Five Worker-controlled Factories in Venezuela: Can Socialism be Achieved through the Bolivarian Process? By Sharat G. Lin

12 April 2006

Five Worker-controlled Factories in Venezuela:
Can Socialism be Achieved through the Bolivarian Process?

By Sharat G. Lin


Historical background

President Hugo Chávez won his first election in December 1998 on the radical platform of his party, Movimiento Quinta República (Movement of the Fifth Republic, also commonly written Movimiento V República or MVR). In a 1999 referendum, voters approved a new constitution, renaming the country República Bolivariana de Venezuela. The election of 2000, re-elected Chávez and placed many members of the MVR into the National Assembly. At the grassroots level, supporters of the Bolivarian process (el proceso Bolivariano) organized themselves into open participatory assemblies called Círculos Bolivarianos (Bolivarian Circles).

However, Chávez faced fierce opposition from the private media (dominated by wealthy capitalist families), industrialists, bureaucrats in the oil industry, large landowners, and many shopkeepers and professionals (elements of the petty bourgeoisie). Government attempts in 2001 to assert more control over the state oil company, Petróleos de Venezuela, S.A. (PDVSA), led to a general work stoppage organized by the opposition in December 2001. This was followed by a coup attempt in April 2002 in which businessman Pedro Carmona Estanga proclaimed himself president of an interim government with the support of a section of the military, press, business community, and labor bureaucracy. Carmona was then president of the Venezuelan Federation of Chambers of Commerce (Federación de Cámaras y Asociaciones de Comercio y Producción de Venezuela, also known as Fedecámaras). Chávez was ousted from the presidential palace (Palacio de Miraflores) for two days until well over a million of his supporters stormed out of the barrios to surround the palace demanding his reinstatement. With the people’s backing, civil authorities, troops and palace guards loyal to Chávez reinstated him.

The traditional labor federation, Confederación de Trabajadores de Venezuela (CTV) has been considered to be the leading trade union body in the country. Claiming to represent over 1 million workers, CTV has consistently supported the opposition and opposition-led general strikes. In December 2002, CTV joined forces with Fedecámaras (!) to lead a prolonged anti-government strike in the oil industry from December 2002 to February 2003. The strike slashed oil exports, sending the country into a steep recession. A resolution of the crisis and end to violence was negotiated in May 2003 with the mediation of the Organization of American States (OAS), calling for a recall referendum on Chávez’s presidency. In August 2004, Chávez won the referendum with 59 per cent of the votes cast. While elements of the opposition and the U.S. government challenged the validity of the count, the OAS and the Carter Center certified the fairness of the vote. (Former U.S. president Jimmy Carter, one of hundreds independent foreign election observers, stated that in his opinion the vote in Venezuela was fairer than the voting process in Florida in the 2000 U.S. presidential election.)

The oil strike of 2002-2003 symbolized the quasi-class divide within PDVSA itself in which white collar professional employees largely supported the opposition strike to oust Chávez and blue collar workers largely supported him. While the Venezuelan economy suffered two successive years of disastrous 9 per cent declines in GDP in the years of the oil strike, a positive outcome of the turmoil was that the oil workers and government wrested control of PDVSA from the former opposition management. Some 18,000 executives and professionals out of PDVSA’s 46,000 employees were fired in the process for their role in the strike to bring down the economy and the government. But, the resulting new PDVSA has been substantially restructured with features of state-worker co-management, and now provides nearly $4 billion in direct annual funding for social projects, bypassing the separate state programs funded indirectly by oil revenues.

In 2002 and 2003, it was acknowledged that the CTV leadership had received training and financial support from the U.S.’s National Endowment for Democracy (NED) through the AFL-CIO’s Solidarity Center, long known as conduits for U.S. government funding (mainly USAID and State Department) with the objective of co-opting trade union bureaucrats in developing countries to collaborate with management by fostering “skilful collective bargaining.” In 2000, a new trade union federation was formed, Frente Bolivariano de Trabajadores (FBT), and in 2003, the Unión Nacional de Trabajadores (UNT) was established. Over time, many unions have severed their ties to the CTV and affiliated with the UNT or the FBT. No longer held back by the CTV’s corrupt leadership and its ties to the old business elites, UNT- and FBT-affiliated workers were at last freed to demand their just labor rights and act in the interests of the working class and poor.

