Hunger hit Venezuela unexpectedly. Despite the absence of civil war, floods or droughts, by 2007 Venezuela’s population confronted food shortages. Those shortages have only increased since; today the country confronts widespread food insecurity.
Instead of the factors associated with starvation and malnutrition in Africa or Asia, Venezuela’s food crisis stems from profound policy mismanagement and a failure to understand the historic problems of food production in an economy built on coffee, cacao and later oil, but never foodstuffs.
With the current food crisis in Venezuela have come the other symptoms of economic incompetence and state-centric zealotry: escalating inflation, a widening fiscal deficit, and a dramatically contracting economy. The efforts of the 21st Century Socialist government of first President Hugo Chávez and today Nicolás Maduro to reorganize politics and society have wrought disaster on Venezuela’s economy and on its human development.
The seeds of food insecurity
In the early 20th century, Venezuela was the most important producer of coffee and cacao in Latin America, and its agrarian sector was the main source of foreign exchange. The reliance on coffee and cacao exports dwarfed the production of other foodstuffs more oriented toward domestic staples. The discovery of immense crude reserves in 1920 quickly overtook the country’s agricultural sector as the major source of gross domestic production (GDP) from 2.5% in 1920 to 40% in 1930. In the same period, agriculture—primarily coffee and cacao—as a percent of GDP dropped from 34% to 12.2% respectively.
After the drop of the coffee price in 1930 (from $3.98 per sack in 1919 to $1.32 in 1933), most Latin-American countries devalued their currency to keep their exports globally competitive. Venezuela, though, pursued a different route. With the country’s foreign reserves growing due to oil exports, the government—responding to pressure from local demands—maintained an overvalued exchange rate to permit the import of cheaper foodstuffs, which the state distributed locally rather than purchasing inputs so that those foodstuffs could be produced domestically.
That logic—based on domestic constituencies rather than economics—persisted when—between 1929 and 1938, in the middle of the international financial crisis, Venezuela increased the value of its currency by 64 percent. The reasoning was that “the stronger the local currency, the more Venezuelans could consume, and importers and retailers would become richer.” Flooded with cheap imported products and facing higher export prices, small agricultural producers could no longer compete on the world market.
This policy framework—that favored consumers and retailers over domestic agricultural producers—set the foundation for Venezuela’s development model for years to come, even after the arrival of the Bolivarian Revolution.
During the first half of 20th century, the introduction of fertilizers, machines and labor-efficient techniques of production would have improved productivity, reduced prices of production, improved surplus value, and, hence, stimulated a competitive agrarian sector. Yet Venezuela was unable to update from the small-scale rudimentary techniques used by small farmers to modern, large-scale, more-productive agricultural production. The unfair competition created by the overvalued national currency, the bolivar, and inattention to producers’ needs drove small farmers out of production and forced them into urban shantytowns—all the while reducing the capacity of Venezuela to produce the basic foodstuffs it needed to feed its own population.
Vuelta al campo… too little, too late
Intentionally and unintentionally, the Chávez government continued and deepened these policy distortions. As oil prices soared from around $20 per barrel when he was inaugurated in 1999 to over $100 per barrel by 2008, the government’s reliance on petroleum for its political/economic project increased. The resulting overvalued bolivar further crowded out domestic agricultural production.
But in 2001, the government embarked on an effort to diversify the economy, generate employment, alleviate poverty, reduce overcrowding in urban areas, and achieve food self-sufficiency by promoting rural development. In the name of “endogenous development”—based on participatory production and the development of a campesino agricultural class—the government invested its oil windfall to promote the integration of marginalized sectors of society into the “social economy.”
The idea was to stimulate internal networks of production and to substitute imports for domestic production as part of a “participatory economy” focused on agriculture. But in reality, the program was just a pale version of previous policies adopted earlier by pre-Chávez governments that had also failed. Case in point, between 1994 and 1998, the Venezuelan Agricultural Credit Fund (FCA) invested $20.9 million to increase agricultural productivity and labor. Ten years later, in 2005, the chavista-created Fund for the Development of Socialist Agriculture (FONDAS) invested almost $400 million to achieve many of the same basic economic goals. The amount invested was much more, but the larger policy distortions that undermined the agricultural production remained unchanged and if anything had worsened.
