After brokerages, are Venezuela’s banks the next target?

[Die Neue Zeit]

After brokerages, are Venezuela’s banks the next target? (http://blogs.ft.com/beyond-brics/2010/08/25/after-brokerages-are-venezuelas-banks-the-next-target/)



By Benedict Mander

The scary level of violent crime in Venezuela is in the spotlight, thanks to the government’s complete failure to control the problem. If only it were equally incompetent at fighting financial crime, a number of bankers must be thinking at the moment.

There is the president and six more executives of Banco del Sol, who have just been included on Interpol’s “wanted” list. Among others, there are the four directors of Econoinvest, who have been wasting away in a prison cell since the government seized Venezuela’s biggest broker three months ago. (Unfortunately for them, it’s perfectly possible that they will stay there without being brought to trial for some time to come, if past experience is anything to go by. Certainly no judge will want to release them, even if she deems them innocent, after the notorious Afiuni affair.)

Some 43 brokerages have now been seized by the government and a bevy of brokers detained over suspected “irregularities” in trading on the unofficial “parallel” foreign exchange market, which was shut down in May. Ten of those 43 have been liquidated altogether, apparently because of solvency problems – although, curiously enough, that includes Econoinvest, whose liquidation was announced a few days ago even though its annual accounts published just before it was taken over showed it to be a perfectly profitable and well functioning business.

Gone are the halcyon days when people could make vast sums of money practically overnight in Venezuela’s financial sector, virtually unchecked. In fact, the game is up for brokerages altogether after a new capital markets law came into being last week, formalising their exclusion from trading in currency or dollar-denominated debt. (The fact that they are still allowed to trade local equities and securities isn’t much comfort, given that Caracas’s stock market has become a rather ghostly place since Hugo Chávez started nationalising all the big listed companies a few years ago – it traded an average of less than $500,000 a day last year and there is almost no investment banking or IPO business).

With brokers gone, “Venezuelans will now be able to save, but no longer in rotten bourgeois brokerages so that they can take their money to the United States or to fiscal paradises,” Chávez said. Well, it’s certainly true that it has become a whole lot more difficult for Venezuelans to get their money out of the country and save it in a currency that preserves it value. But saving in bolívars has hardly become any more enticing, with galloping inflation continuing to gnaw away at bank accounts, where real interest rates are negative.

Indeed, now that he has dealt with the brokerages, there is some concern that Venezuela’s socialist president might now start thinking about increasing state control over those other servants of capitalism: the banks. Whether or not that will help to cure the ills of Venezuela’s economy is a different issue.

[Sperm-Doll Setsuna]

It's about time something was done about the banks.

[The Vegan Marxist]

The article seems almost like it's blaming the increase of crime levels on the Venezuelan government, which is untrue. If so, I believe this article is quite relevant against such claims:


Crocodile Tears? Covering Crime in Venezuela
By SAMUEL GROVE - NEW LEFT PROJECT, August 18th 2010

The ability of dominant elites to exploit crises and configure them in ways appropriate to their narrow interests is a capitalist staple. The economic crisis was articulated as a stock market crisis meriting a massive transfer of wealth (http://www.huffingtonpost.com/jeffrey-sachs/the-geithner-summers-plan_b_183499.html) to the financial class. Equally when the elites refer to the safety and security of a country what they really mean is safety and security for investors. Describing the humanitarian crisis in Palestine recently Barack Obama bemoaned (http://www.youtube.com/watch?v=w22z2dW99is) the fact that Palestinians were unable ‘to create businesses and engage in trade’. With this in mind it is interesting to observe the current western elite media disquiet regarding crime in Venezuela.

