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Going it alone
From oil, to television, to steel, Hugo Chavez has a bold vision of nationalisation. But does it look like he is biting off more than he can chew?
The last year has been a busy one in Venezuela. Oilfields and utilities have been nationalist in an attempt to preserve ‘national interest’, pushing the country towards a fully fledged socialist state. Chavez, who labels capitalism an evil, has ordered firms to fall into line with his self-styled socialist revolution or face nationalisation for what he describes as ‘the benefit of the people’. This looks set to continue and spread, with aspirations to nationalise banks, a steelmaker and cement companies. However, with the effects of these moves stretching far beyond national boundaries, the implications look set to prove significant.
The steel industry has been that most recently facing the threat of nationalisation. Argentine-owned Ternium-Sidor has been threatened with an ultimatum, suggesting Venezuela’s largest steelmaker supply the local market before exports are made, or face nationalisation. Chavez complained that the company, which is majority-owned by Latin America’s largest steel-making group, Ternium, mainly exports its steel, leaving Venezuelans to import the product from as far away as China. Such a move will be ratified using the powers given to Chavez by Congress to rule by decree this year.
And such a move is hardly a surprise. Due to exchange controls, some companies put a priority on selling products abroad to ensure they are paid in a foreign currency rather than the local bolivar, which trades on the black market at almost half its official rate. Inevitably, at the detriment to national interest, it drew Chavez to instruct, prior to a recent meeting: “Before exporting a single ton abroad, first you have to guarantee me that all the (Venezuelan) companies are supplied”. Chavez told private banks and Ternium-Sidor, the country’s largest steelmaker, to adapt their businesses to what he called the ‘national interest’. Meanwhile, earlier this year, cement-makers were told they could be nationalised if they were found to be worsening a housing shortfall by favouring exports over domestic sales.
Popular among the majority of the poor for lavishing high oil revenues on them, Chavez does not engender enthusiasm among all. Indeed, many polls show that the people generally do not share his vision for turning the South American country into a socialist state. Recent protests took to the streets following the alleged censorship of national television content after the taking over of Venezuela’s largest media firm News agent Reuters. They recently published the comments of an annoymous government insider who insisted that Cavez’s nationalisation threats were more than mere bluster. Despite being in opposition to the nationalisation program, his remarks backed up the general consensus that Chavez has the drive to follow through on his rhetoric.
The rhetoric can seem very convincing. Improvements in the country’s previously impoverished social services have given opportunity to many, while enforcing the importance of the ‘national interest’ has appealed to those in other countries, including neighbouring Colombia, who have seen assets decimated with profits seeping out to multinationals, who re-invest little back into the country. Oil means much more to the country than just cash. The oil industry had integrated the whole country’s infrastructure and development, and boosted its thin population as immigrants arrived in search of work. Government policy-makers insist that they are fully backed by a population adamant it is they who should fully benefit from Venezuela’s considerable riches.
Yet some of the moves taken to safeguard such resources have looked, on the outside, extremely dubious. Before Venezuela’s largest telecommunications firm, CANTV, was nationalised, Chavez talked for months about a takeover if it did not adjust its pension payments. In December, CANTV said in response to a court ruling it would make retroactive payments to more than 4,000 employees, but Chavez ordered its takeover a month later anyway.
He is also making some powerful enemies. The country’s last privately run oilfields that he has taken over, were previously owned by some of the world’s largest companies. This will undoubtedly play a great influence in all private sector decisions, both inside the country and outside. With Chavez vowing to leave the International Monetary Fund, he risks closing the door on an economic community which may come to haunt the country later on. Up until now, the majority of the firms upset have had leading shareholdings owned by US-owned companies. Although this is politically easier, Ternium-Sidor is owned by a company from Chavez’s leftist ally Argentina. Chavez, had said he was reluctant to nationalise the company because its main investors were Latin American. Still, the parent company’s share price fell to an almost two-month low immediately after the move became imminent.
Meanwhile, the banking sector is equally controversial. There is considerable Spanish involvement in Venezuelan banks, with Banco Provincial being a unit of Banco Bilbao Vizcaya Argentaria and Banco de Venezuela a subsidiary of Banco Santander Central Hispano. By threatening such a globally established structure, Chavez risks further alienation from the economic system as well as jeopardising political relations with Spain, with the most important socialist government in Europe. Yet Venezuela is not the only Latin American nation which has accelerated its bid to reclaim resources. Just over a year ago, Bolivian President Evo Morales, a leftist ally of Chavez, ordered troops to seize gas fields in his country.
Venezuela’s new policies have given the nation a new self-image, according to those who styled Chavez’ new-look nation including Venezuelan Deputy Energy Minister Bernard Mommer. This meant, among other things, that it no longer offered the option of international arbitration in deals as its legal system offered sufficient security.
With a new-found confidence, Venezuela is flying the flag for all those countries unwilling to accept the policies of a few super-powerful governing nations. By re-investing the country’s oil profits in its people, and standing up the multinational, Chavez has reinvented socialism in his own image. The extent to which this is possible within the economic structures so intrinsically adhered to by most of the rest of the world remains to be seen. A collision course with the US, as well as major institutions such as the World Trade Organisation, appear likely and there are those who fear that Hugo Chavez will follow the route of many self-styled ‘dictators’, placing his own legacy above the good of the nation. Yet the romantic notion of freeing his people from under the wheels of capitalism is certainly causing the world to sit up and take notice.