New Venezuelan Oil Tax to Fund Public Health Care Programs

March 25th 2008, by James Suggett

President Chavez announces an expansion of the medical care program in the city of Maracaibo.

Mérida, March 25, 2008 (venezuelanalysis.com)— Venezuelan President Hugo Chávez announced a new tax on extraordinary oil profits Monday, the revenue of which will help fund the expansion of health care programs known as the Barrio Adentro “missions,” which bring health care to marginalized communities with the help of Cuban doctors.

“I have decided to apply a new tax on unexpected profits for Barrio Adentro III,” Chávez declared during a visit to the University Hospital in Maracaibo, on the shores of oil-rich Lake Maracaibo.

The president pointed out that soaring oil prices, which have topped $110 per barrel this year, allow oil companies to extract unbudgeted profits which reflect “no extraordinary effort,” investment, or improvement in production efficiency by the companies. He said he had considered taxing these profits for several years, and studied the ideas of Joseph Stiglitz, the former Chief Economist of the World Bank, on the subject.

During his visit to Maracaibo, Chávez inaugurated 11 new surgery rooms and an intensive care facility fully equipped with 431 pieces of cutting edge medical technology in the public hospital. Similar remodeling is planned for 130 other public hospitals across the country during the coming surge financed by the new oil tax, the amount of which is yet to be specified.

These improvements in advanced level health care pertain to the more recent third stage of Barrio Adentro, while stages I and II of Barrio Adentro, already well-developed over the past 5 years, focus on primary care.

Chávez said the measures fall within the framework of an effort called “Revision, Rectification, and Re-advance,” or Three Rs, a period of reflection following the electoral defeat of constitutional reform proposals last December, which was the Chávez administration’s first ever loss at the polls.

The president said Monday that the difference between capitalist and socialist health care is that capitalism “grows like a cancer,” and reserves health care for those who have money to pay for it, while in a socialist system, health care is a human right guaranteed to all.

The president emphasized that the expansion of free health care provided by the Barrio Adentro programs thus far is “unprecedented in the history of humanity.” He noted that the programs have saved nearly 350,000 lives of people who never would have seen a doctor otherwise, and increased the number of doctors in Venezuela from 20 to 60 per 100 people.

The new tax will build upon the 31% increase in contributions to social programs by Venezuela’s state oil company PDVSA in 2007, a total of 7.4 billion bolivars ($3.5 billion), and other contributions PDVSA made through the National Development Fund (FONDEN), according to the Venezuelan newspaper El Universal.

90% of PDVSA’s contributions last year went to Barrio Adentro programs and the subsidized food market known as the Mercal mission, representing respective increases of 60% and 92% in the oil company’s contributions to those programs.

Combined with increases in federal budget allocations, PDVSA’s social spending helped the budgets of the social missions grow to a total of over 26 billion bolivars ($12.1 billion) in 2007, 20% more than in 2006.

Beyond bulking up the health care and food missions, Chávez also announced an expansion of the Culture Mission so that it can provide musical “circuses” in poor communities, and new projects of the Tree Mission, which promotes reforestation in key areas of the country, through the Environment Ministry, according to the state news agency ABN.

PVDSA can expect good times to come in the wake of its recent victory over Exxon Mobil Corporation in a dispute over compensation for a nationalized Orinoco Oil Belt project.

In a celebration ceremony in Caracas Monday, Chávez called the ruling by a London court last Tuesday in favor of Venezuela a “milestone” in the long struggle against imperialism. Exxon must now retract false accusations which harmed PDVSA’s international reputation and undo a $12 billion asset freeze it had pursued against the Venezuelan company, which represents “first a moral victory, then a legal victory,” Chávez exalted.

“The people, awakening, have brought about a government that obeys the popular will,” the president proudly proclaimed at the celebration Monday. The “Fatherland Sellouts” who negotiated trade deals which favored foreign oil companies in the past “will never govern again,” he added.

However, Venezuela must stay alert and not fall back asleep, “because we know who we are facing: Imperialism which does not recognize laws nor arbitration decisions, and much less when they do not favor them,” Chávez advised.