Until the August 2004 referendum, industrialists had hoped to unseat Chávez by one means or another. As it became clearer that each successive attempt was destined to fail, industrialists, businessmen, and wealthy landlords accelerated the flight of capital out of the country. One aspect was the draining of value from fixed capital assets by taking out oversized loans collateralized against those assets, ostensibly for reinvestment in factories, and then fleeing the country with the money in hand. Thus, the year 2004 saw an upsurge in industrial bankruptcies with owners seeking to close down “sick” factories and idle thousands of workers. This flight of capital continues to accounts for the 10-20 per cent differential between the official exchange rate valuation of the Venezuelan currency, the Bolívar, and its black market value, despite an economy that grew at a healthy 8.3 per cent in 2005 and rising foreign exchange reserves ($31 billion at the end of 2005) bolstered by increasing crude oil prices.

With the Bolivarian government seeking to develop “21st century socialism”, it offered financial support to workers willing to organize into cooperatives. However, the ambient economic system remained overwhelmingly capitalist, and the relations of exchange remained fully market capitalist. In this context, Chávez recognized the need to work within the legal framework of the constitution and bourgeois law in order maintain continuity of production. Thus, wholesale expropriation of private capital and defaulting on private bank loans was not generally supported by the government. Instead, the state served to negotiate terms of transfer, typically putting up a major share of the capital with which to pay off external debts and restart production, and mandated the transfer of full legal title to workers’ cooperatives. Under worker-state “co-management” schemes, it was understood that the state will gradually reduce its equity share as revenues from factory production would enable workers to collectively increase their share capital over time.

Note that although the term “cooperativa” is more widely used that “colectivo” in Venezuela, it is generally associated with de facto workers’ control and statutory workers’ ownership. Thus, it implies a collective in Marxist terminology, rather than merely a cooperative of shared efforts, facilities, and resources. The following case studies of five worker-controlled factories in Venezuela provide some insight into the actual functioning of the Bolivarian process in the incremental transformation of the social relations of production.


Alcasa (Aluminio del Caroní, S.A.)
Ciudad Guayana, Estado Bolívar

Alcasa was founded on 14 October 1967 as a state enterprise. It produces aluminium by operating a carbon plant, foundry plant, and rolling mill employing 2700 workers. In 2004, Alcasa was reorganized as a worker-controlled cooperative under a scheme of “co-management” with the Venezuelan government. The state share of the ownership will decline over time as the workers’ cooperative generates the revenue to increase its equity share in the company. The workers’ cooperative is part of a larger umbrella cooperative that operates primarily in the mining and metellugical industries – Corporación Venezolana de Guayana.

Carlos Lanz is president of Alcasa. In an interview in one of the films by Dario Azzellini and Oliver Ressler, Lanz says that he is the only employee who does not come from among the workers of the company. Rather he represents the state, being on loan from the Venezuelan central government to Alcasa to help ensure a smooth and successful transition from bureaucratic state ownership to workers’ co-management. This is understandable from the standpoint of the Venezuelan government, since the success of the transition in such a large enterprise will inevitably have a demonstration effect, positive or negative, on future attempts to transform capitalist and state capitalist relations of production into a collective socialist ones.

Lanz demonstrates clarity in his understanding of the mode of production. He says that in the Soviet Union, industries, farms, and other enterprises were nationalized, but management did not pass on to the workers. [Here he refers to the 1930s, not the workers’ seizures of factories and the subsequent establishment of workers’ soviets after the 1917 Bolshevik Revolution.] He calls this “state capitalism” or “bureaucrat capitalism”. He, thus, differentiates worker co-management (“socialism from below”) from the top-down Soviet model of the Stalin period. He further acknowledges the challenges of creating nuclei of “21st century socialism” within the context of a capitalism mode of production in Venezuela and in the world.


