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Venezuela: Economic Crisis Sparks New Measures and Structures

Faced with the growing impact of the global economic crisis, Washington’s intentions to establish seven military bases in Colombia, and growing challenges in solving structural problems, Venezuelan President Hugo Chavez reaffirmed the need to build a new state.

Chavez explained: “We have inherited a capitalist state that serves the interests of the bourgeoisie and is still penetrated by interests contrary to the revolution.”

“We need to carry out an internal shake up of the government structures,” Chavez said on September 19 during the second Expanded Council of Ministers meeting, which also involved governors and mayors aligned with the Bolivarian revolution.

The meeting was called to discuss a series of new measures the revolutionary government plans to announce in coming weeks to confront some of the challenges it faces on the economic, political, and social fronts.

In all, 54 new measures have already been approved by his cabinet.

Global Economic Crisis

New figures released by the Central Bank of Venezuela (BCV) showed the national economy contracted by 1% in the first half of the year, including a 2.4% drop in the second quarter.

The pro-poor and pro-development economic measures taken during the past 10 years of the Chavez government have ensured that some of the impact of the global economic crisis has been lessened, particularly in comparison with other countries.

However, it is becoming clear that Venezuela is being negatively affected by the global downturn.

This has also been felt in the decline in manufacturing industry (down 8.5%), among others, and the slight rise in unemployment, from 7.3% in March to 8% in August.

While pro-capitalist economists are claiming the economic crisis is coming to an end, Chavez said: “No one can say that we have already passed through the worst of the crisis of capitalism.”

He said worst could still lie ahead.

Chavez said the insistence of the US government on imposing the same economic model “that generated the crisis” was making the situation worse.

Chavez pointed to the military coup in Honduras and the seven new US military bases planned in neighboring Colombia.  He said these represent “the great threat of the empire and its pretension to continue imposing on us a model which they insist on despite the misery it has caused.”

In Venezuela, the Washington-backed right-wing opposition continues to ramp up its propaganda campaign, using its control of the private media, against the government and Venezuelan people.

In most cases, the propaganda is based on lies and distortions.  However, in some cases it takes advantage of weaknesses in the revolution — a result of bureaucracy, corruption, internal power struggles, and attempts to stifle popular participation that pervade the old state structures.

Chavez said an “emergency situation” existed in the health sector.  He said 2,000 local medical clinics that were part of Mission Barrio Adentro, the popular government-run program that provides free health care to the poor, were no longer functioning due to “neglect on the part of everyone.”

He warned that “the [US] empire knows that elections will be held next year.  They are seeking a majority in the National Assembly.

“They will try to weaken us.  They will exploit to the maximum our inefficiencies.

“They are going into the barrios [poor neighborhoods].  They are trying to create movements to cohere support . . . we know they are capable of anything: buying votes, blackmail, trickery.”

Popular support for Chavez remains extremely high.  However, there is growing evidence that, after 10 years of the revolution, tiredness and discontent with the lack of advances in critical areas could mean that support for Chavez does not translate into similar support for pro-Chavez candidates in parliamentary elections.

The opposition, which boycotted the 2005 National Assembly elections, will go into the poll with control of a number of key governorships and a vote that has risen in recent years, particularly in the larger cities.

There are concerns they could win enough seats to sabotage the work of the assembly.

New State

In a July 25 National Assembly speech, Chavez raised the alarm about the failure of his government to act on decisive issues, such as health and crime, and the impact it was having on support for the revolution.

Some of the social missions created by the government — with the active participation of the people — to tackle problems in the areas of health, education, and housing have begun to falter due to neglect and flagging participation.

The social missions emerged on the back of two important events. 

Firstly, the April 2002 defeat of a US-backed military coup through a popular uprising that included important sections of the military. 

Secondly, the powerful mobilisation of the workers, communities, and the armed forces that defeated a two-month bosses’ lockout (including shutting down the state-owned oil industry by its corrupt management) from December 2002 to January 2003.

Defeating the lockout meant the government won control over the state oil company, allowing it to use oil revenue to set up the social missions.  By organizing the masses to help run the missions, the government was able to bypass the decrepit and corrupt old state structures that had proven incapable of meeting the needs of the people.