In recent years there has been a torrent of articles, features and programmes on soaring levels (http://www.timesonline.co.uk/tol/news/world/article1083077.ece?token=null&print=yes&randnum=1151003209000) of crime in the country. Venezuela is in a state of ‘‘societal breakdown in which impunity is widespread’ (http://www.nytimes.com/2009/12/11/world/americas/11venez.html) and violence is ‘rampant (http://www.mg.co.za/article/2006-04-21-rampant-violence-plagues-venezuela)’. The reportage peaked in late 2008 after a study (http://www.foreignpolicy.com/articles/2008/09/28/the_list_murder_capitals_of_the_world) by Foreign Policy magazine hailed Caracas the murder capital of the world. Shortly afterwards Channel 4 broadcast a programme entitled ‘Venezuela: Cult of the Thugs (http://www.channel4.com/news/ontv/article.jsp?id=2827492)’ exploring ‘a crime wave the police seem unable to contain’. Since then coverage has continued (http://www.reuters.com/article/idUSTRE62A44A20100311) at a steady (http://www.guardian.co.uk/world/2009/may/17/venezuela-colombia-gangs-barinas-caracas) pace (http://news.bbc.co.uk/1/hi/world/americas/8008795.stm).

In contrast to the reporting on crime in the west, which tends to find explanation in either a delinquent (http://www.spectator.co.uk/rodliddle/5601833/benefits-of-a-multicultural-britain.thtml) culture (http://www.guardian.co.uk/politics/2007/apr/12/ukcrime.race) or delinquent genes (http://www.dailymail.co.uk/sciencetech/article-558554/Scientists-uncover-delinquency-gene.html), the crime wave in Venezuela has been blamed on the Venezuelan government. The New York Times quickly latched on to the story of crime in Venezuela as a political scandal back in 2006 when they cited “crime analysts (http://www.nytimes.com/2006/12/02/world/americas/02venezuela.html?_r=2)” who blamed the high rates of crime on the Venezuelan president Hugo Chávez’s “politicization” of the police force—anyone thought to disagree with Chávez’s “militaristic attempt” to reconfigure society along “vague socialist ideals” is “marginalized”—they argued. More recently Reuters argued that the problem was not so much the criminals, but rather the “government’s inaction and lack of policies (http://www.reuters.com/article/idUSTRE62A44A20100311)”.

Crime is high in Venezuela. According to the 2008 Latinobarometro report, Venezuelans saying they have been a victim of crime has veered between 43-53% of the population over the last 10 years. It is understandably therefore a major concern for Venezuelans. According to the same report 57% of respondents say that crime is the biggest problem the country faces. The Research Institute of Citizen Security and Coexistence (INCOSEC (http://incosec.sumospace.com/)) estimates (http://incosec.sumospace.com/wp-content/uploads/2010/04/informe-1-trimestre-2010-final-4.pdf) that the average murder rate (measured per 100,000 of the population) was 49 in 2009 (compared (http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-07-015/EN/KS-SF-07-015-EN.PDF) to an average of about 1.59 in England and Wales). However this, alone, tells us very little regarding the western media’s sudden interest in crime in Venezuela.

We have at least two sizable reasons to be suspicious of the media in this regard. To begin with the crime wave described in Venezuela is actually all over Latin America. According (http://www.who.int/dg/lee/speeches/2004/lima_peru/en/index.html) to the World Health Organization (WHO) Latin America has the highest level of youth homicide of all regions in the world, with El Salvador and Puerto Rico singled out for special mention. Why isn’t there similar vituperation about these countries? In neighbouring Colombia an average (http://www.cipcol.org/?p=1471) of 12 people a day have been killed or disappeared in conflict related violence since 2002. Furthermore a significant proportion of these killings have been shared (http://www.amnestyusa.org/all-countries/colombia/more-on-colombia/page.do?id=1011310) between the Colombian army and the paramilitary groups closely allied to them. The second reason to be suspicious is that while crime is high in Venezuela, it has been high for a very long time (http://www.cscs.umich.edu/~crshalizi/Economist_Articles/venezuela-crime-wave.html). Why the deluge of articles now? Why not ten, fifteen, twenty or even thirty years ago? Why aren’t the former presidencies of Rafael Caldera, Jaime Lusinchi or Luis Herrera Capins also tarnished by criminally high crime rates?

