Businesses in Venezuela have a problem.
Actually, almost everyone in Venezuela has a great many problems. Starvation, for example. Shortages of basic goods. Dysfunctional and understaffed hospitals, which lack medications. A corrupt and increasingly militarised government determined to protect the incumbent president, Nicolás Maduro, at all costs.
Shortages, inflation, and protectionism cripple the economy.But businesses, especially factories, face another, more specific problem. As Venezuela’s economy has ground to a halt and its currency has depreciated by nearly two thirds in the past year, the raw materials needed for manufacturing have become prohibitively expensive, or simply impossible to come by. This is not helped by the government’s steep import tariffs and currency restrictions, nor by the rock-bottom price controls, which make operating a business an utterly unprofitable enterprise.
This disaster is entirely of President Maduro’s own making. But rather than acknowledge that 17 years of Chavismo socialism have been a terrible mistake that have wrecked Venezuela, Maduro is tightening the iron fist of state control.
The government has seized a factory for the crime of shutting down.The BBC reports that the Venezuelan government has seized a factory that makes hygiene products like toilet paper, owned by the US company Kimberly-Clark. Kimberly-Clark’s crime? Closing the factory, due to an inability to obtain raw materials.
The Venezuelan Labour Minister, Oswaldo Vera, has called the closing of the factory “illegal,” and promised that the factory will continue to operate “in the hands of the workers.” To which the obvious question must be: with what materials? How does the government think the factory can re-open without the raw materials it needs?
The president there is then the issue of the chilling authoritarianism of declaring that a privately-owned company broke the law by ceasing business. In May, President Maduro threatened to arrest and jail the owners of factories that stop producing, saying Venezeula’s productive capacity was “being paralysed by the bourgeoisie.”
Who would open a business where it's illegal succeed and illegal to fail?In actual fact, it is being paralysed by the government’s radically anti-business policies, which include such threats. What company, whether domestic or international, will want to set up a factory in Venezuela under such tyrannical conditions, knowing it is impossible to make a profit and that owners risk arrest by trying?
Maduro has blamed the latest crisis, as he has all previous crises, on an economic war being waged against his regime by the opposition, in collusion with US forces. The simple fact is he has left business owners no options, creating a climate in which it is impossible to operate. The daily protests against food shortages across the country show that Venezuelans are getting desperate. Nicolás Maduro’s socialist regime is running out of time.