[Marxism] Venezuela: oil royalties versus capital flight:

Jurriaan Bendien andromeda246 at hetnet.nl
Thu Aug 19 09:29:24 MDT 2004


I don't remember all the sites, to be honest. My sources are (wrote this up
very quickly this morning, out of curiosity): Oxford Institute for Energy
Studies; Paul Krugman; Max Weisbrot; Research and Documentation Centre on
Direct Democracy, University of Geneve; Initiative for Policy Dialogue,
Columbia University; CIA factbook; Nationmaster; a few news stories on the
net; own calculations. It's easy to find this kind of data.

I didn't bother with footnotes, because the idea was just to convey some of
the magnitudes involved. My point is simply that the additional funds
acquired by Chavez, through raising the amount of revenue appropriated from
the oil industry by the government, is exceeded by the privately-owned
capital funds of Venezuelan residents, that leave the country and are not
available for local investment. Quite possibly, in future there will be some
attempts to curb the outflow of funds.

The fact that capital export and capital flight persistently occurs in
Venezuela (with spikes in times of "instability") is wellknown, and reported
by numerous sources, and not particularly controversial - though its exact
amounts are difficult to measure accurately, because capital also transits
through illegal or "grey" channels (you could look at the Venezuelan Balance
of Payments data for some indications of magnitudes though). Venezuelan
accounts also are often not the best, and considerable work is now going
into providing some clarity about the financial position.

Basically what happens in many Latin American countries such as Venezuela,
Colombia and others is that the wealthy classes keep a lot of their capital
and cash in foreign accounts and investments (in the USA and Europe etc.),
and as soon as there are jitters in the exchange-rate or signs of financial
instability, capital just leaves the country. The governments, keen to
attract foreign investment that develops local business, and creates jobs
and revenue, then offer to sell assets, resources and concessions for a
"very nice price" to foreign investors (principally multinational
corporations).

In this way, key sectors of the economy become foreign-owned, and integrated
in the world market, but unless the government is able to negotiate or
enforce specific guarantees, a large proportion of profits is not
re-invested locally, but goes to foreign share-holders and foreign
companies. Therefore, the aggregate benefit of foreign investment may be
quite limited, really affecting less than a quarter of the population, and
doesn't create cumulative economic growth.

The overall result of that is an international hierarchy of capitals, and an
international hierarchy of labor, which shapes the international division of
labor mainly not in line with local requirements (the people who live
there), but in line with the requirements of the richer countries, whose
command over capital resources and buying power is infinitely greater. Since
this process is difficult to stop, the only option may be to migrate to a
country higher on the development scale... until you run into immigration
controls. The freedom of capital is predicated on the fact that workers must
accept conditions of work and pay, because they have no other option.

You might ask, for example, how is it possible for the Dutch balance of
payments and the government budget not to be wildly out of kilter, with such
a low overall labor-participation rate ? It's basically because of net
income receipts from overseas assets and trade. To trace the maze of
transactions out in detail is a big job, but the short of it, is a type of
unequal exchange based on a superior ability to command large capital funds.
Without international trade and international capital flows, the Dutch
economy would cave in, because it isn't sustainable without it. That's why
the Dutch are mainly in favour of globalisation, and think the
anti-globalisation protestors are a bit nutty. Holland may be a country of
16 million people, but it's in the top ten of international investor
countries by capital value, and the third largest foreign investor in the
USA.

Jurriaan






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