Oil Wars

Here is an interesting article on the new co-operatives being set up by the government. Apparently they are not all new enterprises. Some are existing concerns which switch to the new model in exchange for government support. I have to say I was impressed as this was one of the first general news agency articles to get the poverty statistics right - maybe progress is being made after all:

Venezuela tries '21st-century socialism'
By Natalie Obiko Pearson
the associated press

CARACAS, Venezuela — A landslide all but wiped out Wilfredo Rodriguez's small shoemaking business last year, entitling him to a loan from President Hugo Chavez's government — money he says he never would've found elsewhere.
It came with strings attached — his workers get limited co-ownership and he must make payments to community projects. But no matter. The factory is thriving. Its 14 workers produce 1,200 pairs of shoes each month and has begun selling sandals to Cuba.
Cooperatives and co-managed "social production" companies such as Rodriguez's shoe factory are the backbone of the new "21st-century socialism" that Chavez is trying to create.
Venezuela's iconoclastic leader is fond of saying he's inventing a new sort of economy that won't just forever alter Venezuelan society but will also serve as an egalitarian model for the entire world.
Such claims may sound exaggerated for a country buoyed by oil wealth where capitalist businesses continue to drive the economy. But in little more than seven years, Chavez's powerful personality and ample petrodollars have transformed Venezuela's economy into a distictive mishmash of public and private enterprise.
By many measures, Venezuela has ceased to be a free-market capitalist society. Billions of dollars are now diverted annually to state-directed social spending; cooperatives jointly owned and operated by workers are favored for government loans and contracts; and new state-owned companies challenge private sector heavyweights, producing everything from tractors to laptops for the poor.
For one, banking regulations require a third of all loans to go to small businesses, low-income mortgages and state-favored sectors at below-market rates.
Economists say it's uncertain whether Chavez's new model, greatly dependent on high oil prices, is sustainable.
But in the meantime, they say the Chavez experiment — to subordinate private enterprise to broader social aims — has become a powerful symbol in Latin America, where U.S.-backed free-market policies of the 1980s and '90s have caused deep disillusionment.
"I think we are seeing something innovative. Venezuela is aspiring to represent an alternative way of organizing society," said Laura Enriquez, a Latin America expert at the University of California-Berkeley.
Chavez has repeatedly expressed admiration for the communist China of Mao Zedong, the leftist dictatorships of Gen. Juan Velasco in Peru and Gen. Omar Torrijos in Panama, and Libya under Moammar Gadhafi, whose economy was similarly oil-based and marked by state cooperatives.
Under Chavez's "people's" action plan, the state also helps pay stipends to workers in various farming and industrial cooperatives — which now total 108,000 in the country, up from about 800 when Chavez came to power, and account for about 5 percent of all jobs.
Official statistics reveal positive signs: 9.4 percent economic growth last year — South America's highest — and a poverty level that has declined from 48 percent of the population in 1997 to 37 percent today. Last year, Venezuelans' per capita income was about $4,900, compared with $42,000 for Americans.
But others don't believe Chavez is creating conditions for long-term growth. The economy is dominated by oil; capital flight continues; and nearly half the work force is estimated to remain in the informal economy in dead-end jobs, including street vendors and laborers.
The conservative Washington-based Heritage Foundation think tank found Venezuela's business climate inhospitable and "repressed" this year, ranking it 152 out of 157 countries — just above Zimbabwe and North Korea.

And it had this interesting sidebar:

Inside '21st-century socialism'
● CARACAS, Venezuela — Wilfredo Rodriguez received a $318,000 government loan to rebuild his shoe factory after a landslide.
His is one of more than 100,000 private businesses now running as cooperatives in Venezuela that have received state assistance on condition they abide by certain "socially minded" principles:
l 10 percent of earnings must go for social programs in his local community.
l The loan has a one-year grace period and he has up to eight years to pay at 4 percent annual interest.
l Rodriguez keeps 60 percent of earnings and divides the rest equally among the other workers.
l The business donated $3,000 worth of shoes to poor families ilast Christmas.
l Group participation in company decisions, including a governing council comprised of Rodriguez, his wife and two workers that meets monthly to set production goals.
l Monthly visit by a government inspector, who ensures the company is adhering to socialist principles.

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