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Hugo Chavez's word is law!

By Veneconomy

22.02.05 | Time has shown that President Hugo Chávez should be judged not only by what he does but also by what he says. In the six years that he has been at Miraflores, he has carried out to the letter everything negative that he has announced. There is now practically nothing left pending.

In his last Sunday show “Aló Presidente,” he gave a warning to businessmen saying “anyone who has a store should see to it,” because “if a businessman abandons his ship, we’ll take the ship.” The warning (or was it a threat?) was pronounced at Invepal, the new state-owned paper company that resulted from the recent “expropriation” by the state of Venepal, although it has yet to be seen whether the government will actually pay the true value of the assets.

In an open, competitive economy, a company that finds itself in financial difficulties has two alternatives. The first is to declare itself to be in a state of arrears and suspend payments to its creditors in order to give it time to restructure the business and make it profitable once again. This is what Venepal attempted to do, when the process was interrupted by the takeover of the plant by a group of workers, a situation that finally led it the “expropriation” of the company.

The second is to declare itself bankrupt, whereupon the company is closed, its assets are sold off at a fair price, and the proceeds from the sale are used to compensate its creditors in an equitable manner.

In the case of Venepal, and as will most probably happen with other companies if the threat to “take the ship” is made good, the government, as the entity acquiring the assets, does not guarantee that a fair price will be paid for them. Besides, it is unlikely that the government will have the management capacity to operate the business at a profit, even with the help of the workers. Based on past experience, unless a miracle occurs, what will most likely happen is that Invepal and other companies taken over by the government will join the herd of white elephants that only serve as a drain on the State’s resources.

With his latest announcement, Chávez has placed another sword of Damocles over the head of the businessmen. The other is the Zamoran decrees authorizing the taking of land. These are all pieces of a jigsaw puzzle that, slowly but surely, are being put in place to create a nation that is totally intervened by the State. The gates are being opened to state control of production, which will be handled through cooperatives and a mechanism of co-management, both easily manipulated and controlled by an increasingly autocratic regime.

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