Archive for March 31st, 2005

The puzzle of the Bolivarian state capitalism by VICTOR SALMERON

March 31, 2005

Victor
Salmeron is without any doubt the best investigative reporter in Venezuela of
those that cover the economic beat. Today he wrote
this piece
in El Universal that I think is worth translating in the context
of my earlier piece on the return of Venezuela Inc. :

The puzzle of the Bolivarian state
capitalism
by VICTOR
SALMERON

Riding the vehicle of oil high income and of the sources
of financing that have raised the criticism of analysts- foreign exchange
profits from the Central Bank, debit tax, issuing new debt- the Hugo Chávez administration
is increasing the role of the state in the economy, assigning it the role of
producer and occupying parcels that had remained in the hands of the private
sector.

Tractor
factories, nationalization of Venepal, the creation of a distribution network
for foodstuffs at low cost, media outlets, expansion of the public financial
system, the telecom company CVG Telecom, are some of the actions that show an increase
of the weight of the state in the economy.

“To this
conglomerate we have to add the non capitalistic arm, we are talking about the endogenous
nuclei and cooperatives, which do not have as their goal obtaining a profit. In
1998 there were only 4 thousand cooperatives, at this time the numbers reaches
24 thousand five hundred” EXPLAINS Jose Guerra, Professor at the School of Economic at Universidad Central de
Venezuela.

The
propagation of the state at a time in which the economy has stayed, in real
terms, at practically the same levels as of those of 1998, has as a consequence
that the participation of the private sector in the economy has been reduced, this
is what Jose Guerra defines as “a change in the structure of property in the
country”

What do
private companies that remain active face, given the advancement of this new
model? “They will have to compete with public enterprises, but at a
disadvantage. They will not receive direct public financing via the budget, they
will not receive the backing of preferential financing from Banco Industrial de
Venezuela, Bandes y Banfoandes, they will also not count with exemptions and fiscal
waivers” says José Guerra.

To the creation
of new public enterprises one has to add a regulatory framework in which the
state controls the purchase of foreign currency, the price of a wide array of products
and is preparing a foreign Exchange penal law to restrict the freedom of the
parallel market for foreign currency.  

Analysts estimate
that the macroeconomic conditions exist at this time to initiate a
flexibilization, as well as the lifting of controls, which arose in the middle
of the difficulties created by the paralyzation of PDVSA and the strike by the
private sector in 2003, but up to this moment there are no signs pointing to
this, on the contrary, the Government has shown that it wants to increase the
statist nature of the model.

Are we
facing a retrograde movement of returning to the seventies?  José Guerra thinks that “there are differences,
this state capitalism is a phase in a political Project”

Up to now,
the creation of public companies has not been successful. The banks of the
People and the Women, emblematic institutions in the game board of the
financial system that the Chavismo has created, are closing 2004 in the red,
according to the financials of the Ministry of Finance.

The oxygen
tank that the public budget represents will require that the price of the Venezuelan
oil basket stays at high levels to continue pumping fuel to this new state
structure.

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