Later in 2008, in an ambitious plan to create a broadly redistributive economy, Venezuela added the Food Sovereignty initiative called Via Campesina to its Constitution, calling it a means to “radically” transform agriculture. The new effort was based on the notions of “entitlements” and “redistribution” of lands. The idea both in political rhetoric and practice was to place redistribution at the heart of a land reform as a mean to address rural poverty, fragmented markets and isolation.
From social agrarian production back to capitalism
Inspired by the writings of the Hungarian Marxist Istvan Mészáros, Chávez launched this so-called cooperative-based form of production as a way to change how communities produced and exchanged goods, including food. Production was now based on “the reorientation of the social reproductive process in such a way that the communally produced goods and services can be fully shared and not individualistically wasted by all those who participate directly in the social production and consumption.”
The program encouraged any head of household or young person to apply and become the leader of a cooperative, regardless of the applicant’s experience in farming. Under the ambitious program the government opened access to productive fields to citizen ownership including to those who had never worked the land before. Accordingly, FONDAS handed out free land titles, eliminated rent payments, and provided support through government-owned distribution networks. That support included: the provision of capital investments such as foreign machinery, the extension of capital loans and micro-credits, a publicly-paid workforce to develop and guide projects, and a massive public investment in infrastructure (roads, irrigation, etc.).
By 2008, the National Land Institute reported the redistribution of more than 4,380,000 hectares of “recovered” land to more than 101,500 families and cooperative-owned farms. Many of those cooperatives soon struggled, failing to achieve levels of productivity and to gain access to internal markets. As a result, the farms had difficulty paying back public loans and many lost state credit and assistance.
In response, the government created social production companies. Under this new scheme, the companies—co-owned by the state and the workers—were not focused on the type of ownership, but on the behavior of the enterprises, intended to transition the agricultural sector from a capitalist to a socialist model of production. The EPS (empresas de producción socialista) were expected to weigh social rather than private profit and to direct production toward the social needs of the community rather than serving the purposes of the market and capital accumulation By creating the EPS, the government obliged all food-producing enterprises to fulfill domestic needs first before seeking export markets.
The effort stood in direct contrast to rationally increasing agricultural productivity to meet the needs of the broader population. Based not on market incentives but rather on political-ideological goals, the state-sponsored agrarian assistance was chaotic and short lived. The socialist agrarian community crafted by the chavista government faced the same problems as previous government efforts: an unreliable, too-small investment source, the inability to repay loans, isolation from internal markets, and the lack of market incentives in the decision-making in what and how much to produce. As a result, small farmers initially working on government-led socialist projects started to work for private (capitalist) cacao exporters—as they did with the country’s largest private chocolate producer Chocolates El Rey–or sell their products to private intermediaries.
The major contradiction of the “socialist” agrarian model was that, even if it was originally created to empower small agrarian producers and entire communities, the restriction of access to markets, rational pricing and resources ultimately reproduced the same inequalities small farmers had historically faced.
Venezuela is one of the best examples of how even when a government attempts to focus on agricultural production, the hyper-regulation of food markets and a macro-economic environment that punishes large scale, market production will lead to domestic inaccessibility of food and starvation. However, the blockage here has more to do with the petro-dependence of petrosocialismo than with socialism per se. The dynamics of the oil industry and the structural and economic hurdles they create become the central aspect of Venezuelan politics, economics, and society and make alternatives nearly impossible.
In the end, was it Venezuela’s historical and structural production legacies and distortions that have led the country’s current food crisis or the past 18 years of socialist experimentation? I answer that in my next piece.
Andreina Aveledo, Venezuelan, graduated from the University of Bern, Switzerland and worked as a researcher for the Swiss Agency for Development and Cooperation (SDC). She is currently pursuing a PhD in Social Anthropology. Her research interests are food security, food sovereignty, political economy and the politics of control. You can follow her @AndreinaAveledo