The media’s selectivity on this issue is partially explicable in the context of a much broader campaign to delegitimise Chávez. In the US in particular, media interest in Venezuela is commensurate with the level of importance of Venezuela to US elites. Not only is Venezuela situated in the US’s backyard, but it is also one of the world’s largest exporters of oil. However Chávez has been a thorn in the side of the US government ever since he openly criticised the invasions of Afghanistan and Iraq. When a country, particularly one of such strategic importance, forgets to read the script of its master, it can expect to be on the receiving end of some media mud-slinging. On this interpretation crime is simply another opportunity to slander the Venezuelan president along with charges of authoritarianism (http://www.telegraph.co.uk/news/worldnews/southamerica/venezuela/3496565/Chavez-accused-of-behaving-like-dictator-ahead-of-elections.html), incompetence (http://www.guardian.co.uk/world/2010/jan/10/venezuela-bolivar-devalued-chavez) and demagoguery (http://www.washingtontimes.com/news/2009/jul/02/obama-stands-with-tyrants/).

The trouble with this analysis is that it mirrors the media’s preoccupation with Chávez. Another consideration to take into account is the degree to which western correspondents are reliant on Venezuelan elites (with whom they have close political, economic and cultural affinity) in order to gather stories, opinion and analysis. Recognising this encourages us to consider more substantial changes within Venezuelan society, which may have triggered a corresponding shift in the western media’s reporting of the country.

One reason why crime in Venezuela has not been reported widely before is that a large portion of the crimes have historically been carried out by the State. In the years preceding Chávez’s election, human rights organisations were reporting (http://venezuelanalysis.com/analysis/4338) a “massive number of arbitrary detentions produced through raids and security operations”, as well as “the persistence of extra-judicial executions by the police forces.” The report was referring explicitly to the presidency of Rafael Caldera, but was by no means an exception. In the 1980s the infamous Cantaura and Yumare massacres (1982 and 1986 respectively) were ultimately eclipsed by the Caracazo (http://en.wikipedia.org/wiki/Caracazo) in 1989 in which as many as 3000 people were killed after the army was sent in to crush a popular protest.

This period of extrajudicial killings, massacres and police violence is what “the dominant stream of scholarship”1 describes as a period of stability in which Venezuela “developed into a model democracy for the hemisphere”2. The scholarship is referring to a period, between 1958 to 1998, when “democracy” was safely contained within a power sharing arrangement between the two main political parties (Acción Democrática and COPEI) known as Puntofijismo. This arrangement represented a centre right consensus that systematically excluded third parties and independents. In particular there was no place in this arrangement for a party representing the broad interests of Venezuela’s poor majority. It was natural under these circumstances that the state would resort to violence and murder (http://venezuelanalysis.com/analysis/3436) to maintain the status quo.

The era of Puntofijismo finally came to an end with the election of Chávez, as an independent, in 1998. Chávez’s arrival represented something far more significant however. It represented the birth of a genuinely (http://venezuelanalysis.com/analysis/1715) democratic process, signaling the integration (http://venezuelanalysis.com/analysis/350) of Venezuela’s poor majority into the political realm. The response from the Venezuelan elite has been one of untrammelled panic. In just the first four years of Chávez’s presidency (1999-2003) over $35 billion (more than 5% of Venezuela’s GDP) left the Venezuelan economy in capital flight.3 The exception to this trend, the economist Javier Santiso notes, came in the days immediately following an attempted coup in April 2002 which saw Chávez briefly replaced with the leader of Venezuela’s business sector lobby group:


After the attempted coup d’etat the response of the markets approached euphoria. This coup was interpreted as an attempt to throw out a leader who was not very friendly to the market. Liquid stocks traded on the Caracas Exchange reached record levels, and the index grew by nearly 1,000 points in a single trading session when it appeared that Chávez had been deposed. When in the following days it became apparent that the coup had failed, the index fell again. The spreads, too, reflected this enthusiasm, dropping nearly 200 basis points, in order to adjust to the rise the market would experience as soon as Chavez return to power was made known.4

