Tag Archives: expropriations

May
13
2013
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With the Economy in Dire Straits, Maduro Scapegoats a Beloved Venezuelan Company

pan0.jpg.520.360.thumb e1368469039817 With the Economy in Dire Straits, Maduro Scapegoats a Beloved Venezuelan Company

Courtesy of: El Universal

Nicolás Maduro and his socialist government cannot claim that they were not warned. Economists have long predicted that a Venezuelan economy propped up by excessive borrowing and an unsustainably high oil market would collapse spectacularly. Hugo Chávez, his cancer kept at bay just long enough to secure reelection, spent enough borrowed money in his final months to postpone the crash until Maduro had taken control. But the reckoning was inevitable. Now Maduro, eager for a scapegoat, is intensifying his attacks on the private sector, taking aim at Venezuelans’ most beloved company: Empresas Polar.

Polar is a pillar of the Venezuelan economy, producing staple goods from cornflour to household supplies and the nation’s most popular beer. Maduro issued his latest threat against the company on Saturday, when he accused the company of economic “sabotage” and demanded company President Lorenzo Mendoza to appear before the government to “explain the situation.” It was the latest in a series of escalating rhetoric against Polar, and a disturbing sign that Maduro refuses to learn the lessons inflicted on Venezuelans by years of failed socialist policies. Mendoza is scheduled meet with Vice-president Jorge Arreaza on Monday and with Maduro on Tuesday.

In a press conference held on Monday before the scheduled meetings, Mendoza addressed Maduro’s statements. He noted that Polar’s cornflour brand, PAN, operates at 100 percent capacity, but has only a 48 percent stake in the Venezuelan market, making it impossible to meet the country’s full demand. Thus far this year, Polar has produced 10 percent – 15,000 tons – more than last year. The remaining 52 percent of the market is comprised primarily of government-owned businesses, which are producing at less than 40 percent of their capacity. In response to Maduro’s accusation of “hoarding,” Mendoza stressed that Polar simply cannot hoard products to begin with since every step of the production and distribution process is regulated by government overseers.

As economists have noted, the shortages and inflation Maduro blames on the private sector are in fact caused by the government’s own policies. Rampant expropriations, price controls and other heavy-handed policies have harmed business and left farmland idle, sapping more than 11 percent from the country’s gross domestic product between 2005 and 2010.

Inflation is soaring, the nation’s debt continues to mount, and a currency devaluation has crippled Venezuelan’s purchasing power. As What’s Next contributor Joel Hirst observed, the economic crisis has left Maduro in the “awkward position of blaming Venezuela’s hobbled private sector for the failure of his own socialist policies.” The Central Bank’s scarcity index for Venezuela, which measures the percentage of goods unavailable in the market, rose to its highest number since it began tracking in April, 2009.

The facts, of course, could not be clearer. The company persevered under the yoke of Chávez’s policies, and continues to provide the goods Venezuelans need even as government controls force Polar and other companies to operate at a loss. These private companies are Venezuela’s best hope for brighter economic days; Maduro, in a desperate bid to save his own political skin, has chosen to marginalize them even further. It is ordinary Venezuelans, however, who will suffer the consequences.

 
Apr
10
2013
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ICYMI: Draft Law in Venezuela Is the Private Sector’s Death Knell

Joel Hirst is a democracy activist and a Principal at Cordoba Group International. He is a regular What’s Next Venezuela contributor.

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Courtesy of: The New York Times

The Huffington Post
April 8, 2013
By Joel Hirst

On April 4, acting Venezuelan President Nicolas Maduro announced he had uncovered a “conspiracy” to destabilize the government in order to lend support to his opponent in the upcoming elections, Miranda Governor Henrique Capriles Radonski.

Maduro told supporters the plot was undertaken by Empresas Polar, a global food and beverage manufacturer and processor that happens to be one of the largest and best known brands in Venezuela. Maduro alleged that Polar has plotted to create a situation of “unrest, shortages, hoarding and speculation.”