Textileros del Táchira
San Cristóbal, Estado Táchira

Formerly a privately-owned capitalist enterprise, the former owners looted the company with bad debts until it went into bankruptcy in 2004. In order to save the factory and their jobs, the workers organized into a cooperative to reopen the factory in 2005. The factory performs cotton spinning and weaving, and employs 118 workers. All workers, no matter what position or skills they hold in the factory, earn the same salary. The company uses a portion of the revenues to provide social benefits directly to the community.


Caigua, C.A.
Altagracia de Orituco, Estado Guárico

When the private management of this small factory lost interest in running it, the company fell into arrears in payment of wages. When the workers learned that management was planning to sell off the remaining raw materials – tomato pulp – stored in the factory, the workers demanded to take over the plant. The government supported this transition financially and by facilitating the paperwork for legalization of the transfer of title. On 7 July 2005, control and ownership was handed over to the workers’ cooperative under a co-management scheme. The factory produces bottled tomato ketchup under the brand name Guárico and employs 58 workers. Its products are sold through the state distribution system for poor families, Misión Mercal through its extensive network of Mercal food stores.


Invepal (Industria Venezolana Endógena de Papel)
Morón, Estado Carabobo

Formerly the privately-owned paper company Venepal, the company had been in financial difficulty since the late 1990s. Conflict with the workers and the government sharpened when management joined in the oil industry shutdown in 2002-2003. But the resulting losses only worsened Venepal’s financial condition until it declared bankruptcy in 2004, and laid off its 900 workers in September of that year. However, 350 workers stayed on, demanding to take over operation of the factory and threatening to occupy it if the government did not take action.

In January 2005, with an injection of $7 million in state funding, a new worker-owned company was formed with the slogan “hecho en Venezuela”. Named as the Venezuelan Endogenous Paper Industry (Invepal), the new company sought to replace wood pulp imported from Chile with entirely domestic raw materials from the Venezuelan states of Anzoátegui and Monagas. This was part of the material component of a national program of desarrollo endógeno (endogenous development). [The social component of desarrollo endógeno is the encouragement of open participatory democracy from below in the running of all local organizations and collective enterprises.] The 350 workers of Invepal restarted production in March 2005, producing white copy paper and paper notebooks.

But more importantly, Invepal will be co-managed by join team of workers’ and state representatives. Initial equity ownership was divided between workers (51%) and the Venezuelan state (49%). Revenues from production would be used by the workers to gradually buy out the state’s share until the state retained only a symbolic 1 per cent “golden” share. Guidance in setting up a cooperative under worker ownership and worker management was being provided by joining the umbrella Cooperativa Venezolana de Industria de Pulpa y Papel (Covinpa).

Following the concept of “social production”, Invepal feeds many poor local school children in the company cafeteria and supports community development projects that are not otherwise funded by government programs. In other words, the surplus value of production is directed not into retained profits, but rather into social use value for the benefit of the local community.


Cacao Agro-industria
Península de Paria, Estado Sucre

This enterprise was reportedly the first to be converted to workers’ control in the Bolivarian process. It produces chocolate liquor which is sold as chocolate butter and chocolate non-fat solids to manufacturers of finished chocolate products. It includes a laboratory for testing the quality of incoming raw materials and outgoing products.

The cooperative actually consists of two member cooperatives. Unión de Productores de Cacao (Uproca) consists of 3600 cacao cultivators. Chocomar operates the factory with 96 workers. Each member cooperative elects 16 members to a joint 32-member assembly. Each also elects 4 members to a joint 8-member management team that coordinates day-to-day operations. All workers participate in the general body meetings to discuss long range plans and policies. One agreed-upon long-range plan is to gear up for production of finished chocolate products, such as chocolate pastries, bons bons, and chocolate candies.


Can socialism be achieved in Venezuela through the Bolivarian process?