However, several years down the track, these new emerging structures have begun to be “infected” by the “old state structures,” Chavez warned on August 25.

“We cannot allow the new to be infected . . . its failure will mean the end of the revolution.”

That is why “we have to finish off demolishing the old structures of the bourgeois state and create the new structures of the proletarian state.”

At the September 19 meeting, Chavez called on the government to revitalize the social missions — this time within a single system with a single fund to ensure the resources reach the missions.  Chavez said that, right now, “there are many entities responsible [for different missions], something which is holding back the process.”

“The missions have to be instruments for the acceleration of the creation of the new state” and therefore must not fall into the hands of “the old bureaucracy.”

In order to reinforce Mission Barrio Adentro, more than 1,000 Cuban doctors and 213 Venezuelan doctors trained in Cuba, as well as 257 specialists in intensive therapy, endoscopy, and other areas, will arrive in Venezuela in October.

They will join the almost 30,000-strong team of Cuban doctors, specialists, and health technicians already working in Venezuela.

Chavez emphasized on September 17 that these plans had to go hand-in-hand with the strengthening of popular power organizations.

“The communal councils have to reactivate and commit themselves to this revitalization . . . because the role of the communes and communal councils are vital for consolidating its success.”

At the cabinet meeting two days later, Chavez said that the communal councils, which group 200-400 families in urban areas and 20-50 in rural areas to solve the problems of local communities, “have to be a cell of a bigger body that is called the commune.”

Chavez has constantly referred to the communes as the fundamental building blocs of a new, revolutionary state.

Chavez announced the transfer of almost US$57 million for more than 330 projects decided on by local communal councils and communes.

As part of the government shake up, Chavez announced the creation of six new vice presidencies.  These positions would each work to improve the coordination of government policy and ministerial action in the areas of social and political issues, the financial and productive economy, territorial development, and defense.

A new Council of Revolutionary Ministries has also been formed, involving the six vice presidents and a permanent secretary.  It will involve an executive roundtable — the finance and planning ministers, the first vice president, and Chavez — whose aim will be to speed government action by cutting through bureaucratic obstacles.

Chavez also requested a law be drafted and presented to the National Assembly to create a Federal Council of Government involving all ministers and governors.

“The opposition governors will be able to come,” he said.

“As of now we invite the opposition.  Instead of recruiting paramilitaries and enacting plans to destabilize the government, come to the Bolivarian Federal Council, where the people govern.”

Economic Measures

Chavez indicated which direction the economic measures will be likely to head when he presented a number of them at the September 19 meeting.

These include the creation of a new ministry and the Venezuelan Public Banking Corporation (Corporación de la Banca Pública) to restructure and regulate the banking sector.  With the completion of the government buy-out of the Bank of Venezuela, the state now directly controls around 16% of loans and 24% of deposits.

Eight public banks, which until now have functioned with autonomous boards of directors and no coordination between them, will come under the new banking corporation.

Chavez demanded stricter regulation of the private banking sector and noted this sector “continues, almost in its entirely, to not comply fully with its role of financial intermediary.”

He called on governors to present productive projects for the creation of “mixed companies between the national state, the workers, and the regional states in order to continue creating a new public sector based on social property”.

In line with this proposal, Chavez said the cabinet had decided to create, together with the BCV, a fund to finance and support all initiatives of the new companies of social property.

A Special Plan for Employment has also been entrusted to the minister of infrastructure, housing, and public works, and the minister of science, technology and medium industry.

The National Assembly has announced plans to approve a reform of the labor law by the end of October.  Pro-worker changes to be discussed include the reducing the workday, job protection, workers’ councils, and banning labor-hire practices.


Federico Fuentes is a frequent writer for the Australian socialist newspaper Green Left Weekly and maintains the blog Bolivia Rising.  He is a member of the Democratic Socialist Perspective, a tendency within the Australian Socialist Alliance.  This article was first published by the Green Left Weekly on 24 September 2009; it is reproduced here for educational purposes.


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