Venezuela's Oil Wealth Funds Gusher
of Anti-Poverty Projects
by Robert Collier
San Francisco Chronicle, October
Hugo Chavez's revolution came to the hillside
slum of San Juan one recent night in the glare of a solitary lightbulb
and with puddles from a recent thunderstorm still underfoot.
Two dozen people clustered on a rooftop
to debate the money and power that suddenly seemed within their
grasp -- everything from home construction to bank loans, street
repairs, and after-school and vacation recreation programs for
It was the first meeting of San Juan's
communal council, an example of a new grassroots governing structure
that is spreading across Venezuela. Like thousands of other such
newly elected councils, the San Juan group will soon be given
previously unheard of sums of money by the central government
in what Chavez calls "a revolution within the revolution."
While the Venezuelan president has caused
international controversy with his angry denunciations of the
Bush administration, this is where the rubber meets the road for
Chavez's radical rhetoric. He is spending billions of dollars
on anti-poverty programs, in what experts say may amount to the
largest such effort in a developing nation.
And in a gamble that turns part of his
own government's power structure on its head, he is handing a
large degree of authority over these spending programs to thousands
of these elected local councils.
"The issues in these neighborhoods
are very old fights -- water, land, decent housing," said
Andres Antillano, a professor of social psychology and criminology
at the Central University of Venezuela in Caracas who has been
an adviser to many neighborhood groups.
"For many years, the only relationship
with the state was the police. They came here and put everyone
against the wall," Antillano said. "Chavez has chosen
to gamble on legitimizing these issues. The communal councils
are a very serious attempt at grassroots organizing."
The policy appears especially popular
in the hard-bitten slums of Caracas -- although as is true elsewhere
around the country, the electorate seems divided between a strongly
pro-Chavez minority and an apathetic majority. San Juan's new
council was chosen in local voting a week previously, with only
330 of the neighborhood's 916 eligible adult residents casting
"We like Chavez because he's giving
us control," said Leomar Aquino, who had just been chosen
head of the Education, Culture, Recreation and Sports Committee,
one of a half-dozen such panels on the council. "If you don't
want to participate in it, hey papito, that's your problem."
On this night, nobody seemed to know exactly
how much their neighborhood would receive. Nor, the next day,
did anyone at the offices of the local district government or
in the central government buildings downtown.
What is certain, however, is that Venezuela's
petroleum export earnings are rising rapidly, and the government
is spending the money with abandon.
The government initially budgeted $857
million for social spending in 2006. But as oil money floods in,
officials keep increasing the amount. It now stands at $7 billion,
although many experts view that figure as a guesstimate of money
being spent on the fly.
Public works projects are everywhere,
ranging from subway lines in Caracas and Valencia to bridges over
the Orinoco River. New medical clinics -- mostly staffed by Cuban
doctors provided under Chavez's oil aid program to Fidel Castro
-- are within reach of almost everyone in this nation of 25 million
people. Illiteracy, formerly at 10 percent of the population,
has been completely eliminated, and infant mortality has been
cut from 21 deaths per 1,000 births to 16 per 1,000.
Another initiative that could change the
lives of millions of poor Venezuelans is a new program aimed at
increasing land ownership.
Venezuela is the most urbanized nation
in Latin America, with about 86 percent of its people living in
cities, but about one-third of those urban dwellers have no title
to their land. In legal terms they are squatters, and thus cannot
access many government programs.
Over the past year, 57 cooperatives of
land surveyors have been formed to scour Caracas' hillside slums,
measuring the sprawling neighborhoods that previously were merely
blank spaces on official maps.
Ivan Martinez, director of the Urban Land
Committee titling office for Caracas, said that more than 200,000
titles had been given out, involving about 1 million people.
"People now can get basic services,"
he said. "We can hook them up to water, electricity. We can
help rebuild their houses. It's a huge change."
In San Juan, people are already hard at
Down the hillside from where the communal
council was meeting, another council had already put its new powers
to work. Using money and technical assistance from the state-owned
oil company, PDVSA, and the water utility, Hidrocapital, it has
hired local residents to install more than a mile of pipes in
"My street, around the corner there,
was recently hooked up," said one worker, Beyser Bernal,
putting down his shovel. "Before, we had it pirated, we hooked
it to the main through a bunch of pipes that were broken, like
those electricity wires," he said, pointing to a spider's
nest of wiring overhead where residents had jury-rigged their
homes into the electrical grid.