The first three years of Hugo Chávez’s presidency, 1999-2001, were mainly preoccupied with consolidating political power in the face of a resentful opposition that had become accustomed to its historical monopoly over political power. The general strike of December 2002 – February 2003 marked a watershed by paving the way for workers to struggle for control of productive forces and take over factories in the wake of the Bolivarian coup in PDVSA management. Thus, between 2001 and 2006, if one includes PDVSA employees, the number of workers engaged in Bolivarian state enterprises, state-worker co-managed enterprises, or production collectives has grown from a negligible percentage to perhaps 2-3 per cent of the total labor force of 12.3 million (2005 estimate). Although PDVSA alone accounts for on the order of one-third of GDP (depending on the fluctuating international price of crude oil), enterprises potentially conforming to a socialist mode of production still engage only a very small fraction of the workforce. The ambient mode of production in Venezuela remains overwhelmingly capitalist. The relevant questions are several.

First, while worker co-managed factories may be viable in a growing economy, will they remain competitive in times of economic contraction in the context of an ambient capitalist mode of production? When the rules of exchange are driven by market forces of supply, demand, and manipulations of access to technology and finance by the much-larger capitalist sector, the deck could easily be stacked against socialist enterprises. The counterweight to capitalist technology and finance is, of course, the political and legal authority and financial clout of the Bolivarian state. But the prospects for future transitions to socialist production will depend in part on the success of the current collective experiments and their long-run economic viability.

Second, to what extent will the trend of conversions of capitalist enterprises into worker co-managed enterprises continue? As a section of industrialists decides to jump ship in the face of the rising tide of the Bolivarian process, the remaining industrialists consist of those who chose to stay and defend their companies maintaining their viability. Without resort to forced expropriations of private enterprises, the availability of sick industries that may become subject to worker occupation may level off. On the other hand, a new violent confrontation between Chávistas and opposition forces could provide a pretext for more industrialists to flee the country with all of their liquid and liquidatible assets. Another such confrontation is probably inevitable, given that the Bolivarian process tolerates incremental change over an indefinite period of time, and given that the social contradictions inherent in a situation of dual power (capitalist economic infrastructure versus worker-based political superstructure) are ultimately unsustainable.

Third, while Washington has critically tolerated a Bolivarian government in Caracas, unlike the economic boycott and travel ban that it has relentlessly imposed on socialist Cuba, further incremental movement towards a socialist mode of production could harden Bush administration policy as it tries to reassert the Monroe Doctrine in its “backyard”. Is there a threshold beyond which Washington will no longer tolerate Chávez and will seek extra-economic means to arrest the Bolivarian process? If U.S.-sponsored coup attempts continue to fail, the Bush administration will refuse to rule out pre-emptive military “options”. Once again this begs the question of socialism in one country. Nevertheless, Venezuela holds the oil card that Cuba never possessed as a lever on U.S. imperialism.

The available evidence strongly suggests that what has happened in Venezuela is not limited to the electoral victory of a worker-based party in a capitalist state. Rather the Bolivarian process is incrementally moving the country towards socialist relations of production is various sectors. While workers have achieved a measure of political power is a dual power situation, this does not imply any sort of “peaceful transition to socialism”. In fact, the transition from 2001 to 2003 has been anything but peaceful, only spread over a period of time instead of being concentrated in a single cataclysmic revolutionary overthrow of an old ruling class. These Bolivarian social experiments are not merely islands of socialism in a capitalist sea, but rather are connected by umbrella cooperative organizations, entities like the Coordinadora Nacional de Círculos Bolivarianos, and the vast array of politico-social structures intent on advancing the Bolivarian process. How far it can advance towards socialism remains to be seen. Perhaps the single more encouraging sign is that leading cadres like Carlos Lanz appear to have a profound understanding of the shortcomings of the Stalinist road to statism, and a commitment to pave a new path in “21st century socialism”. Precisely what that means will continue to be an unfolding drama in Venezuela.