With this response, Santiso continues, “well off Venezuelans cast a no-confidence vote” of Venezuela’s democracy.5 It is only with the continued organisation (http://www.zcommunications.org/venezuelas-secret-grassroots-democracy-by-michael-fox) and commitment (http://venezuelanalysis.com/analysis/1192) of the Venezuelan poor—including the popular protests that returned him to power following the coup—that has enabled Chávez to last as long as he has.

The terms of Venezuela’s displaced governing pact should be perfectly familiar to us in the west. In the words (http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=2250) of the respected conservative political commentator George Will “the question we settle in an election is not whether elites shall rule, but which elite shall rule.” Will was expressing a sentiment that goes as far back as Plato and was neatly summed up by Sir Henry Ireton when ‘democracy’ was first proposed in Britain during the Putney Debates in 1647. Arguing against the extension of the franchise, Ireton declared “no person has a right to an interest or share in the disposing of the affairs of the kingdom, and in determining […] what laws we shall be ruled by […] that has not a permanent fixed interest [i.e. property].”6

Genuine ‘democratic politics’ such as has taken place in Venezuela ‘happens very little or rarely’ argues the political philosopher Jacques Rancière.7 Rancière uses the term ‘police’ to describe the apparatus by which elites maintain their rule and ward off the threat of democracy. By ‘police’ Rancière does not simply mean uniformed officers, but a whole array of institutional ‘procedures, organization of powers, distributions of places and roles, and the systems for legitimizing this distribution’.8 In short the ensemble of institutions and networks that ensure everyone knows their place and the system runs smoothly. Rancière’s rather idiosyncratic terminology at least serves to convey the message. ‘Democratic politics’ fundamentally disrupts the order. If people suddenly come to forget or refuse to accept their allotted place this would be perceived by powerful interests as a break down in the social order; a break down in law and order come to that. It is within this context that the reportage of crime in Venezuela needs to be interpreted. It is significant that Ireton did not justify his opposition to democracy in terms of his narrow material interests. What he feared (http://www.socialistworker.co.uk/art.php?id=13465) was that democracy would quickly descend into “anarchy”. If the establishment of the ‘police’ represents the institutionalization of Ireton’s sentiments, then the elite media’s reaction to the unleashing of democratic forces in Venezuela represents the expression of Ireton’s fears writ large; and it doesn’t take a very close reading of media reports to demonstrate this.

In The New York Times article (http://www.nytimes.com/2006/12/02/world/americas/02venezuela.html?_r=2) cited at the beginning of this piece, Chávez’s role in aggravating crime is explained by the opposition presidential candidate Manuel Rosales in more detail. “Chávez nourishes the anarchic forces that are tearing Venezuela apart with a discourse advocating aggression on all fronts”. The anarchic theme is repeated in another (http://www.nytimes.com/2009/07/21/world/americas/21venez.html) article from The New York Times. “This is what anarchy looks like” one Venezuelan onlooker is quoted as saying, “at least the type of anarchy where the family of Chávez accumulates wealth and power as the rest of us fear for our lives”. The Washington Post also quotes “prominent opposition politicians” who said that Chávez contributed to the problem with rhetoric that “accentuates class warfare”. The British press has been similarly damning. Sticking to the more liberal end of the political spectrum, The Guardian cited (http://www.guardian.co.uk/world/2008/nov/23/gang-wars-caracas-murder) unnamed critics who claimed that Chávez’s “denunciations of inequality and ‘squealing oligarchs’ [have] encouraged youths to ease their poverty the fast way”. The South African daily, The Mail and Guardian, provided perhaps the most fitting (http://www.mg.co.za/article/2006-04-21-rampant-violence-plagues-venezuela) summation of all. “Crime has long bedevilled Venezuelans there’s a new element to the danger now—class tensions incited by Chávez himself.” Chávez “didn’t invent the class tension” the article continues “he just gave it a flag and made it a political movement.”

