Venezuela:
Independence within Limits

May 14, 2007

On May 1, the leader of Venezuela announced he was breaking with the IMF and the World Bank. He said the oil fields would be re-nationalized in the Orinoco region. Venezuelan President Hugo Chavez showed his desire to take control of what his predecessors sold off cheaply to foreign oil companies.

Chavez described the IMF and the World Bank as “mechanisms of imperialism designed to exploit the poor countries.” Yes, they certainly are. IMF loans, usually accompanied by austerity plans for the population of the recipient countries, generate huge interest payments, forcing recipients to pay back several times what they were loaned. This break with the IMF has its limits, however. First Chavez paid back the entire 3.3 billion dollars that Venezuela owed the IMF. The countries of Brazil, Argentina, Uruguay and Ecuador just did the same thing.

And why did these countries pay back their loans? They propose to set up their own regional lending bank, the Bank of the South, this coming June. Venezuela, Argentina and Brazil could very well play on a regional level the role that the IMF plays with respect to them. These countries have 200 billion dollars in financial reserves, half invested in U.S. treasury bonds. But they have their differences. Brazil says a Bank of the South should imitate the World Bank by supporting development projects, while Argentina and Venezuela prefer that it be like the IMF, a lender in the region.

In any case, this regional bank would, like other institutions such as Mercosur, the regional common market, create a counterweight to the economic pressures these countries face from the United States.

The Latin American states have found a perfect moment for this move, since the U.S. is mainly preoccupied with the war in Iraq. The U.S. has failed in its attempt to establish a common market of the Americas, reaching from Canada to the southern tip of South America, a market in which the U.S. would be the main beneficiary.

After his declaration against the IMF, Chavez sent in the army and industry workers to occupy the oil fields of the Orinoco region. Symbolically, the flag of the Venezuela oil company PDVSA was raised. Since 2005, PDVSA has owned 51% of the stock of the different oil companies throughout Venezuela. The Orinoco is the last oil sector where foreign companies are still dominant, because they alone have the technical means to refine oil from the especially heavy crude of the region. The Orinoco is important because, according to experts, it may contain the largest reserve of oil and gas in the world, more even than Saudi Arabia.

The media circus in Orinoco is meant to aid Venezuela’s renegotiation of oil contracts in effect with the foreign companies. Two oil companies say they will abandon the Orinoco. But eleven others, particularly Chevron and Total, have accepted a reduction in their share of ownership in order to maintain a foothold in this very promising region. In this way, Chavez gains their technical assistance to continue to extract oil from the Orinoco region. The U.S. oil companies are quite conciliatory since Venezuela remains one of the main oil suppliers to the U.S.

Chavez showed he intends to hold his course, putting forth the rights of the Venezuela state, that is, of the Venezuela bourgeoisie, to control the resources of the country. This attitude permits him to reinvest a part of the oil windfall in social programs that benefit the poor population. In Latin America, this is rather an exception to the rule. But it hasn’t changed the underlying exploitation of the laboring population in Venezuela.