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EXCLUSIVE: Breaking Down The Economic War on Venezuela [Photos]

Caracas (GPA– There is a lot of negative press lately in the US concerning Venezuela and the country’s current financial crisis. We here at Geopolitics Alert have also noticed that within the alternative media audience there is a willingness to believe some of these stories despite the usual attitude of distrust of the mainstream media. This article is intended to clear up some of the common lies spread in the US media and shed some light on the real causes of the current turmoil in Venezuela.

Venezuela has been in the cross-hairs of the United States for years now since the election of Hugo Chavez in 1998. Chavez was considered a threat to the US domination of South America soon after he took office on a mandate of expelling the multi-nationals and putting control of the wealth of his country in the hands of the people who elected him.

Venezuela had one resource in particular that makes them such a desirable target for theft and exploitation by US corporations; a massive amount of oil. A common misconception is that Hugo Chavez made the decision to nationalize Venezuela’s oil, but the process actually began in 1976.

Chavez just used the system already in place to take the government from having partial ownership of oil resources, to total ownership. Chavez decided that instead of Venezuela only taking a minority share of the profits from their own oil – previously used to enrich a small group of elites willing to collaborate with the oil companies – he would take all of the oil revenue, using it to enrich the lives of the people of Venezuela. The oil giants Total, ConocoPhillips, Chevron and ExxonMobil – because of course – hated this development that inevitably led to the loss of their control over another country’s resources and the revenue they always feel entitled to.

The change by Chavez was perceived as an attack on the oil companies and Wall Street in a similar manner to Saddam Hussein’s decision to drop the dollar as the reserve currency of his oil-rich country. While Iraq paid for this sin with a full scale US invasion, Chavez ended up the target of a Washington backed coup which failed within three days.

Venezuela’s Wealth Returned to the People

So before we dive into the current fiscal crisis in Venezuela, we should first examine the factors that contributed to the Chavez government’s overwhelming popular support. As stated above, the oil companies were furious that they had lost out on what is possibly the world’s largest proven oil reserve, but the oil giants’ losses were the peoples’ gain. Chavez began to use the oil revenues to improve the lives of the most vulnerable citizens in his country in ways we’ll explain here.

  • Chavez top priority was to combat the growing problem of Venezuela’s rates of poverty, extreme poverty and income inequality. Programs to change the quality of life of millions were rolled out such as an overhaul of public housing, and subsidies for products ranging from consumer goods to utilities began to have major positive effects on the economy. This major redistribution of wealth to the nation’s poorest citizens facilitated a drop in both the percentage of people below the poverty line (28.9% in 1998 to 19.1% in 2015) and extreme poverty (10.8% in ’98 to 4.7% in ’15). While obviously this has changed recently, that will be more thoroughly explained below.
Poverty and Extreme Poverty Rates.
  • Another benefit seen under Chavez was a result of the oil profits backing Venezuela’s currency, the Bolivar. While there has been a return of inflation as the economic war on Venezuela has heated up in the past several years, the Chavez government did manage to rein in past patterns of previously unpredictable peaks and valleys of inflation to keeping the average rate around twenty percent.
Venezuela Inflation Rate 1989 – 2013
  • This period of economic improvement and stability triggered an overall growth in the Venezuelan economy. One indicator of this is the unemployment rate, which did see a slight rise in the wake of Chavez’s historic victory against the corporate order (see the aforementioned coup), yet later fell to an all time low of six percent.
Venezuelan Unemployment Rate
  • While the previous statistics may seem like meta interpretations that could be open to spin by propagandists, there are hard numbers that show just how many Venezuelans benefit from the Bolivarian policies. This includes hard facts like the number of pensions paid out to retirees, the overall quality of employment, the increase in (publicly funded) college enrollment, and the rise of wages adjusted with the cost of living.
Number of Pension Recipients
Quality of Employment
College Enrollment in Venezuela
Minimum Wage (Red) Compared to Avg. Cost of Living (Blue)
  • The regular people of Venezuela also saw another direct impact via the government subsidies and price controls on a range of staple consumer goods. Below are a few examples of common food staples under the price controls in Venezuela compared to their average resale price on the black market after being smuggled in to neighboring Columbia.

 

 

 

 

 

 

 

The low prices on products like those above make them a prime target of anti-government business interests with connections to black market merchants. These goods are smuggled out of Venezuela to countries across Latin America and the Caribbean where they are sold for prices sometimes inflated up to several hundreds times the controlled price.

In addition to the smuggling and black market activity, Venezuela also struggles with other external and internal factors from enemies of the Bolivarian government. These forces are applied from enemies of Maduro in a variety of ways, which goes all the way down to the capitalist opposition at home.

The resistance of the private businesses owners plays out in the form of hoarding consumer goods and manipulation of what products reach store shelves. For a quick example, let’s take a look at a simple product – laundry detergent – which is increasingly sold only in smaller quantities in order to produce maximum profit.

Reduction in quantity of laundry detergent available to customers.

While obviously it’s not a crime to only stock smaller quantities but the situation changes when the issue of hoarding comes into play. The widely known problem of hoarding by food producers, importers and distributors has steadily increased following the 2014 implementation of price controls by the Venezuelan government. These controls, known as the Just Price Law, were enacted to fight rapid inflation.

The law outraged the business community in Venezuela – mostly composed of subsidiaries to multinational corporations – which led to even more hoarding and an attack on the country in the form of manufactured scarcity.

Statistics on private entities accused/convicted of breaking the Just Price law.

There are also external pressures pushing on Venezuela such as an unjust valuation of their currency by a single man who works at a Home Depot in Alabama and admittedly supports the Venezuelan opposition. This is the same opposition who has called on foreign banks to stop loaning money to the government in Caracas despite their massive reserves of natural resources that would be considered state assets in any other circumstances. This has led to an unjust manipulation of the Bolivar on the black market based on inaccurate factors.

The real exchange rate of the Venezuelan Bolivar compared to the rate set by Dolar Today

This has also been compounded by attacks by Washington in the form of anti-Venezuelan executive orders issued by Obama, and more recently meetings between members of the Trump administration and exiled Venezuelan opposition.

All of these factors, coupled with the sharp drop in oil prices have led to the current crisis in Venezuela. While the economic reforms made by the government in Venezuela have done some good in curbing the economic damage, Caracas doesn’t deny that they’re still in dire financial straits. Venezuela has many problems they’re attempting to rectify but the prolonged economic terrorism carried out by every US president since Bush is still proving a major hindrance to this day.