He ended his comments with an overt threat, telling Polar that “everything in life has its time.”

For Venezuelans, this is just a typical day of anti-capitalist bombast from a leader working hard to channel recently deceased President Chávez. But a new legislative proposal quickly moving through that country’s National Assembly gives new force to that country’s ‘socialist’ government’s war on the private sector.

Venezuela’s proposed Law Against Monopolies and Other Similar Practices grants the government the broad discretion and unchecked power to single out and nationalize the few remaining large companies in the country — a sanction for what the Venezuelan government calls anti-competitive behavior. Assembly leaders have announced the law will move through the assembly with “parliamentary urgency.” A procedural vote was already held and the common committee review will be expedited.

While the world remains fixated on President Hugo Chávez’s recent death, and the upcoming presidential election to chose his successor, this so-called monopoly law continues to progress slowly through the Assembly. Passage would legitimize the government’s extensive and arbitrary power over the Venezuelan private sector.

The bill departs from internationally accepted terms for anti-competitive behavior focused on market share, instead calling for a vague definition of an entity’s “economic space,” an amorphous term whose meaning the government will then define according to their own agenda. If passed, Chávez’s successor will be granted unprecedented power over the private sector — even more than was wielded by President Chavez and his arbitrary nationalizations.

The proposed law creates a new commission, the National Superintendent Against Monopolies and Similar Practices (SUNAM), to be chaired by a presidential appointee. SUNAM would have the power to confiscate resources and materials at will. Moreover, it states that any company in violation of the new law can be expropriated. Because the SUNAM would lack oversight, this law would subject so-called “illegal” businesses to an arbitrary state takeover with no chance for appeal or independent review. Any attempt to challenge expropriations would die inside Venezuela’s judiciary, which is completely controlled by the executive.

Though the bill has progressed largely under the radar, experts and the political opposition have taken notice and are denouncing the law. Vestalia Sampedro, a Deputy in the Venezuelan National Assembly,states that the law will only further extend the government’s control over the economy, extending the socialism that has not worked. Jorge Botti, the President of the Venezuelan Federation of Chambers of Commerce notes that the bill’s broad language means that even small businesses who succeeded by developing quality products and successful marketing strategies may not escape the government’s reach.

And all the while, the Venezuelan economy continues to worsen. The number of private companies in Venezuela has already declined by 36 percent from 1998. Price controls and the recent currency devaluation have worsened already-high unemployment, crippled Venezuelans’ purchasing power and exacerbated the shortages that now plague the country. Venezuelans already struggle to find basic necessities like chicken and corn. These economic policies have crippled vital industries like medical care as well. As of January, pharmaceutical shortages stood at 40 percent — a number which will only rise if the government acts on proposals to enforce price controls on medications as well. And with legislation like this monopoly law in the pipeline, few private investors would even consider bringing their capital to Venezuela.

While expropriations in Venezuela have become so common that they rarely even make news, in point of fact they are still illegal and unconstitutional. With the passage of this legislation, while remaining unconstitutional they would become ‘legal’ (a paradox that only those who follow Venezuela closely understand). Should acting President Maduro win, this would leave the country’s private sector in danger of extinction. Venezuela’s companies are already needlessly harassed and intimidated by the government, and the country’s economy has suffered as a result. This law, which the Assembly hopes to pass while the world looks the other way, would make matters far worse.

To read this article at the Huffington Post, please click here.

 
Jan
18
2013
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ICYMI: 5 Ways Hugo Chavez has Destroyed the Venezuelan Economy

ABC News
January 17, 2013
By Stephen Keppel

ap chavez military uniform wg ICYMI: 5 Ways Hugo Chavez has Destroyed the Venezuelan Economy

Courtesy of: Associated Press

It is unclear if Venezuelan president Hugo Chavez will make a full recovery from his most recent surgery in Cuba. Whatever happens, he always stirs a lot of passions. Certainly that is the case when thinking of what his lasting legacy in Venezuela will be.

