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Private companies in Venezuela

By Tomas Sancio | Venezuelan Politics

29.03.05 | Let's start with this premise: there are few private companies in Venezuela. If a company's earnings are expressed in Bolivares (the official currency), then it is not private. If its earnings in hard currency (US$, Euros, etc.) are lower than its expenses, then it is not a private company, but completely dependent on the State's monetary policy.

  • In Venezuela, the oil exports account for approximately 80% of the total. If you add up other State-owned companies (mining, etc.), you will notice that the real value of the official currency in the country is practically held up by oil. It's just like a Gold Standard for the Venezuelan Bolivar, but worse. The international price of oil is a fickle number that is subject to events in the ever-problematic Middle East and to the increase in consumption by countries such as China.

    This is not so much of an issue when there is a free currency exchange but gets markedly worse when the government introduces currency exchange controls. Hence, you cannot exchange freely the product of your work. If your company generates its profits in Bolivares, then you will not be able to purchase US$ or other currencies unless you register with the Venezuelan government. In the best case, there's a layer of bureaucracy to sort. In the worse case, you will need to pay a commission to a government official.

  • Then there are companies that by nature, depend indirectly on the State's budget. The clearest example is advertising and newspapers. When there is a paper that is all too critical of the government (Talcual, for example), then the government withdraws its ads from said paper. When another paper complies with the government's information policy (Ultimas Noticias, for example), then it received government ads and its Director even gets invited to self-congratulatory events.

  • Finally, we have the companies that depend directly on the State. These are in a far worse condition freedom-wise and have to comply with certain requirements that are not directly related to the business. For example, if you are a PDVSA contractor, you cannot hire people that signed the petition for last year's Recall against the President. This is completely illegal and against basic Human Rights but allowable under the noses of the pro-government Judicial system.

Hence, in Venezuela there are far less private companies than the official numbers. If your company falls into the three bullet-points above, then you really need to re-check who actually owns your business.

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