Expropriation, a strategy to expand government control

If reelected, President Hugo Chavez will focus all efforts toward making the shift to socialism irreversible. Throughout his campaign, the candidate of the Venezuelan socialist party insists on this course of action as he lays out his future government plans.

"Let us not kid anyone: Venezuela's socioeconomic structure is still that of a capitalist and rentier state. Nevertheless, socialism has begun to impose its own kind of internal dynamics amongst us," claimed Chavez upon announcing his government plan (2013-2019), submitted to the National Electoral Council.

From the official sector's point of view, the so-called Socialism of the 21st Century has yet to consolidate. However, after Chavez's 14-year tenure, there are clear signs of changes to the economic model.

After announcing the socialist nature of the "Venezuelan revolution" in 2006 and implementing the First Socialist Plan (2007-2013), the government has implemented a system that gives the state greater control and involvement in the national economy.

Changes to the legal environment, increased controls upon private entities and a sustained expropriation plan are the most visible strategies of the national government in its continued attempt to discard the previous economic order, which was based on respecting the market and private-sector activities.

According to the Venezuelan Confederation of Industries (Conindustria), from 2002 to June 2012, the government nationalized 1,162 companies. Research shows that from 2002 to 2006 only 15 enterprises were expropriated, but from 2007 onwards, that figure amounts to 1,147, a whopping 98%.

The cost in dollars puts things into perspective. Estimates made by consulting firm Econalítica show that the national government has paid 13 billion dollars on those expropriations but holds an outstanding debt of 21 billion dollars.

Expropriation by stages

The government's expropriation activity has had several phases. At the beginning, the explanation given for the seizures was that the affected enterprises belonged to "strategic" sectors.

Under the First Socialist Plan, "the state shall control all production activities of strategic value to the country's development." Chavez has made this very
same announcement repeatedly.

"All of those important and strategic sectors for us all, like the electric-energy sector, which was once privatized must be nationalized! Let us take back social ownership over strategic means of production. Phone company Cantv is to be nationalized (... ) The nation must regain ownership of the strategic means of sovereignty, security, defense (... ) electric energy is a strategic area of the country, like water supply and telephone services," voiced Chavez in 2007.             

Therefore, companies related to the basic industries, petroleum, telephone services and electricity were nationalized. But these measures have also been used, in certain cases, as punishment.

"There are countless scenarios in which workers' claims upon company shutdowns match expropriations, seizures and compulsory purchases of enterprises on the basis of the search for workplace stability or shortages in food products," reads the book Management in Red, coordinated by Richard Obuchi and published in 2011.

These seizures have also expanded state dominance over certain sectors, thus affecting production, distribution and sale of assets.                                          

This practice has diluted property rights, according to businesses, and has made the state the owner of large companies, as well as ports, banks, transportation networks and trade companies.

Translated by Félix Rojas Alva