Whether Chávez made the political movement or the political movement made Chávez is beside the point. What is clear is that the western media dare not elaborate further on the political movement lest they give it any more exposure; far better to reduce it to the machinations of one man and then demonise both. The reality is that, since Chávez came to power, crimes aggravated by “class tensions” (i.e. robbery) far from spiralling out of control have actually marginally decreased (http://venezuelanalysis.com/analysis/4338). However what the robbery rates don’t take into account is the magnitude of the crime. The western media understands that the Venezuelan state is the property of the Venezuelan elites but that it has been stolen in the course of a democratic process. Crime is indeed a major problem in Venezuela, mainly for Venezuela’s poor who make up the vast majority of its victims. This has not stopped wealthy Venezuelans and their patrons in the western media championing their cause (http://venezuelanalysis.com/analysis/1712) in a wider and separate strategy to take back a country that they regard as rightfully their own.

[B]Notes:

1 Myers, David J., ‘Venezuelan Politics in the Chavez Era: Class, Polarization, and Conflict (review)’ Latin American Politics & Society, Volume 46, Number 2, Summer 2004, pp. 187-192.

2 McCoy, Jennifer. ‘Chavez and the End of "Partyarchy" in Venezuela’ Journal of Democracy, Volume 10, Number 3, July 1999, pp. 64-77.

3 Javier Santiso, Latin America’s Political Economy of the Possible: Beyond Good Revolutionaries and Free Marketeers, MIT Press 2006, p.196.

4 Ibid, 195

5 Ibid, p.197.

6 Foot, P. The Vote: How It was Won and How It was Undermined, Penguin Books 2005, p.29

7 Ranciere, J. Disagreement (tr. Julie Rose), University of Minnesota Press 1995, p.17.

8 Ibid, p.28

http://venezuelanalysis.com/analysis/5578

Other than that. It is really is about time the nationalization of banks comes in full force.

[REDSOX]

I think we all agree that the chavez government should nationalise the 2/3rds of the banking system that is in private hands. Nevertheless the governments very tight regulations on the banks, the virtual elimination of brokerage houses, the jailing of bankers, regulation of the bond market, the near disapearence of the stock market are very welcome as far as they go. And crime is a problem in venezuela no doubt although they say they are having some success in dealing with it.

[Dean]

Apparently the FT doesn't understand that confidence is a major factor in runaway inflation and divestment from certain currencies. You know, the kind of confidence - or lack thereof - engendered in the myriad stories about how "Chavez' policies are running Venezuela into the ground."

Frame it a different way: more equitable redistribution of wealth in specific localities will have the effect of capital flight and decreased confidence by nature of the fact that it reduces the profits for the capitalist class. So, in effect, 'sound fiscal policy' will always be represented by those policies which create a favorable atmosphere for capital and financial accumulation.

More equitable distributions will always weaken the local economy since it lowers the capability for profits on finance and capital.

[Kiev Communard]

Apparently the FT doesn't understand that confidence is a major factor in runaway inflation and divestment from certain currencies. You know, the kind of confidence - or lack thereof - engendered in the myriad stories about how "Chavez' policies are running Venezuela into the ground."

Frame it a different way: more equitable redistribution of wealth in specific localities will have the effect of capital flight and decreased confidence by nature of the fact that it reduces the profits for the capitalist class. So, in effect, 'sound fiscal policy' will always be represented by those policies which create a favorable atmosphere for capital and financial accumulation.

More equitable distributions will always weaken the local economy since it lowers the capability for profits on finance and capital.

Yes, therefore the only way to prevent this is to abolish capital as a social relation. That's why I think the revolutionaries should simply ignore "liberal" whining about "decreased confidence" because this very "confidence" is "good" only from the standpoint of the capitalist class.