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From the archives

Imperialism and Sudan: same oil story

FRFI 181, October/November 2004

Sudan oil fire min

Just as they did at the end of the 19th century in the rush for gold and diamonds, in a renewed competitive rush to plunder the oppressed nations of the world for their natural resources, especially oil, the imperialists are intent on neo-colonising and controlling Africa’s vast resources. Read more >


Monopoly: ‘the death-knell of capitalism’

The Myth of Capitalism cover blur min

We review a new book on economics which exposes the symptoms of capitalism's terminal sickness.


Venezuela – Chavez takes over the banks

‘These bankers should be shown for what they really are to the public: vulgar robbers, thieves in ties, pickpockets and obstinate kleptomaniacs’. Hugo Chavez

Chavez’s government well knows that the dollar-blinded rich in Venezuela must be defeated politically. A democratic economy is essential, and as private ownership fails to meet the needs of the masses, the state is taking over and formulating alternative ways of managing production and distribution. The pricing system is being moderated and social priorities are replacing market manipulation.

Dealing with the banks

The shift towards a new economic model has ameliorated the effects of the global economic crisis on Venezuela. Preventive measures were taken beforehand: the government diversified its currency holdings in order not to rely exclusively on the dollar, changing them to Euros, Yen and other currencies so that the dollar’s fall did not sharply affect the Venezuelan economy. The government also budgeted for an oil price of $60 per barrel. Since the price fluctuated between $65 and $70 until the middle of 2009, state revenues were healthy compared to planned expenses.

As the global banking crisis and its scandals grew, the Venezuelan government ensured effective regulation at home. Several small private banks were taken over following revelations of bank fraud. In November the main shareholder of a group of four banks, Grupo Financiero Bolivar, Ricardo Fernandez, known as a Chavez supporter, was arrested. Two of the banks were nationalised, and two were closed. The Institute in Defence of People’s Access to Goods and Services took control of four food companies owned by Ricardo Fernandez, to make sure there were no supply disruptions. Subsequently, a further three banks were nationalised and, on 11 December, Venezuela’s Superintendency of Banks closed an eighth.

On 21 December the five nationalised banks were merged with a state-owned bank, Banfoandes, to open a new Bicentenary Bank with 20% of the nation’s deposits. This will provide housing credits to those who have been turned down by private banks which only give credit to rich people. Brokerage and insurance houses are also to be investigated. The assets of the three other banks were transferred to the Bank of Venezuela, with deposits guaranteed up to 30,000 bolivars.

Ten bankers have been detained and 28 arrest warrants issued, including nine passed on to Interpol, for involvement in organised crime and unexplained fund movements. 23 of those indicted have since fled to the US, Spain or Curacao while on bail. During 2009, a further 10 banks were fined more than 23 million bolivars, or $5.34m at the 4.30 bolivar rate, for failing to comply with financial regulations established for the agricultural sector. On 19 January, Venezuela’s Superintendency of Banks announced the takeover of three more small private banks because serious administrative problems had left them unable to cover their obligations. Customers’ savings are guaranteed by the state.

This fight against bank crime has alarmed the international bourgeoisie, who dumped Venezuelan bonds, whilst Moody’s Investors Service has downgraded credit ratings on two big banks, the private Banco Mercantile CA and the state Banco Venezuela (acquired from Banco Santander for $1.95bn earlier this year). In November it cost $1.156m for lenders to insure each $10m loan to Venezuela. Iceland’s debt cost only $0.4m per $10m to insure, and Britain’s $0.073m, whilst McDonald’s cost $0.045m. Even Greece’s debt was insured at a mere $0.0202m. Venezuela’s rating is clearly political.

Asset seizures

The state has seized the assets of several bank owners who are charged with fraud and has proceeded to freeze their assets abroad. ‘The battle that we are waging against these bankers who sabotaged and robbed many people is advancing rapidly,’ Chavez declared on 10 December. ‘I have ordered the takeover of tuna, fish, corn processing and rice companies, as well as [the bankers’] estates and cattle ... this will become wealth for the people’. He added: ‘We are confronting these problems in a coordinated manner with the whole state, and we are taking over companies that were forming a kind of network ...We cannot wait until tomorrow. At the first sign, [we take] immediate action and inexorably apply the established laws and procedures.’ The government is waging a full-scale battle against corruption in the financial sector. ‘The traitors have many forms of connecting with each other, and we have to unmask them’, said Chavez. In this battle the media is central, and on 23 January RCTV and five other cable channels were temporarily taken off the air for breaking transmission laws requiring them to televise government announcements. On 14 January the state expropriated the sugar mills ‘Casta’, in the state of Tachira and the ‘La Batalla’ agricultural mill in the state of Barinas, to turn them into social property.

Currency realignment

On 8 January, a decree created a dual exchange rate in order to conserve foreign exchange and to prevent speculation against the national currency (the Strong Bolivar). Priority imports – food, medicines, machinery – will be paid for at 2.60 bolivars per US dollar instead of the previous 2.15 bolivars; the rest will paid for at 4.30 bolivars. The government also aims to legalise and intervene in the ‘parallel’ or ‘free market’ where the dollar had reached 5.8 bolivars. The large multinationals will now not be able to draw such large quantities of US dollars from the country when converting their profits, which will strengthen Venezuela’s reserves. Colgate-Palmolive, the world’s largest toothpaste-maker, will now cut its earnings forecast to reflect the decline in its bolivar holdings.

The conditions are being created to encourage domestic manufacturing production. This will be supported by state measures to ensure that the necessary technology is not blocked by overseas corporations. Oil exports from PDVSA produce just under 90% of Venezuela’s export income (and one third of its GDP), and the decree now means that PDVSA will have twice the bolivars it previously received. The further result is that the government will have a surplus on its budget this year. The overall aim is to overcome the economic model imposed for decades by the United States with its dependency on oil exports.

Expropriate! Educate!

All resources to the people!

Alvaro Michaels

FRFI 213 February / March 2010


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