Structural Changes and Planning of the Economy in Revolutionary Venezuela Eduardo Torrealba III October 13 th, 2010

Authors Rémy Herrera Rémy Herrera – University of Paris, France – Researcher at CNRS (National Centre of Scientific Research) Paulo Nakatani Paulo Nakatani – Federal University of Espirito Santo, Brazil – Specializes in capitalism, contemporary socialism, economic policy, monetary policy, external sector and fiscal policy

Background Location Location Population Population

Oil Economy 9th largest oil producer in the world

Oil Economy Oil prices and GDP not directly linked

Hugo Chavez Served in the military since age of 17 Served in the military since age of 17 Attempted coup in 1992 Attempted coup in 1992 Elected President in 1998 Elected President in 1998 Founder of the Bolivarian movement Term limits abolished in 2009

Redistribution of Wealth Gini Index of.5 in 1997 Gini Index of.5 in 1997 – Top 5% owned 75% of land – Oil production GDP% change 18.7% to 13.8% 18.7% to 13.8% Public spending increased Public spending increased – Oil revenue of state Increase in oil price Increase in oil price 5.8% to 16.1% 5.8% to 16.1%

Redistribution of Wealth Implementation of social programs Implementation of social programs Healthcare services Enrolment in education services Illiteracy Infant mortality Impacts over 17 million Venezuelans Impacts over 17 million Venezuelans Financed by PDVSA Financed by PDVSA – 7.3% of GDP

Policy Reforms Moving toward socialism Moving toward socialism Fixed exchange rate in 2003 Fixed exchange rate in 2003 – Crisis Increases in public spending Increases in public spending Decreased autonomy of central bank Decreased autonomy of central bank – Currently aimed at fighting inflation Failure Failure

Capital Problems Capital flights Capital flights – Legal $2.3 Billion $2.3 Billion – Illegal $2.86 Billion $2.86 Billion Exchange rate Exchange rate – Officially 2,147:1 – Illegal 5,350:1

Successes Lowest inflation since 1970s Lowest inflation since 1970s – 19.6 % since election vs. 49.4% before High GDP growth High GDP growth – 13% since 2003 Increase in foreign reserves Increase in foreign reserves – $14.9 billion to $37.4 billion – Capable of paying off all external debt

Transition to Socialism No expropriation of private property Continuing presence of “dominate” class State controls strategic sectors – Oil – Electricity – Telephone

Decentralized Planning Founded on 2001 Organic Law of Planning Founded on 2001 Organic Law of Planning Councils Councils – Local Councils of Public Planning – District Councils 420,000 people 420,000 people – Council of Workers – Council of Peasants

Authors’ Conclusions Transition to full socialism not complete Transition to full socialism not complete First time oil rent has been used to help poor First time oil rent has been used to help poor Rethink strategy since 2007 defeat Rethink strategy since 2007 defeat Needs support of all progressive nations Needs support of all progressive nations

My Conclusions Pros Pros – Increased public services – Lower inflation and high GDP growth Cons Cons – Slow erosion of rights – Cult of personality Frontline episode “The Hugo Chavez Show” Frontline episode “The Hugo Chavez Show”

Questions?