How viable is it for the Chinese economic model to be applied in Venezuela as Maduro wishes?

In 1989, President Carlos Andrés Pérez applied a series of neoliberal economic reforms in Venezuela based on the so-called Washington Consensus.

Some 30 years later, the government of Nicolás Maduro seems to have found its political model not in Washington, but in its geopolitical antipodes: in Beijing.

“[La economía venezolana] “It is in a transition, which has the Chinese model as a reference,” said Rafael Lacava, a member of the national leadership of the ruling United Socialist Party of Venezuela (PSUV) and governor of Carabobo state, during a visit to Shanghai in November.

Lacava, who claimed to be there as Maduro's special envoy, later explained that this vision of China was what explained why the Venezuelan president had traveled so frequently to that country.

And, indeed, Maduro had made his third state visit to China in September, which, he claimed, was also his 11th trip to that country since 1999.

The Venezuelan president had already mentioned Beijing as a reference in the past. In July 2022, for example, he did so by promulgating the law that allowed the creation of special economic zones (SEZ) as a “path to attract productive investments.

“We already know well the experiences of China for 40 years, the experience of South Korea, the experience of Vietnam, among others (…), which have served as inspiration for us to take this step,” he said then.

A year earlier, when the draft of that law was presented to Congress by Congressman Nicolás Maduro Guerra, son of the president, he also made it clear that they wanted to advance in Beijing's wake.

“A large successful EEZ is (that of) our brothers from the People's Republic of China, where an area called Canton in the 80s had a population of two million inhabitants, very humble and economically depressed, and today (…) it is one of the main industrial zones in China,” he said.

But how viable is it to apply the so-called “Chinese model” in Maduro's Venezuela?

A simple vision of a complex reality

“What people call the Chinese model is a simplification of the Chinese reality,” says Luis Vicente León, president of the consulting firm Datanalisis, when asked about the viability of this initiative in Venezuela.

He states that, in general terms, when people refer to the Chinese model they are referring to the possibility of combining strict political and social control – within the framework of a concentration of power – with a process of economic opening, with private participation, etc. .

“That vision is very simple because the Chinese model is very complex and, furthermore, it has migrated from its first steps that started from strict communism that opened the economy a little to the private sector to what it is today: a very sophisticated model. “, says

“This is a model that mixes private companies, but also public companies; that allows international participation, but with strong state controls and monitoring; where the State plays a very important role in the research and development process; and where there are very strong connections between the productive State, the political State and the private sector; and where the political issue remains strictly concentrated in the Communist Party,” he adds.

León points out that if one were to assume the most generic vision that summarizes the idea of ​​the Chinese model in a situation in which a high concentration of political power and an openness to the private sector and foreign investment in economic matters is maintained, then it can be thought that That model is applicable to Venezuela.

“It's not that it will happen, but in some way there is already progress in that regard. If you analyze Hugo Chávez's economic strategy of penetration, expropriation and intervention of private companies, of hostility in the company-State or government relationship, that is very different today,” he points out.

“In the years 2021, 2022 and 2023 we have seen a very important reorientation of the relationship between the government and the private sector. It's not that it is a very productive or super positive relationship, but a much more fluid relationship. Here there has been no progress in expropriations or in the intervention of companies. On the contrary, the government has rather been leaving these processes and has even handed over companies or sectors that were expropriated,” he points out.

A Chinese model acclimatized to the tropics

Political scientist Ricardo Sucre, who has been following the rapprochement between China and Venezuela over the last two decades, highlights a characteristic of the Chinese model that he considers essential and that he does not see in Maduro's Venezuela: a planning process by the State. .

“[En China] What is distinctive is that there is a political leadership that directs a development process that combines State and market mechanisms,” he tells BBC Mundo.

“When we talk about the Chinese model, it is a figure to synthesize an idea, but that does not exist as such in Venezuela. We do not have a reform process. Here there is a certain liberalization of controls, of prices, the use of the dollar as a reference is allowed. But the idea of ​​a reform process that comes from the State, that still does not exist here,” he says.

