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Story Publication logo November 27, 2006

Oil Fuels Chávez's Economic Shift

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Andrew Cutraro and Guy Taylor uncloak the cult of personality surrounding the Bolivarian movement of...

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Alberto Robles stood beneath a street lamp whose yellow glow hung over a corner of the barrio where he has lived his whole life.

Robles, 36, pointed to a steep hillside dotted with lights nearby where a block of crumbling shacks was recently replaced by sturdy houses. It's a shining example of grass-roots government at work, he said.

Robles is a member of the barrio's new community council, which organized a cooperative of workers to receive government money for construction of the homes. "It's worked perfectly," he said.

In what backers of Venezuelan President Hugo Chávez call a defining moment for his self-described revolution toward "21st-century socialism," thousands of community councils have been formed across Venezuela, becoming the central link between the nation's huge oil profits and its vast population of poor people seeking a better life.

Critics say the councils are havens of communist-style ideology geared toward replacing capitalism with a counterproductive, chaotic system of cooperatives bent on replacing existing municipal governments.

But Chávez, expected to be re-elected in national elections on Sunday is forging ahead.

He built a base of support during his first eight years in office by channeling his country's substantial oil revenue — about $1 billion a month — toward free health clinics and education programs for the poor. Now, he has begun a government restructuring that supporters say is key to the long-term fate of his revolution, and to his goal of lessening U.S. dominance in South America.

Chávez is the most prominent of a series of leftists who have recently come to power in South America. His nation has one of the largest oil reserves in the world and is one of the top suppliers to the United States. Because of his opposition to the United States, he cultivates friendships with its rivals, such as Cuba and Iran.

His opponents say Chávez's domestic success will depend on the ability of the growing number of community councils — "consejo comunals" — to transfer to the grass-roots level decisions over how the country's oil wealth is to be spent in the coming years.

"This is a moment of trial for the revolution," said Rosaida Hernandez, a longtime Chávez supporter and official in Caracas' existing municipal government who works closely with the new councils.

"It is a way for people to organize and identify the problems of the community and find a way to solve their problems."

Funneling money

National and international agencies estimate that half of all Venezuelans live in poverty. Some 9.5 million of the country's 25 million people subsist on $2 a day or less, according to recent United Nations figures.

During the past two years, about 140,000 community councils have been formed nationwide, said Juan Jose Aguilar, a regional director for the federal agency that channels money to the councils to fund everything from housing projects to farm cooperatives.

Council members are elected in neighborhood meetings. A law passed by the Venezuelan Congress in April gave the councils legal authority to receive money directly from agencies overseen by Chávez, or to petition the existing state and city government for money.

"The goal of the consejo comunals is transferring political power and social power to the people," Aguilar said, adding that the new system signals a move forward from Venezuela's existing state and city governments, which have long ignored vast segments of the population.

Specifically, Aguilar said, the councils fill a gap in aggressive land reform policies being pushed by the Chávez government that pave the way for peasants to take over previously private farms and properties that the government deems unproductive or lacking a clear legal owner.

Recent years have seen a rise in the number of shantytowns popping up on that land. Aguilar said the community councils create a link between the squatters and federal bureaucrats with oil revenue to build housing.

In Montalban, a city of 4,000 people 85 miles west of Caracas, squatters have erected three dozen shacks on a patch of land about the size of a football field. On a recent evening, young children ran through mud puddles that swirled in a gully carved through the shacks by rainwater.

The squatters universally support Chávez. A photo of the president hangs above the bed inside the one-room, tin-roofed shack where Marta Shepis lives.

"The fact that we're here is the result of a long-running exclusion policy," says Shepis, 34, who organized the other families two years ago to squat on the land and begin jointly petitioning for the construction of public housing.

Although there was no action during the first year and a half, the group has worked closely for the past six months with a newly formed community council in Montalban to organize the construction of 36 permanent homes on the land.

"Now we're finally going to receive an answer from the government," Shepis said.

Power grab alleged

Chávez's critics call the emerging system chaos at best because the councils are funded without oversight by a rising dictatorship benefiting from soaring oil profits. The result: an erosion of Venezuela's existing city and state governments.

"They are creating a parallel state with no rules," said Roberto Briceno, a sociologist at the Central University of Venezuela in Caracas. Briceno believes the councils are federally funded havens of political support for Chávez with no room for dissenting voices.

"The consejo comunals are going to 'disappear' all the local authorities; all the local powers, the mayors, they are going to have no power at all," he said. "It's an elimination of all the local mediums of power, and that means the elimination of politics, and that is totalitarianism, even if the president is charismatic and is good, or whatever, even if he is a saint, it is still totalitarianism."

Briceno maintains that an initial result of the Chávez government's favoritism of the new neighborhood-based system has been the breakdown of law and order, which depends on support and funding from the existing municipal government.

According to the Central University's Criminal Justice Institute, 4,550 homicides occurred in Venezuela during 1998, when Chávez was first elected. In 2003, there were 13,288. To hide the problem, Briceno said, the government is "trying to change the statistics system in order to create a new reality based on Chávez's own perception of the society."

"We know the crime situation is worsening, but it's impossible to establish that," he said. "The statistics have even disappeared from the website of the justice ministry; in general there is no information about violence."

"Two Venezuelas"

Supporters of Chávez's Bolivarian Revolution — named after Venezuelan independence hero Simón Bolívar — argue that widespread poverty in Venezuela is a result of a free-market system dominated by large transnational corporations whose business practices favor wealthy managers over the working class.

The community councils are fostering a new economic model based on cooperatives. Each is a group of at least five people who pool government stipends to form a micro-company that produces goods to be sent to government-subsidized stores opened in poor areas across the country.

Government figures claim more than 108,000 cooperatives are now active in Venezuela, employing some 1.5 million people and accounting for about 5 percent of the total economy. But signs of interaction between this emerging cooperative-based economy and the country's existing private economy are limited.

In one Caracas barrio, residents can buy a 2-pound "Bolivarian Government" bag of pasta for 35 cents at a government store, while just a few blocks away a traditional private marketplace is lined with shops selling everything from fresh fish to smoked meats and expensive sodas.

While gasoline hovers around 15 cents a gallon, one can expect to pay about four times that for a can of Coca-Cola and even more for a gallon of spring water, which usually costs a bit more than $2.

Beyond the barrios, newly constructed high-rise condominiums pepper the downtown landscape and shiny new cars and SUVs, imported from the United States, Germany, Japan and China, clog the main avenues.

"Today there are two Venezuelas," says Magaly Garcia, a former U.S.-based business consultant who now works in the Venezuelan Ministry of Foreign Affairs. "One has people with jobs in the capitalist private system; the other is a great sector of the population not benefiting from that.

"Chávez is allowing the private capitalist system to exist, and it will remain," she said, adding that the long-term goal is for the two economies to integrate.

Critics say that in the long run, the cooperatives represent drag on, not a boost to, the economy. "What people who follow President Chávez are really after is jobs, not co-ops," said Oscar Meza, president of Cendas, a Caracas-based independent research center. It holds that the community council and cooperative system is advancing a socialist local trade structure that lacks economic vision.

"Over the past eight years, Venezuela has had so much oil revenues, but it has failed to use those revenues to generate productive jobs, stable jobs and companies and industry," Meza said. "Instead it went for the cooperative model."

"When you belong to a co-op, you're not really a worker, you're a partner, so you're not entitled to minimum wage or benefits or severance, or Christmas pay or bonuses," he said. "People feel disheartened, and they just abandon the co-ops."

See the Post-Dispatch's slideshow of Andrew Cutraro's photographs.

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