Balance 2021-Outlook 2022
Imperialist blockade and socio-economic crisis
The economic blockade is a genocidal crime against our people. The economic cost of the illegal sanctions applied by Washington alone exceeds 120 billion dollars and has affected the entire nation, but fundamentally the oil industry, the heart of our economy, provider of foreign exchange for imports and income for productive and social investments of the State.
The oil industry is suffocated by these brutal sanctions as it is prevented from investments, marketing and financing essential for its development. In fact, production plummeted from two million barrels a day in August 2017, when the Trump administration established the first sanctions, to a record low of less than 150,000 barrels per day last year.
As we said, the entire national economy is a victim of the blockade by closing the doors to foreign financing and international trade. Our assets abroad have been confiscated, representing a loss of more than 35 billion dollars.
The economic consequences of the sanctions range from the dramatic contraction of oil exports, which constitute 95% of the country’s foreign hard currency income and 70% of fiscal revenues, thus deactivating two fundamental engines of the nation’s economic growth. The effects include the deep fall of productive activity, acceleration of the inflationary process, the drastic decrease of imports, the growing deterioration of the country’s fiscal income and the notable drop in international reserves.
Regarding the social impacts, these have been tragic: an increase in the cost of living, deterioration of public services, as well as of education and health, the fall in formal employment, wages and social security, an increase in poverty.
Politics, Geopolitics and Economy
This explanation of the harsh consequences of the economic blockade is necessary because the logic that drives U.S. aggression consists in creating an economic crisis of such magnitude that it leads to a scenario of ungovernability and chaos, which finally translates into overthrow of the government by a social outbreak, coup, civil war or foreign intervention for “humanitarian purposes.”
This means that the country’s crisis is not because of internal factors or conventional mechanisms that determine the performance of an economy. It is a fierce onslaught unleashed by imperial arrogance against a government that exercises its sovereignty and challenges Yankee hegemony imposed since the beginning of the 20th century in its “backyard.”
This eminently geopolitical fact means we must overcome the political crisis generated by Yankee interference in order to be able to reactivate the economy and recover the wellbeing of our people.
Precisely, the historic Bolivarian victories have given us a political stability that stimulates the economy’s growth by offering security and confidence to investors, as well as a scenario that allows us to concentrate our efforts on the economic and social issues of the country.
Oil and productive recovery
With the historic political victories and despite the blockade, the national economy has registered clear signs of recovery in the second half of 2021.
This upward trend of our productive apparatus is due to a set of factors, among which the following should be mentioned.
In the first place, the recovery of oil production stands out. Recently, news agencies like Bloomberg reviewed the highest oil production records in recent years, placing it at more than 900,000 barrels per day.
This increase — unanticipated by the country’s enemies — is due in the first place, to the contribution and commitment of our country’s oil workers (managers, workers, etc.). Its ability to plan, manage, improve technological processes, adapt to blockade conditions to overcome harsh restrictions, has resulted in the activation of oil fields and increased production, of those that were already activated.
The Anti-Blockade Law has also been a key factor. Under its protection, private companies have been incorporated, which have been developing investment plans under the direction of the Venezuelan State.
The support of our friends around the world who have come to our aid also stands out. A special place in this regard is occupied by Iran, which, in defiance of sanctions, has contributed in multiple ways to increase our production.
In the midst of the blockade, this constitutes wonderful news, as it shows we are able to overcome its devastating impacts. Oil ignites the engines of imports, necessary for growth (even when we are engaged in a broad process of import substitution), and of public spending, with its powerful multiplier effects throughout the productive apparatus.
Private investment and economic growth.
A novel element of this situation is private investment. This has been increasing progressively in its early stage, for the first time in decades, independently of oil revenues, especially in sectors with massive demand for goods and services.
This development offers us two initial readings. On the one hand, the confidence and security that are vital for productive investment — so battered by imperialism’s terrible campaigns and destabilizing plans — have returned. There we see the manifestation of our victories and the return of political stability. But the fruits of a coherent economic policy of the Bolivarian government are also evident, in the midst of such tremendous complexities.
The contribution of the Bolivarian government and workers
The Bolivarian government has been present in this productive recovery. Its economic policies have been really consistent in facing so many challenges simultaneously. It is not possible in the face of so many difficulties to have success of the same magnitude on all fronts. But it is evident that progress has been made in productive resuscitation and in progressive stabilization of the economy, as expressed in lower levels of inflation.
In fact, without strangling domestic productive activity, it has been possible to lower the inflationary index from a maximum of 330,000% (annualized inflation between 2018-2019) to single-digit inflation for the fourth consecutive month at the end of 2021. This is important, because it supports economic growth for the future.
In addition, the government of President Nicolás Maduro has been able to evade the sanctions through the Anti-Blockade Law with the help of our international allies, as well as what we have learned from our own situation and the experiences of our allies subjected to decades of sanctions, as is the case of Cuba and Iran.
For their part, workers in the public companies, especially in basic industries, assume an increasingly leading role thanks to their greater organization and awareness. Even without new investments, they are starting to increase the production of essential supplies for the country’s main industries. Without a doubt, in this crisis the working class has made a qualitative leap in its ability to fight politically and also economically.