"The water just dripped out, and
it was dirty. Now it comes out great, and it's clean. My whole
family is happy."
But for many, progress is not happening
fast enough -- and they blame the government.
"Chavez is working well," said
Manuel Hernandez, a Caracas firefighter, who lives in San Juan.
"My aunt was sent to Cuba to get her eyes operated on. But
the people around Chavez are very bad. There is too much waste,
too much corruption."
Chavez, who has been in power for seven
years, often rails against the government bureaucracy as if he
were an outsider. While Venezuela's government has long been known
for its inefficiency, many people say the problem under Chavez
At a ceremony April 9 to inaugurate the
communal council program, Chavez acknowledged this perception.
"Many are saying that this is just
Chavez's plan to corrupt the people, that now Chavez will spread
money all around so people can go party and drink miche,"
he said, referring to a homemade liquor popular in the western
mountains. "They say that everything will be wasted. But
we're going to demonstrate what the Venezuelan people are capable
Some analysts point to the more than 100,000
cooperatives created under Chavez, a program that has broad public
support yet also is viewed as having fostered waste and graft.
They say the rules giving preference to cooperatives in the letting
of state contracts -- including more than $200 million worth from
PDVSA alone -- have prompted thousands of private companies to
convert into cooperatives in name only.
"Chavez is spending so quickly, with
such a lack of oversight, through a parallel state apparatus,
that corruption easily could spin out of control," said Teri
Karl, a political science professor and Latin America specialist
at Stanford University.
Suspicions are so widespread that they
have become the stuff of popular legend. Virtually every Venezuelan
seems to know someone who formed a bogus cooperative in order
to receive a large loan from a state-owned bank, then declared
bankruptcy and pocketed the money, only to be allowed to repeat
the process, milking the government for larger and larger sums.
"There is a problem of accountability,
it's very true," said Griselda Olvero, president of the San
Juan parish council, the local government for 110,000 residents
in the San Juan area.
She spoke while busily signing checks
in an office decorated by posters portraying leftist icons ranging
from Yasser Arafat to Moammar Khadafy, Fidel Castro and Patty
Hearst, along with Venezuelan independence hero, Francisco Miranda.
The largesse went for public works and supply contracts, welfare
assistance of all kinds, and one-off payments to "people
with special needs, who asked for our help," she said. One
of the checks was to a 10-year-old girl who played in a band so
she could replace her broken violin.
"We're doing our best, but there
is no way to track all this," she added as her assistants
lined up at her desk with more checks to sign.
The result of all this spending has contributed
to a red-hot economic boom, with gross domestic product growing
at 9.3 percent last year and 9.6 percent for the first half of
this year. And there's plenty more money to spend -- central bank
reserves are at $36 billion, and other government rainy-day funds
hold an estimated $15 billion. Inflation is 14 percent, a relatively
moderate rate by traditional Venezuelan standards, and is held
in check by subsidized prices at state-owned stores and by government
Chavez opponents accuse him of trying
to buy loyalty. "This is a colossal waste of money,"
said Alberto Quiros, an oil industry analyst in Caracas. "Just
when you think Chavez couldn't get farther from the laws of the
market and common sense, he proves everyone wrong."
Stanford's Karl, who studies the development
strategies of oil-producing nations, said Chavez's push to address
poverty is "truly huge, and long overdue, but very risky."
"Because all this spending is not
tied to any larger effort to increase economic competitiveness,
because it's all based on the distribution of oil income, it's
not at all sustainable," she said. "If the price of
oil goes down, there could be a crash."
Chavez has said that although international
oil prices have dropped recently, his spending programs can continue
unimpeded as long as the international price of oil stays above
$50 a barrel. As of Friday, the price was about $63.
For Chavez's supporters among the poor
of San Juan, a big worry is making sure that the money for their
own neighborhood doesn't get stolen.
"We're going to get huge amounts
of money, and I barely know how to manage my own (home) budget,"
said the newly elected budget director, Hector Carvajal, speaking
to his fellow council members on the rooftop. "Please, I
need training. I don't want anyone to blame me for even one bolivar