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Venezuela Inc. is back, under revolutionary management

By Miguel Octavio | The Devil's Excrement

24.03.05 | In the 1970’s, with the first wave of oil price increases, another leftist populist Carlos Andres Perez, was President of Venezuela. Perez nationalized the oil and iron ore industries and with the money from the oil windfall, created the Venezuelan Investment Fund and the Venezuelan Corporation for Guayana (CVG). Hundreds of companies ended up under these two umbrellas, with few of them ever showing a profit or even producing anything. Venezuela Inc. was a gigantic failure, as most enterprises had no business plan, were inefficiently run and corruption was rampant. Few of them had anything going for them other than desire or wishful thinking by some Government official that the state should participate in those particular areas.

Venezuela Inc. is back, and much like the first time around, the decisions are being made at the top, without any serious studies and most will once again become huge sinkholes for public funds. So far, President Chavez and his Cabinet have had the state become newly involved in:

- The expropriation of the assets of bankrupt paper company Venepal. It could not survive with private management; can anyone expect it to survive under the Government’s supervision? US$ 7 million have been invested in it already.

- Government airline Conviasa, which so far has one plane and will try to get the Government in what Warren Buffet considers the most difficult business to be in.

- Venezuelan-Iranian joint tractor venture Veneiran. In only ten days in existence the company has already faced its first general strike, when management tried to fire Venezuelan workers because they did not meet their standards. The most curious aspect is that the Iranian management wants workers to be under thirty, but all of them are above fifty. Truly a fundamentalist company.

- Mercal, the food import company which has quickly become the largest importer of foodstuffs in Venezuela. So much for endogenous developments!

- Farmal is the pharmaceutical distribution company the Government is now setting up to imitate the Mercal model in this area.

- CVG Telecom is the Government’s new entry into the telecom field, after the country’s telephone company was privatized in 1991 and few invested in Venezuela after the 2001 Chavez “telecom opening” bill. It will compete with companies managed by Spain’s Telefonica and Verizon.

- Yesterday the Government created four new enterprises: CVA Azucar, CVA Cereales y Oleaginosas, CVA Lacteos and CVA Empresa Comercializadora de Insumos y Servicios Agricolas. These companies will be in charge of sugar production, processing and commercialization, corn flour, pasta, rice and oil, milk and agricultural supplies and services respectively.

The more things change, the more they stay the same, but "revolutionary" management will not change the final outcome this time around either.

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