Since the election of Chavez, and the ‘Bolivarian Revolution’ that continues under Maduro, the Venezuelan private sector has been heavily damaged. Twenty years ago, there were more than 650,000 private companies in Venezuela. Today, there are just 140,000, a loss of almost 80%.
The companies that remain are working at less than a quarter of their capacity. In terms of absolute production, only 6% remains of what there was in 1999. Juan Pablo Olalquiaga, President of industry body Conindustria, has described this as “a very important destruction process” and predicted that production will continue to decline while describing the Maduro regime as one “anchored in feudalism.”
The crisis in Venezuela isn’t abating. If anything, it is getting worse. Companies are closing week after week. Colgate Palmolive have halted production at its detergent plant due to a lack of cardboard packaging. Cardboard shortages were directly caused by the government seizure of the Smurfitt Kappa cardboard plant. After the seizure, production ceased.
When plants stop production, they are usually taken over by the government which claims that it will continue operations. But time after time, they fail to keep producing the goods. Earlier this year the Government took over the Kellogs cereal plant after it announced its closure due to “the current economic and social deterioration in the country”. Under Chavista management, the factory has produced no cereal.
The regime’s policies have made it next to impossible for private companies to operate. They can’t freely import raw materials or components. Any products they do make are subject to price controls, often meaning if they did operate they’d make a loss. Businesses have to sell any currency they gain from exports to the Central Bank, and they are subject to a mass of regulations backed by an aggressive and corrupt inspection regime. This is all part of a Chavista plan to substitute private property with state property. In the 2007-2013 National Plan had the explicit aim of “the progressive development of social property over the means of production and the implementation of fair, equitable and solidary exchange systems that are contrary to capitalism.”
But there is nothing “fair or equitable” in the shortages this has produced. Nor in the state’s harassment of private companies, their take over, and shut downs.
The 2014 ‘Law on Organic Prices’ created the National Superintendency for the Defence of Socioeconomic Rights (Sundde) which is tasked with the “consolidation of the Socialist economic order.” With inflation approaching 60,000%, prices have to change constantly if a business wants to survive. But under Article 39 of the law, an inspector can immediately occupy or shutdown an establishment if he accuses it of non-compliance. In 2017 alone, there were 9,341 inspections which resulted in 3 outright expropriations, 12 shutdowns, 10 occupations, 186 confiscations, and 1,189 cases of state-encouraged looting.
The right to private property is a fundamental human right, but the Chavista regime has tried as hard as it can to abolish it. Even now, millions of Venezuelans do not have legal rights to their homes, allowing the regime to do what they like to homeowners. The economic results of all this are not surprising, but still the regime maintains its destructive policies.
There was a telling exchange at an “economic recuperation” conference in Venezuela this week. A Venezuelan Minister said that the key to increased productivity was more state control. Yu Bin, head of the Chinese Government delegation, replied that had not been China’s experience. He stressed that 90% of companies in China are private and that the aim of government policy should be to help them improve their productivity and efficiency. It is a huge shame that the Venezuelan government refuses to take this advice.
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