Max Leak, Pipe Dreams: The Fading Prospects of Petro-socialism

There is probably no event more sweeping or dramatic in contemporary politics than the ongoing plummet in the price of oil. Pundits disagree on whether the drop – which has seen Brent crude prices decline from $115 per barrel in June 2014 to around $50 at the time of writing – will be reversed in time to save embattled leaders such as Vladimir Putin. But whatever the outlook, it seems that any eventual recovery will be too little and too late to save one section of the oil-exporting world – the so-called ‘petro-socialist’ bloc of Venezuela, Ecuador and their client states in Latin America. Since 1998, Venezuela has led and sponsored a new wave of redistributionist, anti-US governments in Latin America. Formalized in ALBA – the ‘Bolivarian Alliance of Peoples for Our America‘, named after the South American anti-colonial leader Simón de Bolívar – this tendency now includes Ecuador, Cuba, Bolivia, and Nicaragua, and enjoys limited support and protection from the tepidly Left-leaning governments of Brazil and Argentina. The term ‘petro-socialism’ may be pejorative, but it is broadly fair: oil constitutes over 95 percent of Venezuelan exports;1 the precipitous drop in prices will severely damage the clout of ALBA and may spell the end of the administration of Venezuelan President Nicolás Maduro.

There is an urgent need to understand what exactly is at stake in the tumult of the present political moment in Latin America. The global Left will need to take a long look at the successes and failures of the region’s extraction-based Leftist governments (Bolivia, though not an oil exporter, has similarly progressive governance based on the exploitation of mineral resources), and to ruthlessly evaluate the performance of these administrations to date. The present essay aims to provide an introductory analysis of this kind for the case of Ecuador, a country which remains largely stable at the time of writing, and which exemplifies many of the major triumphs and contradictions of the extraction-based model of South American socialism.

In Ecuador as in Venezuela, the role of oil in the project of enhanced state intervention is pivotal. Oil accounts for around 57 percent of exports, and the corresponding payments equate to around 11.5 percent of GDP.2 The state oil company, PetroEcuador, has nothing approaching a monopoly on the nation’s reserves, with American, Chinese, Venezuelan and Brazilian companies all heavily involved, but the present government has significantly increased oil-related revenue by levying greater royalties and taxes. Revenues have also grown due to strong headline economic growth, which, while in a slight decline, has also been solid: last year, the economy grew 4 percent, down from 4.5 percent in 2013 and a rollicking high of 7.8 percent in 2011. President Rafael Correa – a US-trained economist before his entry into politics – has used the proceeds to finance an ambitious range of social programmes. These include expansions of education and healthcare and the establishment of several new welfare programmes, all underpinned by a substantial increase in public spending, which in 2013 neared 45 percent of GDP.3 The results have been impressive: the World Bank reports that poverty in Ecuador fell from 37 percent in June 2006 (using the national poverty line) to 25 percent in June 2014. Firm campaigns against child labour, and a near-doubling of the education budget, have had their effect: a recent UNESCO study placed Ecuador’s education system 6th out of 15 nations studied, up from 13th out of 14 nations in the previous study in 2006. Another pillar of the government’s programme is a commitment to lessening the nation’s dependence on North American finance. This effort has been partially successful. One of Correa’s first actions upon assuming the presidency was the convocation of a national commission on the sovereign debt, and in 2008 the nation defaulted on $3.2 billion of debt, declaring these indemnities (racked up by corrupt political predecessors) to be ‘illegitimate’.4 Institutions such as the World Bank and IMF initially cried foul, but have since been brought back to the table by the government’s courting of alternative Chinese finance.

The broader policy prospectus of the President’s Alianza PAIS (AP) party is branded as a ‘citizens’ revolution’, and a serious degree of effort has been devoted to reforms which, while sometimes controversial, are hardly ideological in nature. In such areas as infrastructure, road safety, consumer protection and tax collection, the government is undertaking the long-neglected task of erecting a functioning, twenty-first-century state. It has also sharpened measures against domestic violence, endorsed LGBT rights, and involved women and disenfranchised ethnic groups in politics – no small feat for a government whose core support is among a strongly Catholic, often socially conservative working class.

