Chavez Restyles Venezuela With ’21st-Century Socialism’

By JUAN FORERO

CARACAS, Venezuela - Firmly in power and his revolution
now in overdrive, President Hugo Chavez is moving fast
to transform Venezuela’s economy by bucking free-market
planning with what he calls 21st-century socialism:
founding state companies, seizing abandoned private
factories and establishing thousands of cooperatives
and worker-run businesses.

The populist government is reorganizing the country’s
colossal oil industry, taking a bigger share from
private multinationals. Planners are reorganizing the
banking system, placing stringent restrictions on
lending while creating state banks. Venezuela is also
developing a state-to-state barter system to trade
items as varied as cattle, oil and cement as far away
as Argentina and as near as Cuba, its closest ally.

"It’s impossible for capitalism to achieve our goals,
nor is it possible to search for an intermediate way,"
Mr. Chavez said a few months ago, laying out his plans.
"I invite all Venezuelans to march together on the path
of socialism of the new century."

According to many mainstream economists, the change is
simply a mix of plans taken from the protectionist
policies of the 1960’s and others adopted from Cuba and
countries of the former Soviet bloc. It may not be
communism - as detractors contend it is - but it mixes
socialism with capitalism and what some call
improvisation.

Many of the president’s grandest plans are put into
practice at the year-old Ministry for the Popular
Economy. Planners there have already created 6,840
cooperatives that employ 210,000 people nationwide,
many producing for the state.

The banking system is crucial to the government’s
plans. Regulators tightly control interest rates and
demand that private banks devote 31.5 percent of all
loans to agricultural projects, housing construction,
tourism and microcredits, loans to tiny startup
businesses.

The new measures - which include the seizure of
factories, mines and fields the government says are
unproductive - are playing well domestically. Mr.
Chavez has an approval rating topping 70 percent.

"I’m not afraid of socialism and never have been," said
Rivas Silvino, who works in a diaper factory run by
workers and managers under a state co-management plan.
"The world is afraid. I say, don’t be afraid."

So far, no noticeable exodus of foreign companies
operating in Venezuela has occurred. Banks and oil
companies are making record profits thanks to oil
prices that have left the country, the world’s
fifth-largest exporter, awash in petrodollars. This
year, the oil industry is generating $20 billion for
the government, nearly $8 billion more than last year.

Still, there is restlessness in the boardrooms, with
executives worried about government intervention, which
is sometimes seen as haphazard and improvised.
Economists say the government has not made the
investments needed in the oil sector. And political
analysts and mainstream economists warn of recession
and dourly note that foreign investment is about a
third of what it was five years ago. They say that
Venezuela’s vast oil profits give the illusion of
prosperity - the economy’s growth rate is 9.3 percent -
but that if prices fall, or Venezuela’s growing
spending catches up, the economy could founder.

Domingo Maza Zavala, the director of the Central Bank,
warned of recession as soon as 2007. "There is
uncertainty and instability because of the strategies
being used by the state," he said in an interview. "If
there was a strategy, defined, well established and
clear and with objectives, this would create a climate
of confidence that could generate a recuperation of
investments."

In the tumbledown barrios where Mr. Chavez draws much
of his support, it is easy to see why the new system
has been warmly welcomed. The hills around Caracas and
the farms in the outback are filled with cooperatives
and other businesses in which the state plays an
important role. Workers produce everything from shoes
to corn.

Aura Matos, 28, is a seamstress in a state-run textile
factory that sells to the state, a job she has held
just a few weeks. "I was in my house, with nothing to
do, and President Chavez and God gave me this
opportunity," Ms. Matos said as she took a break from
sewing jeans and blouses.

One of the government’s most ambitious ventures is a
new state airline, price $110 million so far. The
airline, Conviasa, now has three planes, which
regularly serve Bogota, Havana and other nearby
destinations. It plans to expand to 14 jets in about a
year and travel as far as Beijing and Europe.

What about competition in this cutthroat industry? "The
philosophy is not to compete, but to cooperate with
other airlines," said Wilmer Castro, who as Venezuela’s
tourism minister oversees the airline. "Our policy is
to have fares that are lower than the others in the
market."

Another project gives workers a stake in the ownership
and management of tottering private companies. In
return, management - made up of the original owners and
the workers - receives government credits and other
incentives.

"The businesses closed by the neoliberal system -
factories and farms - are reopening, but it’s done by
the people," said Elias Jose Jaua, minister of the
popular economy. "This is a state that has the duty to
push and support this."

The state is also founding a mining company, an iron
and steel company, a tractor factory and a state
computer company, which Mr. Chavez says will produce
"Bolivarian computers" in honor of his guiding light,
the 19th-century independence hero Simon Bolivar. The
government has even spoken about acquiring nuclear
technology from Brazil and Argentina - emphasizing that
it would be for peaceful purposes, like energy
production or medical care.

http://www.nytimes.com/2005/10/30/i...