Venezuela's 'Socialist Revolution' Just Made a U-Turn

In a major flip-flop, Venezuela’s socialist President Nicolás Maduro is now preparing to privatize state-run businesses that were once nationalized by his predecessor and founder of the country’s ‘socialist revolution,’ Hugo Chávez.

A new piece of legislation known as the “anti-blockade law” will help Maduro’s government further consolidate power by allowing some foreign private investment into the country’s beleaguered oil sector. The legislation also allows the creation of permits that sell parts of state businesses such as beer-brewers and food-producers to raise money for social programs.

“Those on the left are decrying the opening of the door to private investment and privatization as a violation of sovereignty and a betrayal of ‘Chavismo,’” said Paul J. Angelo, a Latin American fellow at the Council on Foreign Relations.

“Chavismo” is the name given to the nationalist, socialist ideology espoused by the late, charismatic Chávez, who governed the oil-rich South American country from 1999 until his death from cancer in 2013. But now, grinding poverty, food scarcity, and blackouts have replaced the socialist fervor of many.

“The anti-blockade law is the Maduro administration’s response to sanctions and the specific goal of these privatizations is to restore the regime’s ability to fund social programs as the regime runs out of money,” said Angelo.

In 2002, Chávez threw out the top brass from the state oil company PDVSA, and five years later nationalized parts of the oil sector, forcing out top American oil companies like Exxon. As oil prices climbed and the government filled its coffers from oil sales to the U.S., Chávez used some of that revenue to fuel social programs and make good on his promise to reduce poverty. He also dreamed of spreading his brand of socialism across Latin America.

Following the death of Chávez, who tolerated corruption and mismanagement on his watch, his protégé Maduro claimed electoral victory. But when the oil price collapsed in 2014, so did Venezuela’s economy and all of the poverty alleviation efforts that oil money funded.

“Rhetorically, the attempt here is to place blame on the United States and other sanctioning actors, rather than address the Maduro regime’s own responsibilities for declining resources,” says Angelo.

With Maduro at the helm, Venezuela pushed socialism to its limits, using the country’s vast mineral wealth to spend on whatever the government deemed necessary. When oil production plummeted, Maduro began mining gold and exporting it to his allies in exchange for food imports. Socialist policies and unchecked spending caused hyperinflation to soar.

In 2017, widespread anti-government protests were met with a brutal crackdown by Venezuelan security forces.

Maduro further consolidated power by cracking down on protesters and neutering parliament. The leader of Venezuela's parliament, Juan Guaidó, declared himself president in early 2019. The U.S. and the European Union support Guaidó, but the effort failed at transitioning Venezuela back towards democracy.

In a sign of desperation, the administration of U.S. President Donald Trump began to slap heavier sanctions on members of government and the state oil company in a bid to cripple Maduro and his inner circle. Top members of the Maduro government have been sanctioned by the U.S. government for human rights abuses, corruption and drug-trafficking.

Venezuela is attempting to skirt those sanctions with the new law. Maduro said the legislation “contains a special feature that it hits back at the blockade and the “criminal” sanctions of the United States.”

“Our country believes in me and believes in this law,” he added proudly. “Because I wrote it.”

Some observers think Trump’s sanctions have largely backfired, and speculate that Maduro will sell shares of the state oil company to allies like Russia and China. Iran, who is already skirting sanctions by sending fuel to Caracas, Venezuela’s capital, is a possible investor too.

Economist Francisco Rodriguez worries that instead of weakening the regime, sanctions have pushed ordinary Venezuelans into poverty and consequently strengthened Maduro’s grasp on power.

“The U.S. has effectively asked Venezuelans to pay the price for Maduro’s atrocities,” he wrote. “Continuing to do so will not win hearts and minds. On the contrary, it will further insulate the regime from its own failures and abuses.”

Indeed, Maduro maintains power as ordinary Venezuelans hunt for food and wait in line for gasoline to power their cars. Once cheap and abundant, the double whammy of a mismanaged oil sector and sanctions on fuel imports have meant gasoline is extremely difficult to find. Protests over these increasingly severe shortages are roiling. In the central state of Yaracuy, a wave of anti-government protesters took to the streets over lack of fuel and food.

Now, to make use of this new law, Maduro will have to find buyers for shares in oil company PDVSA and the other state-run businesses his administration seeks to privatize. U.S. sanctions currently prohibit American companies and foreign energy firms from doing business with Maduro’s regime. It remains to be seen who will take the risk.

Cover: A woman wearing a face mask walks past a mural depicting late Venezuelan President Hugo Chavez in Caracas on April 17, 2020. Credit: Federico Parra / AFP) (Photo by FEDERICO PARRA/AFP via Getty Images.