This blog was created by a group of bloggers to explain to the outside world why the Venezuelan constitutional reform is dangerous for Venezuelan democracy.

Nov 22, 2007

Article 98: (Kensey Amaya)

Patents and the decline of science and technology in Venezuela

In May I posted information published by the National Science Foundation (NSF) that discussed science and engineering in Latin America. In it they reported that Brazil, Argentina, and Mexico have been trending upwards in technology development to become "high-tech exporters". Not surprisingly Venezuela ranked the lowest of the countries scored, mainly because: "[it] suffered because it was considered the riskiest or least attractive site for foreign investment". Instead of stimulating foreign and domestic investment and encourage technology development, the Chavez government has made decisions that adversely affect Venezuelans competitiveness and economy while currently they are taking steps to further discourage innovation. Specifically within the constitutional reform, to be voted on December 2nd, a modification to article 98 is planned. The original article states:

Cultural creation is free. This freedom includes the right to invest in, produce and disseminate the creative, scientific, technical and humanistic work, as well as legal protection of the authors rights in his works. The State recognizes and protects intellectual property rights in scientific, literary and artistic works, inventions, innovations, trade names, patents, trademarks and slogans, in accordance with the conditions and exceptions established by law and the international treaties executed and ratified by the Republic in this field.

Modified article 98 - text changes are underlined

Cultural creation is free. This freedom includes the right to cultural diversity pertaining to invention, production and dissemination for creative works, scientific, technological, and humanistic, including the legal protection and rights to the author for their work. The state recognizes the rights of all to participate in the cultural community, enjoy the arts, and participate in scientific technological progress, and enjoy their benefits.

The most concerning aspect of this reform is that it limits protection to cultural diversity, to the exclusion of any protection that may be strictly intellectual or economic. In addition, the term "cultural diversity" is non-specific, how should one define it or interpret it? More than likely the interpretation will be left to the court system which is controlled by Chavez.

A simple interpretation of the new article suggests that most science and technology would not be protected since most do not contribute to cultural diversity. There are countless examples of how this will affect Venezuela, from books to merchants with the sole goal of bringing everything under state. State control has proven to be inefficient and a hindrance on scientific and technological progress, the participation of the private sector and intellectual property protection is essential for it to flourish.

It is clear that the Chavez government is reforming and will interpret the new article in a way that will significantly decrease intellectual property rights and severely limit patent protection. In the words of National Assembly member Carlos Escarra these are economic (i.e. capitalist) rights not cultural rights. Cultural rights constitute art, poetry, and literature whereas "inventions" have economic benefits. Apparently, Escarra fails to realize that art, music, and literature do have economic benefits to the inventor, through the sale of their work.

It is unfortunate that the new reform is designed to decrease patent protection since it is well established that patent protection, along with property rights and decreasing state bureaucracy play key roles in spurring innovation and economic development, ultimately leading to decreased poverty. This is not a new concept, but Chavez seems intent on creating a society based on a barter system and where some of the most important technological advances, such asOrimulsion is being phased out while giving the Chinese the technological knowhow for production while collecting little to no royalties.

The proposed reform to article 98 is simply putting on paper what the Chavez has been doing for years, either directly or indirectly though his actions. To see how Venezuela has declined in technological innovation we can look at the number of U.S. patents awarded to individuals in Venezuela (see graph below).

