Observations on Private Property, or the Lack Thereof, in Latin America

The Cases of Cuba and Venezuela

EspañolRecently, Americans for Tax Reform published the International Property Rights Index (IPRI), which measures nations in terms of three core components: legal and political environment, physical property rights, and intellectual property rights. The index exposes a glaring lack of protection for these rights in Latin America, since most countries of the region appear at the bottom of the ranking.

The results correspond with the Doing Business Index 2013, which considers the merits of and difficulties associated with starting a business in a country, including registering property and enforcing contracts. The consistency continues with Heritage’s 2013 Index of Economic Freedom. That is to say that Latin America’s regimes are not just restricting economic freedom through taxes and inflation, but also with bureaucratic procedures that demotivate private initiative.

Political movements that seek to restrict individual liberties and subjugate citizens to state power in Latin America are most notable in Venezuela and Cuba. Venezuela holds the second-to-last place in the IPRI for the world, and Cuba did not even make the analysis. While Cuba has held the same obsolete ideas for fifty years, Venezuela has followed Cuba’s lead since Chávez came to power in the late 1990s. As a result, the values exalted by statists and their views concerning private property can be found in both constitutions.

International Ranking of Property Rights: The Americas

Country
Score
Rank (America)
Legal/ Political Environ.
Phys. Property Rights
Intell. Property Rights.
Canada8.018.47.68.1
United States of America7.627.27.28.3
Chile6.837.47.15.9
Puerto Rico6.446.36.16.9
Uruguay6.257.16.25.2
Costa Rica5.966.36.25.1
Trinidad and Tobago5.775.25.66.2
Panama5.684.37.05.5
Brazil5.685.26.05.6
Jamaica5.4104.85.75.8
Mexico5.2114.25.85.7
Colombia5.2114.06.15.6
Peru5.0133.96.64.5
El Salvador4.8144.36.04.2
Honduras4.8144.15.94.4
Guyana4.7164.25.64.3
Guatemala4.7163.66.34.1
Bolivia4.7163.95.74.5
Argentina4.6194.24.74.8
Dominican Republic4.6194.05.74.0
Ecuador4.6193.35.54.9
Nicaragua4.4223.65.54.1
Paraguay4.2233.35.73.6
Haiti3.4242.63.44.1
Venezuela3.4242.14.73.4

Cuba

Cuba does not recognize private property except for small farms, cooperatives, small businesses, and the like. The state has a strong hold on transactions, and at best the private sector represents around 25 percent of the island’s economy.

There is a curious expression in the Cuban constitution called “personal property” (propiedad personal). It claims to protect all regular possessions of an individual: one’s house, goods, and labor income. It also includes the “means to serve personal or family work.” However, neither a natural nor legal person can own means associated with hiring labor — pure Marxism, in order to prevent supposed exploitation of man by man.

Many thought that the reforms advanced since 2011, with the government of Raúl Castro, meant Cuba would start progressively to let go of communism. However, the extension of cuentapropista work, granting loans to these workers, and permission to trade in cars and immovable property proved that the anticipated liberalization of the Cuban economy consisted of just “patching the Revolution.” The reforms seemed important but were far from the pursuit of liberty and dignity for the Cuban people, seeking rather to sustain the Castro regime and prevent it from failing under the weight of its own policies.

Venezuela

The chavista government in Venezuela and its constitutional reform attempts generated heated debate on property rights and its boundaries. “Life, Liberty and Property,” however, do not appear in the 21st Century Socialism vocabulary. Instead, these words represent the basis of a bourgeois system that must be removed.

It may seem incredible that there are places on earth where property as a right, given how natural it is to human trade, is an argument up for discussion at all. Consider that Chávez started this debate by softening his speech before the 2007 constitutional referendum — since not the whole population would never agree to give the government the power to expropriate private houses without limits. We also know that not even Fidel Castro, as a leader of the Cuban Revolution, came to power recognizing — at least not publicly — that he would lead a communist revolution.

Curious items with regard to private property and its conception under a socialist state already appeared under Chávez in the 1999 Constitution. That included a participative health care system, unable to be privatized under any circumstance, and “collective property.”

While the Constitution still guarantees a property right, at least on paper, it “will be subject to contributions, restrictions and obligations established by law for public utility or general interest. Expropriation of any kind of property may be declared only for reasons of public utility or social interest, by means of final judgment and with timely payment of fair compensation.” Unfortunately, terms such as “public utility” and “social interest” are vague, and they lead to the inevitable use of power against private property on a discretionary basis.

In order to make a comparison, here is the corresponding article — Section 17 — regarding property rights in the Argentinean Constitution:

Property may not be violated, and no inhabitant of the Nation can be deprived of it except by virtue of a sentence based on law. Expropriation for reasons of public interest must be authorized by law and previously compensated.

Thus, the limits set on the government are intrinsically different, more stringent, and leave much less room interpretation. In contrast to the Venezuelan article, the interests of the Socialist Homeland are not always in first place.

No a la Reforma Constitucional en Venezuela 2007

Venezuelans marching against Constitutional Reform in 2007.
Source: Resistencia Santiago de Leon de Caracas

In 2007, Chávez made an attempt to reform Constitution but this reform but the population rejected this in a referendum. During the political campaign, the president presented the project, explaining it in detail. Regarding private property, Chávez tried to include in the Constitution new forms of property, aiming to diversify the economy and promote a fairer economic development, according to his speech. The different forms of property included private property but also:

  • Public property, belonging to State (propiedad pública);
  • Social direct property, belonging to and managed by people (propiedad social directa);
  • Social indirect property, belonging to people and managed by State (propiedad social indirecta);
  • Collective property, belonging to a social group but neither private nor social (propiedad colectiva).

Venezuelan people probably realized that this supposed amplification of property would lead to discretionary management of private property. Collective and cooperative properties could have been fomented and guaranteed using the concept of private property itself, with no need to reform the Constitution.

Chávez said openly when addressing the Popular Assembly that the aim of the constitutional reform was to have property not serving capitalism. That means cooperatives would supposedly organize themselves without falling into the traps of competition and the exploitation of man by man. What a success that has been in Cuba, where productivity has “grown” to US$19 per month.

Why This Matters

Within these contrived forms of property, the basic fundamentals get lost. To ensure liberty, a legal system must not only guarantee a free disposition or use of property, but additionally the right to voluntarily contract between persons. Socialism for the 21st Century dismisses this surplus value in voluntary agreements as exploitation of man by man — although in reality it is mutually beneficial and fairer than any kind of imposition emanating from the state.

As the IPRI report states correctly, the guarantee of private property is the basic principle for the peaceful development of any society. It generates the fairest conditions for the exchange of goods and the consequently economic growing. In other words, observing property right allows the poorest classes to overcome poverty, the nation to grow, and all people to live in freedom — a far cry from what is happening in both Cuba and Venezuela.

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