Economic Warfare

What the heck is really going on in Venezuela? A complex story lies behind the official narrative.

Joyce Nelson

Economic Warfare Venezuela

Economic Warfare – Image: Jared Rodriguez / t r u t h o u t; Adapted: Pfc. Andrya Hill / U.S. Army, Lomo-Cam

Most people are horrified to watch Venezuela seemingly on the verge of outright civil war, or worse, an invasion by U.S. military forces. The death toll continues to rise in the violent street protests led by the right-wing opposition, following the July 30 vote on a Constituent Assembly to rewrite the constitution. U.S. President Donald Trump had threatened to take further, unspecified “economic actions” if Venezuelan President Nicolas Maduro went ahead with the vote, and Trump added that the U.S. would not stand idly by “as Venezuela crumbles.”

The Canadian Peace Congress issued a statement (July 29) that said, “If the attempt at internal counter-revolution fails, plans are being put in place for direct military intervention by the United States, possibly under the cover of the Organization of American States (OAS).”

Maduro had hoped that the July 30 vote would help to bring dialogue and peace to the country, which has been wracked by violence for more than four months.

According to sociologist Maria Paez Victor, the opposition had been demanding that the Maduro government negotiate with them, so early in 2017 “a Peace and Dialogue Table was set up, facilitated by 2 former presidents of Latin America and one of Spain. They then refused to negotiate, demanding the presence of the Vatican. When the Nuncio arrived, they still refused to dialogue. Pope Francis himself stated the dialogue failed because the opposition would not participate. President Maduro then concluded that if the opposition would not negotiate with the government, they would have to negotiate directly with the people – and called for a Constitutional Assembly to amend the constitution.”

Maduro’s call triggered months of violence in the streets, with more than 100 people killed in the lead-up to the July 30 vote.

In advance of that vote, Raul Burbano, Program Director of the Canadian NGO Common Frontiers, told me by email, “The people of Venezuela will elect 540 constituents who will decide what changes to make to the constitution. These constituents will be elected via sector – i.e., workers, students, peasants, business folks, etc. and also territorially,” thereby broadening the members beyond the elite politicians. Burbano added that the Maduro government would likely want to see constitutional changes such as making the state “less bureaucratic” and “enshrining in the constitution the social programs” created over the past years.

Venezuelan electoral authorities announced a voter turnout of 41.53 per cent, or more than 8 million people on July 30. The opposition claimed fewer than half that figure turned out, and say that the Maduro government is becoming “dictatorial” and “consolidating power” through the Constituent Assembly.

Economic Warfare

One reason Maduro is so despised by the opposition is that he refuses to follow the neoliberal economic prescription of austerity, privatization, deregulation, etc. Such refusal makes Venezuela almost unique in Latin America now. As Brazilian professor Dawisson Belem Lopes has written, “…Brazil, Argentina, Mexico, Colombia, Paraguay and Peru have proud neoliberals serving as presidents these days,” even through the “neoliberal experience of the 1990s was simply disastrous for Latin Americans.”

As one of the last regional holdouts against a return to neoliberalism, Venezuela has been especially vulnerable to isolation and targeting, and not just by the U.S.. Raul Burbano says that Canada wants to “marginalize” Venezuela because it does not follow the neoliberal “free trade” agenda that Trudeau is pushing. The Trudeau administration insists on retaining the controversial investor-state dispute settlement (ISDS) mechanism in trade deals. In 2011, former president Hugo Chavez revoked project authorization for gold mines, which prompted four Canadian mining companies to launch ISDS lawsuits against Venezuela for billions of dollars in “lost profits” under the terms of a bilateral trade treaty signed with Canada. Venezuela subsequently cancelled all its bilateral investment treaties – inspiring a world-wide resistance against the ISDS clause, but also further earning the wrath of the private sector.

Sabotage by the private sector has taken the form of hoarding of selected items, price speculation, keeping supermarket shelves empty, sending food shipments to neighbouring countries, even setting food warehouse stockpiles on fire.

As The Canadian Press reported, “Opponents of Venezuela’s government blame it for turning one of the region’s most prosperous countries into an economic basket case with a shrinking economy, soaring inflation and widespread shortages. The government blames the crisis on an economic war waged by its opponents and outside backers.”

Interior and Justice Minister Nestor Reverol has claimed that the U.S. is attempting a “financial coup” to “strangle our country,” through hyperinflation and political turmoil in order to end the 18-year-old Bolivarian Revolution.