The government’s challenges for 2022
To face the blockade successfully, we have to preserve our political strength, our superiority in the face of the counterrevolution. Likewise, it is absolutely necessary to continue advancing in the fight against bureaucracy and corruption.
In terms of economic policy, there are four tasks (among many others) that we have to solve: Recover the financing capacity of the productive apparatus, and avoid turning on the inflation turbines; shield the stability of currency exchange through a greater inflow of foreign currency to be able to defend the national currency; protect national production with tariffs without risking the level of domestic supply; continue to raise the country’s tax revenue, following the extraordinary and successful effort made by SENIAT, especially through the increase in oil production …
Likewise, it is of fundamental importance to boost the production of basic industries. To the effort made by Venezuelan workers, we must add an injection of capital and the incorporation of new technologies. The growth of the main industries in our country depends on this production. This will help to reactivate the entire domestic productive apparatus and, in turn, reduce imports of raw materials and inputs, in general.
Another key element in the economic situation is the de facto dollarization of our economy. Although it has contributed to the recovery of production through the injection of foreign resources, dollarization is not viable as a formula for economic development. We would hand over control over our economic policy, which is already serious, but under conditions of lockdown it is much more delicate.
As the economy returns to its full normality, we will take advantage of the positive aspects of this phenomenon as an escape valve from a very grave situation created by the criminal Yankee sanctions. But we are obliged to reverse its most harmful consequences, starting with social inequalities that each time are more accentuated.
Likewise, investments are a key variable for the growth and sustainable development of our economy. Both private and public investment must experience a very important recovery to strengthen the expansion of national production. Confidence, economic growth, financial strength of the State, the opening to foreign capital under the direction of the State, a climate of trust and stability, these will determine the behavior of this variable of investments.
Objectives of the national economic recovery
In the framework of a socialist government, the economy is at the service of the growing wellbeing of the population, and the generation of wealth is the material basis for this. The availability of income is decisive for responding to the growing needs of the population.
These revenues generated by the current productive reactivation will be geared toward investment in public services that have been so terribly affected by the economic blockade. A good part of our people’s quality of life depends on public services, but major economic growth is also needed for that. Electricity, water, gas and fuel are essential to sustain production, which in turn income and employment are dependent on and which generate social wellbeing. This requires a highly efficient administration, a lot of reasoning in the policies that direct its development and, obviously, increasing investments for maintenance and expansion.
Another absolutely essential factor is salary, which has been dramatically impacted by the sanctions. The devastation of wages due to sanctions is clear, as the unilateral coercive measures aim at the destruction of our socio-economic fabric. The income that provides the wages depends on national production and this has collapsed as a result of the blockade. At the same time, wages are crucial to guarantee the well-being of the population, but also to push the economy towards growth. Its recovery is an urgent priority.
Finally, there is everything related to protection and social security: pensions, education, health, housing, employment … These are first-line priorities of a revolutionary government and, as in other cases, are served by our unwavering will to provide well-being and justice to our people. For this it is also essential to have the necessary income to be able to carry out these proposals and principles. Restoring the conditions of growing well-being and social justice, dramatically disrupted by the imperialist blockade, is the central objective of the Bolivarian revolution.
Outlook 2022 and the socialist horizon
The year 2022 will be one of consolidation of the productive recovery, but we will have to continue fighting against the violent attacks of the sanctions. It seems unlikely they will be lifted, although they have utterly failed in their attempt to overthrow the revolutionary forces. The folly and hatred towards the Venezuelan people by sectors of great influence in the ruling elites of the United States seem to prevail in this aspect of Yankee politics. In any case, we have proven our ability to overcome the onslaught of sanctions.
And on the other hand, we are focused on defending the political stability that has been achieved with so much sacrifice and is so essential to guarantee the confidence necessary for investments. The same applies to economic policies. These must be adjusted to new challenges and changing realities with great precision and in a timely manner. That is a complex task.
Increasing oil production is the most important strategic task. A large part of all the effort to recover our economy rests on this task. There is no other single productive activity that by its own forces can provide the vitality required for the deployment of our productive apparatus.
An important factor is the international context. Strengthening cooperation with our strategic allies is of crucial importance. The same can be said of the changes in the correlation of forces on the continent, which show signs of leaning towards the forces of progress in the upcoming Colombian and Brazilian elections, following the recent triumphs in Honduras and Chile.
All this effort for social and economic development is part of our socialist horizon. The consolidation of People’s Power, the strengthening of the revolutionary organizations with the PSUV at the forefront, the civic-military union …, these are essential conditions to continue advancing in the transition to socialism. But the full consolidation of these factors also depends on the material conditions that provide a robust income-generating productive apparatus for comprehensive development.
In that sense, the most important economic strategy that brings us closer to socialism continues to be industrialization. Socialism requires very solid material bases. Economic sovereignty is closely related to the industrial development of the nation, with its modernization. With industrialization the proletariat grows, the social class destined to build a society free from capitalist exploitation. The elevation of the wellbeing of the people, a fundamental fact in the construction of socialism, is determined by the degree of development of the productive forces. From any perspective, it is essential to advance on the path to industrialization of the country.
Jesús Faría is president of the Permanent Commission of Economy, Finances and Economic Development of the National Assembly and member of the national leadership of the United Socialist Party of Venezuela (PSUV). Translated by Liberation News.