In his critique of Chavismo in Venezuela, Chomsky claims that the Venezuelan government did not diversify its economy and failed to keep sufficient reserves when the price of oil was high. However Venezuela did keep gold reserves offshore which were eroded.
Chomsky has quoted the Venezuelan chief opposition economist, Francisco Rodriguez. However Rodriguez says Venezuela is facing a financial crisis not simply an oil crisis.
Oil production in Venezuela has fallen off a cliff as shown in this graph comparing oil exports with those of Columbia. Columbian troops backed by US advisors are preparing to invade the country.
Since August 2017 Venezuela has been unable to get credit from international banks. A country so dependent on imports cannot survive without credit especially when its revenue is in decline from lower oil prices. Lower oil prices mean lower production because of the high marginal cost of production in Venezuela.
Rodriguez argues: ‘the resulting loss of access to credit appears to have helped precipitate the collapse in oil output driving the resulting economic contraction.‘
Without credit between 2012 and 2017, imports of goods and services fell by a staggering 80%. The Venezuelan economy depends upon imports for it’s growth.
Chomsky claims Chavez failed to diversify the economy, that no money was put aside when oil prices were high, for when oil price would fall. Instead Chavez spent the surplus to alleviate poverty and providing sanitation, better housing, better education. There is nothing wrong with that. What Chomsky should be saying is that it is very difficult to maintain a break with the capitalist system that this represents.
The Venezuelan government has deposited gold reserves in the Bank of England. This is the property of the Venezuelan people, yet British banks have preventing its return. Such sanctions only hurt the poorest in Venezuelan society.
Britain should not be aiding the Trump administration by imposing sanctions and regime change. Instead it should be promoting dialogue and negotiation to reach a peaceful and longstanding settlement in Venezuela as advocated by the Mexican and other Latin American governments.
Venezuela is calling on the British government to act honourably and make clear to the Bank of England that this gold must be returned to its rightful owners – the Venezuelan people.
Venezuela nationalised its oil in 1976. The national company PDVSA bought a US oil company called Citgo. At its peak PDVSA controlled 10% of the US domestic oil market, creating a lucrative export chain from Venezuelan soil to American consumers. Citgo gave Venezuela a revenue stream that provided 90% of the government’s hard-currency earnings. Sanctions have taken this revenue, and worse still, deprived Venezuela access to US refineries and additives that make its crude oil viable.
‘Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country’s other products less price competitive on the export market.’ – Financial Times
Capitalists have predicted crisis in Venezuela ever since oil was discovered in 1922. The neo-liberals want Venezuela to go cap in hand to the IMF which will make the poor carry the debt. The problem is not lack of food or supply, it’s a problem of pricing. There was a decline in oil prices. Oil money was invested in education in sanitation in improving the lot of the poor, what’s wrong with that?
The CIA has been predicting a downfall in the Venezuelan economy since 1922. Venezuela’s economic collapse is financial, engineered by successive U.S. administrations since Obama.
So far Russia and China have continued to support the Venezuelan government. And then there is Cuba who is monitoring troop movements on the Columbian-Venezuelan border.
Cuba has not succumbed to US threats, nor is it likely to.
Notes by Ian Curr