But that perspective is rarely given credence in the mainstream media. More often, we’re told of Maduro’s “economic incompetence,” government “mismanagement of funds,” and “rampant corruption.” As Jeffrey Taylor wrote in Foreign Policy, “Maduro’s response” to food shortages and currency crises “has been to blame everything on scheming ‘Yanquis’…”

It’s important to emphasize that Venezuela is not fully socialist, but has a “mixed” economy, with the private sector involved in many crucial sectors such as food distribution, pharmaceuticals, consumer product importation and sales, and the media. John Pilger has described Venezuela as a “reformist social democracy with a capitalist base” – a description that helps us understand what is happening there.

As Caleb T. Maupin wrote for Mint Press News last year, “It’s odd that the mainstream press blames ‘socialism’ for the food problems in Venezuela, when the food distributors remain in the hands of private corporations,” who are “running general sabotage” of the system.

That sabotage by the private sector has taken the form of hoarding of selected items, price speculation, keeping supermarket shelves empty, sending food shipments to neighbouring countries, even setting food warehouse stockpiles on fire. This purposely-generated scarcity creates chaos and discontent, further undermining the government.

“The opposition … have assaulted, lynched and even burned alive [at least 21] young men of dark skin ‘who looked Chavista.’ This is a violent opposition steeped in racism and classism against their own people.”

—sociologist Maria Paez Victor

Maria Paez Victor notes that “The opposition orchestrated economic sabotage, corporate smuggling, black market currency manipulations, full scale hoarding of food and essential products. They closed highways, burned public buildings including a packed maternity hospital, from a helicopter dropped grenades on to the Supreme Court offices, have assaulted, lynched and even burned alive [at least 21] young men of dark skin ‘who looked Chavista.’ This is a violent opposition steeped in racism and classism against their own people and in the service of foreign powers and Big Oil.”

Big Oil & Other Resources

Mint Press’ Caleb Maupin has blamed the U.S. for the collapse in oil prices in 2014, noting that U.S. ally Saudi Arabia flooded the market with cheap oil in order “to weaken those opponents of Wall Street, London, and Tel Aviv, whose economies are centered around [state-owned] oil and natural gas exports,” including Venezuela, Ecuador, Russia, Brazil and Iran.

Interviewed in 2015, John Pilger similarly referred to the “current conspiracy between the U.S. and Saudi Arabia to lower the price of oil” in order to cause a “coup” in Venezuela “so they can roll-back some of the world’s most important social reforms.” The collapse in the price of oil devastated the Venezuelan economy.

world oil reserves 2014 venezuela

World Oil Reserves 2014. Data from US Energy Information Administration. Image: Delphi234 via Wikimedia Commons


Trends in proven oil reserves in top five countries, 1980-2013

Trends in proven oil reserves in top five countries, 1980-2013. Graphed data from US Energy Information Administration. Image: Plazak via Wikimedia Commons


As economist Mark Weisbrot argues, “Washington has been more committed to ‘regime change’ in Venezuela than anywhere else in South America – not surprisingly, given that it is sitting on the largest oil reserves in the world.” The U.S. and the Venezuelan opposition want the state oil company, Petroleos de Venezuela (PDVSA) to be privatized, but instead the company has lately been forming partnerships with Russia, China, Iran and others – thereby adding to the urgency of the counter-revolution.

But oil is not the only resource that the U.S. wants to get its hands on. Celebrated Venezuelan writer and member of the Venezuelan Council of State, Luis Britto Garcia, recently wrote: “The current economic situation Venezuelans are going through result from political actions undertaken by those who want to seize power of a country that has the largest oil reserve, the second largest gas reserve, and the largest freshwater reserve, gold and coltan in the world. They intend to impede the success of a system other than capitalism.”

As Mark Weisbrot wrote for Counterpunch, “The question of what role Washington should play in Venezuela’s crisis is a simple one, given its recent history. The answer is the same as it would be with regard to the role we would want the Russian government to play in US politics and elections: none at all. Unfortunately the involvement of the United States in Venezuelan internal affairs in the 21st century has dwarfed anything that anyone has even accused Vladimir Putin of doing here.” Besides being thoroughly involved in the 2002 military coup, the U.S. since then “has provided tens of millions of dollars to the Venezuelan opposition,” while supporting violent protests since 2013.

“Washington has been more committed to ‘regime change’ in Venezuela than anywhere else in South America – not surprisingly, given that it is sitting on the largest oil reserves in the world.”