The opposition is weak and divided in domestic elections. At the last elections, in 2013, the President gained 57 percent of the vote, while runner-up Guillermo Lasso came in with 22 percent. (The story has been slightly different in municipal and provincial elections, and the religiously anti-Correa Christian Democrat Jaime Nebot serves as mayor of Guayaquil, the nation’s largest city.) If anything, some opposition figures seem positively uninterested in the factors underlying their electoral failure: having traditionally secured office through petty violence, patronage and corruption, they have been slow to adapt to the need to feign respect for the vast majority of the nation’s residents. The opposition is nonetheless important in understanding the historical backdrop against which many Ecuadorians have embraced the firm leadership offered by Correa. Ecuador approved a democratic constitution in 1978, but this did not deter a regime of corruption and cronyism which had broken down by the first years of the 21st century. From 1996 to 2007, Ecuador had five presidents and an abortive military coup in 2000; despite enormous protests, the US dollar was adopted as an official currency in 2000, defrauding millions through a rigged exchange rate of twenty-five thousand sucres to the dollar. Small wonder that Correa, like other ‘Bolivarian’ leaders, uses the slogan No volverán (‘They will not return’), a conscious echo of twentieth-century anti-Fascist slogan No pasarán (‘They will not pass’).

It is in this context that many have settled for the stability and narrative of linear material progress provided by Correa’s administration. Though foreign observers and some domestic critics are fixated on Correa’s occasional use of the ‘socialist’ label, government discourse appeals principally to a sense of pro-development patriotism. And, despite some fanciful paeans in the nation’s re-written constitution to the ‘rights of nature’ and to the non-materialist philosophy known as buen vivir (loosely translatable as ‘good living’ or ‘living well’), there is very little sign that the government’s notion of ‘development’ is significantly different to that of most capitalist regimes. The superlative importance of the developmentalist plank in the government’s ideological platforms finds expression in a deployment of state repression against those who are seen as hindrances to economic progress. The President is rightly criticised for his bullying rhetoric and occasional legal actions against run-of-the-mill opponents; recent months have seen a particularly menacing campaign against hostile voices on social media, with prominent anti-government Facebook platform Crudo Ecuador closing down after alleged threats to the administrator and his family. But it is less widely publicized that similar rhetoric, and greater amounts of violence, are being employed against indigenous rights groups, environmentalists, and other progressive-minded opponents of extraction and exploitation.

The President has never concealed his antipathy towards those who oppose his government on Leftist or environmentalist grounds: in one of his first speeches as President, in December 2007, he went as far as to assert that ‘infantile Leftists’ and ‘romantic environmentalists’ were the ‘primary danger to our project.’ Since then, he has developed a disparaging discourse towards these movements which would turn the stomach of many a Thatcher-Reagan disciple, prone to calling protesters ‘full-belly environmentalists’ – in other words, middle-class champagne socialists; he has also described some as ‘terrorists’, and his ministers have branded them as ‘enemies of the state’. The fact that many of these ‘enemies’ belong to the same impoverished indigenous communities which form the AP electoral base has been no deterrent. But more serious than the president’s rhetoric have been the actions of law enforcement agencies. Definitive figures are hard to come by, but as of late-2011, human rights commission Comité de Derechos Humanos and ecological group Acción Ecológica had records of 158 ongoing criminal actions against activists, ten administrative actions and one civil case involving a leader. Many of the groups affected have been peasant collectives and trade unions. Equally as important as these actions has been a selective inaction: whilst embracing high-profile fights involving US multinationals, including the ongoing legal battle over Chevron’s massive contamination of Amazonian lands, the government has done little to stem similar abuses perpetrated by more politically acceptable commercial players.

