Structural Changes and Planning of the Economy in

Revolutionary Venezuela

Eduardo Torrealba IIIOctober 13th, 2010

Authors

• Rémy Herrera– University of Paris, France– Researcher at CNRS (National Centre of

Scientific Research)

• Paulo Nakatani– Federal University of Espirito Santo, Brazil– Specializes in capitalism, contemporary

socialism, economic policy, monetary policy, external sector and fiscal policy

Background

•Location

•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• Attempted coup in 1992• Elected President in 1998• Founder of the Bolivarian movement• Term limits abolished in 2009

Redistribution of Wealth

• Gini Index of .5 in 1997– Top 5% owned 75% of land

• 1997-2006– Oil production GDP% change• 18.7% to 13.8%• Public spending increased

– Oil revenue of state • Increase in oil price• 5.8% to 16.1%

Redistribution of Wealth

• Implementation of social programsHealthcare servicesEnrolment in education servicesIlliteracyInfant mortality

• Impacts over 17 million Venezuelans • Financed by PDVSA– 7.3% of GDP

Policy Reforms

• Moving toward socialism • Fixed exchange rate in 2003– 2002-2003 Crisis

• Increases in public spending• Decreased autonomy of central bank– Currently aimed at fighting inflation• Failure

Capital Problems

• Capital flights– Legal • $2.3 Billion

– Illegal• $2.86 Billion

• Exchange rate– Officially 2,147:1– Illegal 5,350:1

Successes

• Lowest inflation since 1970s– 19.6 % since election vs. 49.4% before

• High GDP growth – 13% since 2003

• 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

• Councils – Local Councils of Public Planning– District Councils • 420,000 people

– Council of Workers– Council of Peasants

Authors’ Conclusions

• Transition to full socialism not complete

• First time oil rent has been used to help poor

• Rethink strategy since 2007 defeat • Needs support of all progressive

nations

My Conclusions

• Pros– Increased public services– Lower inflation and high GDP growth

• Cons– Slow erosion of rights – Cult of personality • Frontline episode “The Hugo Chavez Show”

Questions?