Anti-capitalist strategy shields Venezuela from world financial crisis

A strategy forecasting the acute cyclic problems affecting contemporary capitalism was designed by the Bolivarian government in the last years to build an effective wall around Venezuela to face the rigors of the world financial crisis.

The plan, summarized in a document drafted by the Ministry of People’s Power for Finance, provides for the identification of eight steps and includes the securing of Venezuela’s international reserves as one of its main achievements.

Venezuela’s international reserves currently amount to nearly US $ 40.000 million, and after they were moved in October 2005 from U.S. banks, where they were traditionally deposited, they are “well-protected: 60 percent is in Basel, Switzerland; 30 percent in gold, and only 10 percent in other banks, which are constantly being followed up by the Central Bank of Venezuela as a prevention measure.”

The measures taken in the last years include:

Strategic alliances

With a political, economic perspective to free Venezuela from the yoke of capitalist financial mechanisms (IMF, World Bank and WTO), President Hugo Chávez and his government have drawn up strategic alliances with different emerging economies such as Brazil, Russia, India, China, Iran and Belarus.

Such alliances have started generating important foundations; for example, Venezuela and China have created a heavy financing fund, which was recently renewed to US $ 6 billion, made of a US $4 billion Chinese contribution and US $2 billion Venezuelan contribution.

This Fund’s “goal is to promote social, economic development projects in Venezuela under a productive model based on socialist and cooperation principles. It will help sectors such as infrastructure, agriculture, energy, mining and petrochemistry, among other important areas,” reads the document.

Likewise, after President Chávez’s last visit to Russia, the creation of a Venezuela-Russia bi-national bank is gaining strength.

Plans and projects with other countries are also moving forward.

Exports diversification

Venezuela has not only sought to break with unipolarity in the political field, but also in the economic field. Thus, it has proposed to diversify the destination of its hydrocarbon exports (oil, gas, and petrochemistry) beyond the traditional U.S. market.

Therefore, Venezuela has consolidated initiatives such as Petrocaribe to sell oil to Caribbean countries; likewise, it currently sells 350,000 oil barrels per day to China and it estimates to increase that number and send 500,000 oil bpd in a near future.

In addition, Venezuela has established an alliance with Russia’s Gazprom and Lukoil; it recently reached an agreement with Portugal to supply 2 million cubic feet of gas per year and to send 30,000 oil bpd.

Furthermore, Venezuela has endorsed agreements with about 10 countries to jointly exploit oil fields in the Orinoco Oil Belt, thus assuring new destinations for the Venezuelan oil.

Strengthening the Venezuelan State

The Bolivarian government’s policy to guarantee a healthy tax and financial system is implemented through the Venezuelan Finance Ministry and the Central Bank of Venezuela in the tax, banking and monetary fields.

Regarding the tax field, since 2004, Venezuela has undertaken a modernization process of its tax office (Seniat, Spanish acronym), which has made possible a significant growth in tax collection to such an extent that it equals oil incomes.

In the banking field, the Superintendent’s Office of Banks (Sudeban, Spanish acronym) has taken a number of measures regulating the relations of the private financial system with international banks and their financial instruments and assets.

In this sense, private banks were ordered to create a guarantee fund to back up the Venezuelan asserts in U.S. banks Lehman Brothers and Merryl Lynch; which went bankrupt.

Also, on September 23, a letter was sent to private banks ordering them “to create provisions equal to 50 percent of the assets in bonds issued, created, endorsed or guaranteed in U.S. investment banks.”

Thanks to this order and other measures, Venezuela’s financial system has been safeguarded.

Moving reserves timely

In 2005, when the Bolivarian government foresaw this capitalist financial crisis, it decided to move Venezuela’s international reserves.

It ordered to “move most of its international reserves to the Bank of International Settlements, in Basel, Switzerland, because it was dangerous to have them in U.S. banks; in addition, Venezuela started seeking to redirect its savings to safer currencies and economies.”


As aforementioned, the Venezuelans’ savings, represented by international reserves, currently amount to nearly U.S. 40,000 million and after they were moved in October 2005 from U.S. banks, where they were traditionally deposited, they are “well-protected: 60 percent is in Basel, Switzerland; 30 percent in gold, and only 10 percent in other banks, which are constantly being followed up by the Central Bank of Venezuela as a prevention measure.”

Managing liabilities

The Ministry of People’s Power for Finance gives a lot of importance to “the successful management of the Republic’s liabilities.”

The appropriate management of bonds such as the Brady bonds has allowed Venezuela to increase or reduce its cash flow according to the requirements.

Thus, “Venezuela has achieved access to markets of international capital for the first time since 2001, and to the dollar-based market for the first time since 1998.”

Likewise, Venezuela paid off its debts with the IMF and the World Bank.

New economic architecture

With a focus on a new international economic scenario, in December 2007 an important proposal made by President Chávez materializes: The Bank of the South was created. This is an organization whose goal is to become the “financial muscle” of regional integration with an estimated capital of US $ 20,000 million.

Likewise, in 2008, the Bank of the Bolivarian Alternative for the Peoples of Our America (ALBA) was created at a moment when the Union of South American Nations (UNASUR) consolidates its integration and consultation mechanisms.

Commission of Foreign Exchange Administration (Cadivi)

Following the April 2002 coup d’état and the 2002-2003 oil boycott, on February 5, 2003, the Venezuelan government and the Central Bank of Venezuela adopted a currency exchange control to prevent the progressive reduction of international reserves and the devaluation of the bolivar as the result of the pro-opposition oil boycott against PDVSA, Venezuela’s state-run oil company.

The Commission of Foreign Exchange Administration (Cadivi, Spanish acronym) is created with an aim to efficiently manage Venezuela’s currency exchange market.

Thanks to CADIVI’s control over the currency exchange market, Venezuela’s international reserves have reached historical levels, surpassing US $ 30,000 million.

In addition, CADIVI guarantees foreign currency to Venezuelan productive sectors so that they can undertake their activities.

State-owned Financial System

Since 1999, the Venezuelan government has planned to consolidate the state-owned financial system in order to strengthen the country’s economy.

Thus, on October 25, 2008, via Decree 411, a law to regulate the Venezuelan state-owned financial system was passed in order to consolidate the integration of the state-owned banking in a single, coherent and efficient system improving its capacity to provide technical and financial assistance.

Soon, the Banco de Venezuela will join this system, comprised by the Banco Industrial de Venezuela (BIV, Spanish acronym), Banfoandes, Bandes, Banco Agrícola de Venezuela (Agricultural Bank of Venezuela), Banco del Tesoro, Banco del Pueblo Soberano and Banco de la Mujer (Women’s Bank)

National Development Fund

A further important step regarding the strategy to achieve Venezuela’s economic sovereignty is the creation of the National Development Fund (FONDEN, Spanish acronym) in September 2005. FONDEN’s goal is to manage the surplus generated by oil incomes after the necessary base of the country’s monetary reserves is determined.

This fund finances projects in priority fields such as agriculture, health, infrastructure, higher education and housing, among others. It embodies one of the ways through which social expenditure materializes in Venezuela; that is to say 60 percent of the total expenditure of the Venezuelan government’s budget.

In short, these are the decisions and measures adopted by the Bolivarian government to lead Venezuelan on the path of economic sovereignty and social development by dodging the inherent problems of the capitalist system.

By Aurelio Gil Beroes / Bolivarian News Agency (ABN)