[NYTr] Chavez champions welfare over profits

[All the News That Doesn't Fit]

The Financial Times - Nov 20, 2007
http://www.ft.com/cms/s/0/7c766bae-970a-11dc-b2da-0000779fd2ac.html


Chávez champions welfare over profits

By Benedict Mander

Amid rows of softly humming sewing machines, with women calmly chatting
among themselves as they go about their work, Margarita Morales picks
up one of the bright red T-shirts from the production line. 

"We're making these for people to wear at pro-government rallies," she
says cheerfully, revealing a room stacked with T-shirts emblazoned with
slogans such as "With Chávez, the people rule" and with images of
Marxist revolutionary Che Guevara, as well as piles of military
uniforms. 

This small Venezuela Advances factory in Catia, a poor district in the
west of Caracas, is one of Venezuela's showcase co-operatives, at the
frontline of President Hugo Chávez's "Bolivarian revolution". Measures
to promote such outposts of a 'socialist economy' are one of the
central planks of the changes Mr Chávez hopes to introduce to the
constitution, expected to be approved in a referendum on December 2.

But not everyone is so optimistic about the prospects for the
co-operatives. "So far there isn't a single example of a successful
co-operative that I'm aware of," says José Luis Betancourt, the
president of Fedecámaras, Venezuela's leading business association. 

Despite the government having spent well over $1bn on grants and loans
over the past few years, and billions more on social programmes
designed to train workers in how to set up and run co-operatives, the
results have so far been disappointing.

Although according to official statistics there were over 180,000
co-operatives at the end of 2006 - more than any other country -
Gonzalo Gualdrón, the president of the government commission on
co-operatives, says that in fact there are fewer than 80,000. Some
census figures suggest there are fewer still.

While many co-operatives never got off the ground, due to misuse of
government funds, others simply pocketed the money and ran, a situation
that even Mr Gualdrón acknowledges.

Supporters of the scheme say the biggest challenge is a deeply embedded
culture of "capitalist individualism". 

But the new constitution plans to broaden the scope of economic
activity beyond private enterprise by protecting co-operative and
community-based enterprises.

Among the measures to be introduced in the new constitution are
ill-defined new varieties of property, so that in addition to private
property there will also be public, social, collective and mixed forms
of property.

Businesses worry that private property rights will be weakened and that
expropriation will rise. "There is no room for private companies in
this reform project," says Mr Betancourt. But Mr Chávez says the
changes will promote a new economic model that prioritises social
welfare over self-interest and profits, and worker solidarity over
exploitation. 

At the Venezuela Advances co-operative, workers had left early to
attend a government-funded adult literacy programme. The co-operative
is part of the Fabricio Ojeda 'Nucleus for Endogenous Development', an
attempt to put Mr Chavez's '21st-century socialism' into action that
also includes health clinics, subsidised food stores and development
programmes.

Even so, many doubt whether co-operatives can compete with capitalist
enterprises without more restrictions on the private sector, as some
government advisers say is necessary. 

Although the co-operatives receive generous grants and loans and are
exempt from all taxes, those that are successful are often dependent on
government support.

In the case of Venezuela Advances, last year two-thirds of production
was bought up by PDVSA, the state-owned oil company.

"While the emphasis is not on competitiveness, they must be competent
and efficient, and that way they will be productive," says Mr Gualdrón. 

A deeper threat is posed by the preponderance of oil in Venezuela's
economy, which has thwarted attempts to diversify and industrialise the
economy. 

"Under Chávez the economy has become more dependent on oil, and non-oil
exports have been falling. There is nothing in the constitutional
reform that promises to alter this trend," says Francisco Rodríguez,
chief economist for Venezuela's national assembly until 2004, who is
now critical of the government. "There is no indication that the
government even thinks that de-industrialisation is a problem." 

"The feeling I get is that a large number of the co-operatives have
failed," says Steve Ellner, a political scientist at the Oriente
University in Venezuela who has studied the co-operatives. "The ones
that are functioning are not resounding successes ... But they have
transformed the lives of those belonging to them."