s Industrial Policy 1959-2008 Kingston. (Randle, 2008) 157.
6. This data, and all data not otherwise cited, elaborated from PDVSA annual reports, 2009-2011.
7. Guyana Rice Development Board, “Guyana Rice Development Board Annual Report 2010,” 2011.
8. Consejo Monetario Regional del SUCRE, “SUCRE Informe de Gestión 2011,” 2012.
9. Ibid
10. Curtis Williams, “Venezuela Urged to Fast-track Petrocaribe Initiative,” Oil and Gas Journal, 102 (2004):26.
11. Hugo Chávez Frías, Petrocaribe, Towards A New Order in Our America, (Colecciones Discursos, Ministerio de Poder Popular para Comunicación.)
Stephanie Pearce is a doctoral candidate at the School of
Politics & International Relations, Queen Mary College, University
of London. Her research focuses on the role of countertrade in
Venezuela’s “Bolivarian Revolution.”
Read the rest of NACLA's Summer 2013 issue: "Chavismo After Chávez: What Was Created? What Remains?"
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