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Debate: Should Hugo Chávez focus on the private sector more than social spending?

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Revision as of 19:21, 16 July 2008

Should Hugo Chávez focus on the private sector more than social spending?


Background and Context of Debate:

Hugo Chavez Image: Agência Brasil
Hugo Chavez Image: Agência Brasil
Despite the high prices on oil, the economy of Venezuela has recently slowed down. Prices on food are increasing, the cost of feeding a family of five rose by 2.4% in May and stands some 60% higher than the minimum wage. The inflation is also on increase – the inflation rate climbed above 3% a month late last year. Many people believe that it's high time Hugo Chávez did something to overcome the ongoing crisis. This debate asks whether Hugo Chávez and the Venezuelan government could reduce the impact of this crises by focusing on the development of private industries.

Would an increased motivation to succeed appear in a country with a larger private sector?


  • The drive to succeed as an individual is the strongest motivating factor a human being can feel in their work. When work is uncoupled from reward, or when an artificial safety net provides a high standard of living for those who don’t work hard, society suffers. The fact that individuals are driven to succeed is in all our interests. This drive will be more prominent in a country wit a larger private sector.


  • Many could be motivated to work by a wish to aid their fellow man. Over time, as the benefits of this better way of life become obvious, all will. The impulse to share wealth and material amongst the community, to support all, leaving none behind, is one of the purest mankind can experience. It is not merely possible – it is a demonstration of the progress of our species to a finer, more humane state of being. Increased private sector influence and less public jobs and industries will reduce the sharing of wealth.
  • The experience of the USSR shows that mutual support helps to achieve outstanding results - it took USSR only 15 years to transform from agrarian country into an industrial one.

Is it possible that Chávez will consider greater private developent?


  • Hugo Chávez has specifically stated that he supports capitalism. “Everyday I become more convinced, there is no doubt in my mind, as many intellectuals have said, that it is necessary to transcend capitalism. But capitalism can not be transcended through capitalism itself; it must be done through socialism, true socialism, with equality and justice. I’m also convinced that it is possible to do it under democracy, but not in the type of democracy being imposed by Washington. “Hugo Chávez during his closing speech at the World Social Forum in Porto Alegre, Brazil. January 31, 2005. [1]
  • In the beginning of June, 2008, Hugo Chávez invited a handpicked group of captains of finance and industry to the presidential palace. He offered them cheap credit and joint ventures to “reactivate” production.


  • The leader of a socialist party will not support private sector development. Hugo Chávez is currently the leader of the United Socialist Party of Venezuela. As increased private development is completely contrary to the principles of socialism, Chávez is incredibly unlikely to support greater private development.

  • Chávez has specifically stated his opposition to privatization "Privatization is a neoliberal and imperialist plan. Health can’t be privatized because it is a fundamental human right, nor can education, water, electricity and other public services. They can’t be surrendered to private capital that denies the people from their rights." - Hugo Chávez during his closing speech at the World Social Forum in Porto Alegre, Brazil. January 31, 2005. [2]

Will the development of private sector improve the investment climate?


  • The lack of support to private sector makes Venezuela unattractive for investments. The business environment is claimed to be risky and discourages investment, according to El Universal. As measured by prices on local stock exchanges, investors are willing to pay on average 16.3 years worth of earnings to invest in Colombian companies, 15.9 in Chile, 11.1 in Mexico, and 10.7 in Brazil, but only 5.8 in Venezuela. The World Economic Forum ranked Venezuela as 82 out of 102 countries on a measure of how favorable investment is for institutions. However, the encouragement of private initiative will result in the improvement of the investment climate.[3]


  • The increase in private sector in the economy causes instability. Investors are more interested in putting their mile into the economy that they are sure in. Economy where a lot of spheres belong to the government is easy to predict and, therefore, take profits from the investments. On the contrary, private sector that is extremely changeable and unpredictable will prevent the investors from putting their money in Venezuela's economy.

Will the people of Venezuela support giving preference to private sector rather than to social spendings?


  • Current social programmes do not bring benefit to people of Venezuela. Critics, including senior economic officials who have broken ranks with Chávez, say the money is being frittered on short-term programs that boost Chavez's popularity, rather than being invested in long-term growth.[4]
  • Critics also cite the many public hospitals that lack basic medicine and hygienic supplies. Only a quarter of the 110,000 new houses needed each year are being built, because of the public sector's incompetence and its unwillingness to involve the private sector.[5] That also means insufficiency of the social programs in comparison with possible advantages of private sector development.


  • Great social spendings allow people of Venezuela to use many services free. According Dan Grech, "President Hugo Chavez dedicates more than 20 percent of Venezuela's GDP to social spending. The U.S., by comparison, spends a similar percentage on its entire federal budget." This number is enough to provide free medicine, education, etc. However, cutting social spendings will deprive the population of Venezuela from the possibility of using of these free services and, as a result, cause dissatisfaction of the people.

Would privatization help Hugo Chávez to solve food problem?


  • Private farming is more effective to deal with food problem. The Centre for Documentation and Analysis (CENDA) reports that staples such as black beans, rice, maize flour and meat were missing from the shelves of many shops in May. Butchers have staged protests, complaining that price controls oblige them to sell some cuts below cost. Governmental regulations on food production and import do not satisfy people's needs, due to the limited amount of food the prices are increasing. Therefore, private farming should be introduced in order to feed people.


  • Private farming will make the food problem even worse.Privatization of the agricultural sector of the economy will mean the absence of governmental price regulations. This can easily lead to incredible increase in prices for the main products, that will consequently make the population even poorer than it is now.


Daily News - eluniversal

The Economist: Venezuela's economy

Marketplace:Venezuela's social spending spree

The Boston Globe: Critics slam Venezuelan oil windfall spending

[ Venezuela Mission impossible]

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