The key difference, then, between the present government and previous ones may not be the use of force to grease the wheels of extraction, but rather the commitment to passing some share of the wealth produced to the communities affected. Beyond general investments in education and welfare, the government is founding new towns – the so-called ‘Millennium Communities‘ – in the tropical East for Amazon inhabitants. The new comunidades are a conspicuous statement of modernity, complete (at least theoretically) with utilities such as WiFi and electric cookers. Each community must also have a school and health centre, though it is not entirely clear how the more remote regions will fare at attracting staff. The comunidades represent an aggressive push to assert the moral superiority of the government over critics whom the President accuses of romanticising Amazonian poverty as ‘something folkloric’. This model of development is what the influential Uruguayan academic Eduardo Gudynas has branded the ‘compensatory state’: a government which buys local consent for extraction practices by distributing a portion of the proceeds to the communities affected. The inconvenience arises when local communities – including some indigenous tribes which are either uncontacted or living in voluntary isolation – prove less interested in the offered compensation than they are in preserving an environment and a traditional way of life which are fundamentally incompatible with the demands of extraction.

In Ecuador, patience – if not that of government, then certainly that of some of the other parties involved in extraction – is plainly fraying, and may soon snap entirely where indigenous communities cannot be convinced. The Shuar ethnic group, the Amazon’s largest indigenous tribe, has been particularly menaced by aggression and environmental despoilment. Threatened by a rush of oil and mineral projects, and denied any practical right of consultation, the Shuar have been criminalised, displaced and violently harassed for opposing extraction. In 2013 Freddy Taish, a young Shuar man, was killed in a murky confrontation during a supposed military raid against illegal mining. In December of last year, José Tendetza, a prominent Shuar spokesperson against a copper-mining project, was assassinated. The Tendetza affair – which is still under investigation – points to another highly controversial aspect of Correa’s government – its relationship with China. Like many extraction projects, the mining expansion against which Tendetza had protested is a joint venture of the Ecuadorian government and the Chinese business Ecuacorriente. China has been Ecuador’s primary financial backer since the financial upheaval of 2008, and now possesses what might almost be described as a ‘controlling share’ in the country’s economy: extensive loans, negotiated in the form of pre-paid oil sales, have committed to China roughly ninety percent of the oil to be extracted from Ecuadorian soil in the coming years. Chinese businesses and government agencies not only own, to all intents and purposes, a great deal of Ecuador’s oil, but also operate its extraction directly. Officially, Chinese personnel are only dispatched to Ecuador as managers and technicians; nonetheless, it is reputed that Chinese workers are taking up a large number of regular jobs, and that Ecuadorian workers have been mistreated and underpaid. Whatever the truth of the matter, it is plain that Beijing is driving an extremely hard bargain. Indeed, for a country so devoid of other exports or of domestic manufacturing, this state of affairs is seen by some as a threat to national sovereignty; it is even rumoured that Chinese interests have been given secret legal rights to seize Ecuadorian state assets in the event that the treaties signed are not complied with.

This kind of involvement is not unique to Ecuador. In 2014, Chinese investment in Latin America was $15 billion, almost three times the investment offered by the World Bank, with the lion’s share of this funding going to Venezuela. The involvement of the world’s leading state-capitalist power is a deeply concerning development in Bolivarian politics. But the question that arises is whether socialism – or even a rudimentary government with priorities corresponding to socialist principles – could ever have been built within the present international commercial system. The Latin American Left has worked hard to build alliances in recent decades, sharing commodities, expertise and diplomatic support in ways that have circumvented market dynamics. But it is not at all clear that one corner of the world can unilaterally overthrow a global economic system rooted in doctrines of competition and antagonism. Indeed, Ecuador can claim more convincingly than most nations to have genuinely attempted a revision of the standard play-book of development. The flagship project in this regard was the now-abandoned Yasuní-ITT initiative, which aimed to stave off the necessity of drilling for oil in Yasuní National Park. Yasuní is the most biologically diverse area of land in the world. Despite constituting only 0.15 percent of the Amazon basin, it is home to hundreds of jaguars, and to a gigantic number of species of reptiles, birds, amphibians and bats. It also includes the territory of two uncontacted indigenous tribes. Tragically, Yasuní also possesses of one fifth of Ecuador’s oil reserves, and is due to become the site of major drilling in the coming years. The drilling programme is known as ‘Plan B’; Plan A was a fascinating, if dispiriting, attempt to keep the oil in the ground. In 2007, the government announced that it would forego developing Yasuní if international partners, governmental or otherwise, were prepared to pay to Ecuador a sum of $3.6 billion over a twelve year period. This sum represented about half of the estimated contemporary market value of the area’s oil reserves; at the time of the programme’s termination, only $336 million had been pledged over a six year period. The President announced this news in his usual combative style: ‘The world has failed us’.

