September 5, 2005


Venezuela: Cowing the private sector (The Economist)

Capitalism, says Mr Chávez, is the root of all evil. Poverty, corruption, the decline in moral values—all are the fault of “savage neo-liberalism” and globalisation. The only hope for the world is a society based on socialist solidarity. Many wonder whether private enterprise—theoretically guaranteed by the 1999 constitution that Mr Chávez himself fathered before he openly embraced socialism—has any place in this Utopian vision. There is even speculation that the president's “Bolivarian revolution”, ever more closely tied to Fidel Castro's Cuba, might take the road towards collectivisation. [...]

Mr Chávez's version of co-management has been greeted coolly by private-business leaders, who say it would prevent them from applying normal market criteria. But many fear that they may have no choice. Firms seeking government assistance of any kind—even those bidding for public contracts—are increasingly being told that only co-operatives or co-managed businesses will be considered. Legislation already in draft envisages a wide range of circumstances under which firms could be obliged to adopt co-management—if they are considered to be “of public utility or social interest”, have ever received government aid, or go bankrupt, for example.

According to Conindustria, Venezuela's industrialists' organisation, around 40% of the country's 11,000 industrial concerns have gone bust since Mr Chávez came to power. He recently threatened to expropriate some 700 idle firms, along with more than 1,000 working below capacity, unless their owners resumed full production. One large company, the paper firm Venepal (now Invepal), was confiscated earlier this year and put back into operation with government money under a co-management scheme. Many state-owned enterprises are now attempting to implement different forms of workers' control, with mixed results. Nowhere, though, has the state relinquished its majority stake.

The government now has a virtual stranglehold on the economy, thanks to state ownership of the oil industry, representing more than a quarter of GDP, and to a variety of recent government measures including exchange controls, price limits and credit regulations. It recently launched four agro-industrial businesses supplying staple products such as milk and maize flour, and its retail-food chain, Mercal, aims to cover 60% of the market.

Private farmers feel pressured from all sides—threatened with expropriation, heavily dependent on credit and subject to regulations that, they complain, force them to sell below cost. “I need a loan for a tractor,” one farmer explains: “But even if I go to a private bank, they demand a ‘productive farm' certificate, which I can only get if the [government] land-reform agency puts me on the agrarian register.” The agency twice “lost” the title documents he submitted to support his application—a common experience, he claims, among those who signed a referendum petition against Mr Chávez.

Venezuela's once pugnacious private sector, which has backed several failed attempts to remove the president, now looks cowed.

And no one but Pat Robertson is serious about helping them.

Posted by Orrin Judd at September 5, 2005 10:45 PM
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