—economist Mark Weisbrot

As well, Weisbrot notes, “Today, Florida Senator Marco Rubio openly threatens governments including the Dominican Republic, El Salvador, and Haiti with punishment if they do not cooperate with Washington’s abuse of the Organization of American States [OAS] to delegitimize the government of Venezuela. And the Trump administration is threatening more severe economic sanctions against Venezuela, which will only worsen shortages of food and medicine there.”

Economic Sabotage

The Canadian Peace Congress states: “For the past several months, US imperialism and its allies domestically and internationally have been exacerbating Venezuela’s economic difficulties by attacking its international credit rating (making foreign loans increasingly expensive), by weakening the foreign exchange value of the national currency through purposeful speculation, and by withholding basic commodities needed by the people (but whose distribution is still controlled by private monopolies), such as milk, coffee, rice, oil and basic necessities like toilet paper, toothpaste and medicines.”

A new book by Venezuelan economist Pasqualina Curcio – The Visible Hand of the Market: Economic Warfare in Venezuela – reveals more precisely just how some of this economic sabotage is being done: through multinational corporations, whose brand names we all recognize.

For example, Curcio shows that Big Pharma is “responsible for the import and distribution of 50% of pharmaceuticals in Venezuela,” while companies like “Procter & Gamble, Colgate, Kimberly Clark and Johnson & Johnson” control the Venezuelan market for personal and household hygiene products. In league with local private distributors, these multinationals appear to be re-routing and withholding products, and/or bypassing Venezuela completely.

As Curcio notes, “The dependence of the people in Venezuela on large transnational corporations for the acquisition of medicines and personal care products is one of the weaknesses of its economy.”

Another economic warfare weapon that Curcio investigates is the “country-risk indicator,” a calculation that suggests the probability of foreign debt payment default by any country. The higher the country-risk, the higher the risk-premium, or the interest-rate paid on debt.

The higher the country-risk, the higher the risk-premium, or the interest-rate paid on debt … “[Venezuela] has fulfilled all its commitments in a timely manner, and yet its country-risk index was hiked by 202%.”

—economist Pasqualina Curcio

Curcio reveals that the “Large banks and rating agencies are responsible for continuously monitoring the credit risk of countries.” Moody’s, Standard & Poor’s and Fitch Ratings are involved in the country-risk calculation, as are “Credit Suisse, Bank of America, J.P. Morgan, Morgan Stanley and Deutsche Bank.”

Curcio writes, “Since 2013, when an escalation of the country-risk [for Venezuela] started, to the present, Venezuela has paid US $63.566 billion for foreign public debt service [interest charges]. The country has fulfilled all its commitments in a timely manner,” and yet its country-risk index was “hiked by 202%.”

The author also reports that “90% of Venezuelan bondholders” have not sold their bonds, “a sign of confidence in the [debt-servicing] payment capacity of the Venezuelan State.” But shortly after Curcio’s book was translated into English, Goldman Sachs reportedly sold $300 million of Venezuelan bonds to hedge funds – contributing to the narrative of Venezuela’s impending economic collapse. Recalling that Goldman Sachs was central to the demise of Greece’s economy, it’s reasonable to question the motives of this sale.

Curcio’s book investigates several other economic sabotage tactics used against Venezuela and is well worth reading. For those who question its validity, we need only look a bit closer to home to get a taste of how economic warfare works.

Closer to Home

Shortly after being elected, Donald Trump named billionaire Wilbur Ross as his choice for Commerce Secretary. Known as the “King of Bankruptcy,” Ross spent 24 years with N. M. Rothschild & Sons, where he specialized in “asset stripping,” or leveraged buyouts of distressed firms that could later be sold for a large profit.

At his U.S. Senate confirmation hearing in January, Ross talked about the Trump administration’s desire to re-negotiate NAFTA. As reported in January 2017, “Ross did not shy away from spelling out the aggressive implications of Trump’s trade policy. He boasted about the recent collapse in the value of the Mexican peso and the further weakening of the Canada dollar. ‘The president-elect,’ said Ross, ‘has done a wonderful job of preconditioning other countries [with] whom we will be negotiating that change is coming. The peso didn’t go down 35 percent by accident. Even the Canadian dollar has gotten somewhat weaker – also not an accident. He [Trump] has done some of the work that we need to do in order to get better trade deals’, Ross said.”

If that’s how the U.S. deals with its friends, it’s not too hard to imagine what’s being done to Venezuela.

Canadian freelance writer Joyce Nelson’s sixth book is Beyond Banksters: Resisting the New Feudalism, published by Watershed Sentinel Books in 2016.

Further reading: Greening the Venezuelan Constitution: Proposals from the Grassroots

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