In the graph we see that Venezuela averaged about 32 patents a year from 1993 to 2002. From 2002 to 2006 the number patents dropped sharply to 15 after hitting a 13 year low of 10 in 2005. The most probably explanation for this sharp drop in patents is Chavez's decision to purge PDVSA of political opponents, particularly those such as the PhD investigators at PDVSA research institute (INTEVEP), where 66% (108 out of 164) were fired. The loss of highly skilled/educated individuals comes at a huge loss to the State, making it less competitive, reducing innovation and investment, resulting in a less diverse economy and loss of potential revenue. The loss of these investigators is particularly damaging to PDVSA since it accounts for the bulk of the economy and requires technological innovation to stay competitive among the other oil companies. Sadly this loss is long term since the time and investment required to create a highly skilled worker with a PhD is high, approximately 5 years of education and $300,000 not counting the experience needed post PhD. Making the Venezuelan situation worse is that most of these skilled workers have left, and/or have been prevented from working in Venezuela, thus they have emigrated and sought jobs with other petroleum companies taking their knowledge and skills with them. So who loses? Venezuela.

Over the years we have seen how Chavez has made decisions that adversely affect innovation in Venezuela, now the Chavez government is poised to modify article 98 which will further discourage investment and innovation that will not only affect the oil industry but the wider economy. The Venezuelan chamber of franchises has already stated that modification to article 98 will negatively affect that business sector, which has seen significant growth recently and now accounts for 2.2% of the GDP.

The modification of article 98 is an obvious decision by the Chavez government that will only lead to decreased technological innovation in Venezuela. However, this is only one decision, although a significant one, among many that Chavez has made during the past 10 years that will adversely affect Venezuela for many years.

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Kensey writes his own blog, Venezuela US topics, and he can be reached there also for further questions.

1 comment:

Rosa Castro said...

The following comment was written in response to an article published in IP Watch (

The “open” debate surrounding the reform of article 98 of the Venezuelan Constitution is described very accurately in the words used by Rafael Carreño when he highlights how “Edoardo Saman, a former head of the Venezuelan intellectual property organization SAPI” (which is by the way the IP Office, thus a governmental organization), “explained at these discussions that creative works are not a commodity that should be regarded simply as some kind of property”. As most of the debate regarding the Constitutional Reform, it has mainly involved the attempt of imposing a view, more than bringing issues to public discussion.

Within the context of the reform, proposed article 98 is not likely to change the current situation with regard to IP protection in Venezuela. Effective protection has been largely and increasingly absent from our country. And during the last years, the widespread adoption of open source software and collaborative mechanisms that enable sharing of information and knowledge, actively pursued by the government, falsifies the claim that current article 98 has blocked the “growing trend towards the sharing of arts, sciences and knowledge”.

In fact it is important to highlight that the two justifications for modifying article 98, namely that it is included within the cultural rights and that it involves the right “to invest” and not the right “to invent”, were introduced by the 1999 Constitution, which was put forward by the current administration . In fact, the 1961 Constitution only established that “rights over scientific, literary and artistic works, inventions, marks and trademarks will be protected during the time and under the conditions established by the law” (article 100 within the section on economic rights). The added benefit of introducing the same words of Article 27 of the Universal Declaration of Human Rights is only as beneficial as unnecessary, since it recreates a right that already exists since 1948. Implementing such right and solving the clashes between different societal interest, such as benefits from innovation and access to knowledge are the real challenges facing developing countries and Venezuela in particular.
It is widely acknowledged that intellectual property systems are not perfect and entail multiple and complex issues at the international, regional and national levels. They are neither a perfect nor the only possible scheme to provide innovation incentives. Thus, it is necessary to discuss seriously about the clashing effects of increasing IP protection, development concerns and other public interest issues such as public health. Such debate is at the core of many NGO’s at the international level and has increasingly permeate diverse Organizations (WIPO and WHO, for instance) but has been also nurtured by governments, among which, surprisingly, Venezuela has not played a more constructive role (beyond perhaps backing some proposals such as the Friends of Development proposal for a Development Agenda in WIPO, back in 2004).
In sum, the core of the proposed reform is not found in the minor changes to article 98 but in the dilution of private property, over expansion of the executive branch powers and possibility of indefinite re-election. However, concluding that the problems with the IP system should lead to its abolition, further contradicts Venezuelan international commitments without contributing to a necessary debate not only for our country but for many other developing and least developed countries.