He explains that, although special economic zones have been created in Venezuela like China did, in the Asian country state planning has always played a central role.

“In China there was always the element of the vision of the State. For example, in the first special economic zones created there there was an initial liberalization process that allowed these zones to define their own partners, they sought cutting-edge industries in the first technological wave of the 80s, but the State was always present. The market decided, but the State always had a vision and played with the market to achieve it,” he points out.

Sucre considers that in Venezuela the government is more liberal because it acts as if the creation of special economic zones – areas in which certain preferential conditions such as tax exemptions are established – would automatically attract investment.

“I feel that they are waiting, yes, for the magical hand of the market to simply do its magic and I think that in the case of China it was not like that,” he indicates.

The analyst considers that of the two main elements of this simplified version of the Chinese model, in Venezuela Maduro has made progress in terms of political control, because although the PSUV is not a hegemonic party, he considers that they do have political control of the country.

On the economic side, however, he believes that the government is not guiding or planning development.

“Economically it is the market that is acting. You come here and want to set up a factory for X product and they will say yes. Now, where does that fit into a macro vision to build that model that in turn generates the surpluses that in turn then allow the production of other things as occurs in the Chinese model? There is no such thing here,” she says.

“In this case, it is the market that is determining production and the State allows that to happen. And the planning is more about the construction of a Chavista welfare state,” he adds.

Sucre explains that, unlike Chávez, Maduro has a more capitalist vision in which society must produce its own resources, the State collects taxes and distributes them in what it considers its flagship policies to build that kind of welfare state.

Growth, but with limits

Both Sucre and León recognize that the Venezuelan economy is currently limited by several factors, among which the sanctions imposed by the United States stand out, which marks another crucial difference with China, which, on the contrary, received large American investments when it began its opening to the private sector.

However, both agree that this does not completely prevent investments from arriving or the economy from experiencing growth rates.

“I think there can be a flow of investments that do not come from the United States and I think that is what the government has in mind. The government's priority is stability. They believe that if they achieve that they will be able to attract investments. And if I see what can happen,” says Sucre.

The analyst indicates that, in fact, there are even Venezuelans who took their resources out of the country during the Chávez era and who are now bringing them back, seeing that the government is letting the market operate without so many restrictions.

“They may set up small ventures, which are more in line with our culture. And I think that is a bit of the government's vision: a country of entrepreneurs, small things that add to the GDP. And so each person will be able to resolve their life. “It is something very liberal, it is not socialist at all,” he says.

Beyond the sanctions – which the US has recently been relaxing -, Luis Vicente León highlights that the growth of the Venezuelan economy has “brutal” limitations.

“The expansion capacity of the private sector in Venezuela cannot be compared at all with what China could have. I'm not just referring to the size of the economy, which is ridiculous to compare, but I am referring to other conditions such as sanctions and infrastructure conditions that in Venezuela are terribly negative,” he says.

“No change has occurred there: there is no private participation in the management of electrical, water or road infrastructure. There are critical problems to be resolved that have to do with both inefficiency, disinvestment and sanctions,” he adds.

Despite everything, León does see potential for the Venezuelan economy to continue growing but clarifies that this will occur from a very low starting point, since the Venezuelan GDP was reduced to a quarter of what it was in 2013.

“If you lost 75% in 7 years, it means that you were 100 and now you are 25. So, for you to return to 100 you would have to grow 400%. The challenge is titanic and that is not going to happen in the next 5 or 10 years,” she says.

“This does not mean that the economy cannot grow or that there cannot even be a year with double-digit growth in GDP, especially if the opening of the oil and gas markets is maintained. That allows the economy to grow, but rescuing development, solving infrastructure problems, considering a stable model… that takes a lot of time,” he warns.

Click here to read more stories from BBC News Mundo.

And remember that you can receive notifications. Download the latest version of our app and activate them so you don't miss our best content.

ÁNGEL BERMÚDEZ – BBC NEWS WORLD