On the left he is seen as a socialist hero who broke the Venezuelan “oligarchy” and defended the country against the “American Empire.” On the right he is the socialist anti-Christ who “brought Afghanistan to South America.” But perhaps one of the simplest ways to judge his reign, is to remove the politics and look closely at his economic record.

Take gross domestic product, or GDP. In that case the record is certainly mixed. There was strong economic growth from 2004 to 2008 but GDP fell in 1999, 2002, 2003, 2009 and 2010. From the time Chávez took office in 1999 to 2011 Venezuela’s economy grew by an average of 2.8% per year. During this same period Latin America as a whole grew by 3.3% per year and Brazil grew by 3.4% per year.

Others will argue that we must judge Chavez on his record of reducing poverty and inequality. According to the UN’s Economic Commission for Latin America, the percentage of the population living under the poverty line in Venezuela fell from 49.4% in 1999 to 27.8% in 2010. That is a pretty good record but there were similar trends across Latin America. In the region as a whole poverty dropped from 43.8% in 1999 to 31.8% in 2010. A few countries, like Peru, Brazil and Panama, faired even better than Venezuela. Poverty rates in Peru dropped sharply from 54.7% in 2000 to 31.3% in 2010—all three have solidly capitalistic economies.

Inequality has declined in Venezuela but it has across other parts of Latin America as well particularly in Brazil, Chile and Colombia.

When you take a closer look at the entire economy, and where Venezuela is headed, the record is not a good one. Here are five major ways that Chavez has really undone the Venezuelan economy:

1. Venezuela has gone from being dependent on oil to being extremely dependent on oil.

Former minister Gerver Torres points out that in 1998 oil represented 77 percent of Venezuela’s exports but by 2011 oil represented 96 percent of exports. That means today only around 4 percent of the goods that Venezuela exports are non-oil products! The Venezuelan economy relies almost exclusively on the price of oil and the ability of the government to spend oil revenues. This will take years to reverse because of item two below.

2. The Chavez government has crippled private businesses and national industry through expropriations and nationalizations.

The Chavez government has expropriated or nationalized numerous companies (no one seems to be able to count them all) involved in various sectors including aluminum, cement, gold, iron, steel, farming, transportation, electricity, food production, banking, paper and the media. The number of private companies in industry has dropped from 14,000 in 1998 to only 9,000 in 2011, according to Torres.

Companies need investment to grow and hire new workers. One of the biggest failures of the Chavez government has been to drive away both domestic and foreign investors. In 2011 Latin America enjoyed a record of more than $150 billion in foreign investment with Brazil receiving $67 billion. Venezuela’s neighbor Colombia received $13 billion while Venezuela received only $5 billion. To avoid expropriation and find investment a number of Venezuelan companies have moved to Colombia, Panama and the United States.

3. The Venezuelan currency is a mess.

The new currency, the Bolivar fuerte, is anything but strong. The Bolivar fuerte has lost nearly two-thirds of its value since it was launched in 2008. Many analysts expect Venezuela will have to go through a painful devaluation sometime this year or next. This will further reduce the value of wages and sharply increase the costs of imports of basic staple goods. Life will get tougher for most Venezuelans but Chavez probably won’t be around to see it.

4. Prices in Venezuela have gone up by 23 percent a year for more than ten years.

Inflation in Venezuela has averaged 23 percent during 1999-2011 compared to a Latin American average of 4.6 percent. Imagine what life would be like if the price of groceries went up 23 percent every year. This craziness combined with stringent price controls has completely distorted the economy, creating black markets and shortages. In 2012 Venezuela will again have one of the highest inflation rates in the world.

5.Under Chavez Venezuela has become one of the most violent countries on the planet.

The murder rate per 100,000 citizens has risen from 25 in 1999 to 45.1 in 2011. This is not an economic stat per se but violence has an economic impact. It is more challenging and dangerous than ever to do business and go to work in Venezuela. When you consider these points, it’s hard to call the economic legacy of Chavez and his band of 21st Century Socialists a good one.

To read this article on ABC News, please click here.