Whatever one thinks of Correa’s decision-making, the episode is an object-lesson in the indispensability of the movement for climate justice. Poor nations cannot be expected to neglect opportunities for resource extraction unless rich countries are prepared to compensate them for lost revenue. The risible response to the Yasuní-ITT initiative – the only Western countries to contribute a penny were Belgium and Australia – exemplifies the general consensus of major international powers that the neoliberal race to the bottom, in terms of social and environmental responsibility, is the only acceptable route to economic development. Deprived of widespread international support (and indeed, facing outright hostility and sabotage from most major powers) petro-socialist governments have needed, in foreign policy as in domestic economics, to play capitalists at their own amoral game. Venezuela and Ecuador are both active members of OPEC; the late Hugo Chávez, in particular, was notable for investing huge energy in an anti-US axis which included despicable (and hard-Right) regimes such as pre-war Iraq, Iran and Russia. This is not, of course, anything which goes beyond the standard practice of even the most sanctimonious of capitalist governments. But leaders who aspire to socialism cannot ask to be judged by those low standards.

The problems of the model are, broadly speaking, the problems which have always plagued the notion of ‘socialism in one country’, or of socialism as anything other than a global movement based on international solidarity. The failure so far is not one of Latin Americans, but of their potential partners around the world: however we judge the characters and motivations of Bolivarian politicians, they have taken their nations as far as can be reasonably expected in the absence of any kind of meaningful global response. The building of a global economy based on co-operation, as opposed to feral back-biting competition, will need to be a co-ordinated process based strongly on international solidarity.

Amid the disillusionment, it would be all too easy to lose sight of something which is fiercely, and immediately, important: the Bolivarian system was, and continues to be, an improvement on its predecessors. There is a powerful moral difference between a ‘compensatory’ state and a purely violent one. There is a difference, for example, between the present Venezuelan government (a deeply flawed, unstable state plagued by corruption) and that of the pre-Chávez era (a kleptocratic two-party dictatorship notable for butchering around three thousand people on the streets of Caracas in 1989). If we should not romanticise a system which has paid for material gain through continuing violence against humans and the environment, then neither should our judgement be skewed by the equally sentimental impulse of bitterness and disappointment. The single most positive and redeeming feature of the Bolivarian governments has been their steps towards the long-term empowerment of ordinary citizens. Come what may in Caracas or Quito or La Paz, the emboldening of a newly educated and politically involved working class will be difficult to reverse. An ancien régime, once removed, can never be re-imbued with its former sense of grandeur and impregnability. The Bolivarian governments are, if nothing else, encouraging a generation of poorer citizens, against all the lessons of the nineteenth and twentieth centuries, to expect a future of greater dignity and opportunity.

In the end, the ALBA governments may be more ‘Bolivarian’ than they themselves realise. Bolívar, like his North American counterparts, never uprooted the domestic elites which had dominated colonial society; he substituted the domination of Spanish Mercantilism for that of British and North American capital; he failed even to make good on the promised abolition of slavery. But, like other conservative ‘liberators’, he unleashed revolutionary expectations of justice, freedom and self-determination which went far beyond his own limited premises. One hopes that the half-empty rhetoric of Correa and others might yet do the same.

Max Leak is a third year student reading Spanish and Portuguese at Wadham College, Oxford.

1  See World Bank, ‘Venezuela Overview’ <; [accessed 1 June 2015].

2‘El petróleo cae y complica la economía de Ecuador este 2015’, El Universo, 4 January 2015 <> [accessed 1 June 2015].

3  Mónica Orozco y César Sosa, ‘El 2015 será un año difícil por la baja en el precio del petróleo’, El Comercio, 15 October 2014 <; [accessed 1 June 2015].

4  Joshua Schneyer and Nicolas Medina Mora Perez, ‘Special Report: How China took control of an OPEC country’s oil’, Reuters, 26 November 2013, <; [accessed 1 June 2015].

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