Bolívar Distorted: The Effects of Exchange Controls on the ...

controls. Extreme uncertainty surrounding the final handover <strong>of</strong> dollars has made many foreign
companies to be hesitant about doing business with Venezuela. Importers <strong>of</strong> final goods fail to
do business as well as importers <strong>of</strong> raw materials, which hinders the ability <strong>of</strong> exporting (non-oil)
firms to continue their work. 64
<strong>The</strong> Chicken or the Ally?
One <strong>of</strong> the primary criticisms levied by the opposition is the charge <strong>of</strong> a desire by the
government to push the private sector out <strong>of</strong> the import market by denying them dollars,
replacing their goods with imports solicited by the government from firms that align with the
government’s politics. When it became clear that the permit process, along with price controls
was causing food shortages, the Venezuelan government sought out a way to feed its people and
maintain its monopoly on dollars in a manner consistent with the Bolivarian Revolution. That is,
a manner that would not support big business, but rather promote the public good. <strong>The</strong>
opposition’s claim is that the process is actually part <strong>of</strong> Chávez’s move towards political and
economic integration with MERCOSUR 65 and stronger alliances with other Latin American
leaders who have expressed ideology closer to his and closer to that <strong>of</strong> Fidel Castro.
This criticism is especially poignant in Venezuela’s trade relations since Chávez rise to
power and especially since the implementation <strong>of</strong> exchange controls. Venezuela is a member <strong>of</strong>
the Community <strong>of</strong> Andean Nations (CAN) 66 , a five-member trading block reminiscent <strong>of</strong>
NAFTA, but much weaker than its southern counterpart, MERCOSUR. <strong>The</strong>re is an explicit and
implicit agreement to foster trade among the CAN countries. Recently, however, the Venezuelan
64 Mendoza, Francisco. Interview. May 24, 2004.
65 MERCOSUR is the Spanish acronym for the Mercado Cono Sur (Southern Cone Market in English), a trade
alliance whose members include Brazil, Argentina, Uruguay, Paraguay and Bolivia, with Chile as an associate
member. It is a relatively strong trading block and has been vocal in putting regional integration before
hemispherical integration, as desired by the United States. In Portuguese, the block is referred to as MERCOSUL.
66 CAN is the Spanish acronym for Comunidad Andina de Naciones and is a regional trading block that includes
Venezuela, Colombia, Peru, and Ecuador. Members agree to put trade within the block above other trading partners.
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