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Venezuela Freezes Firing: Employers Cease Hiring

By: María Gabriela Díaz - Dec 16, 2013, 4:32 pm

EspañolOn December 6, President Nicolás Maduro signed the extension of the firing freeze, as a way “to secure” employment stability in Venezuela. This measure applies to all public and private-sector employees and aims to protect workers from the so-called “economic war.” This may be a step forward for socialism in Venezuela, but it’s a step backward for economic growth in a country where even the official inflation rate surpasses 40 percent.

This is the 19th time the decree, which makes it almost impossible to dismiss an employee, has been extended. In fact, it has been applied since 2002, when Chávez’s regime suffered a coup d’etat and almost faced its end. This “benefit” from the revolution applies to those whose monthly salary is less than three times the minimum wage — 93.5 perecent of the working population in 2011 — although senior managers and directors aren’t protected, regardless of their wages.

In a broadcast through state media, Maduro said “the fact that we protect employment stability can’t be interpreted by any union as a promotion of laziness, misdirection, or disobedience towards work. We are protecting the one who works from the abuses of those who exploit.” Businesses, however, would disagree.

Instead of promoting productivity and competition, this measure has eliminated those two key factors that distinguish any successful economy. Let me paint the picture of what the labor reality is like in Venezuela.

Employees have job security for a year (the duration of the decree). In other words, companies have a very hard time laying off someone during that period. Given the extensions, though, those in power have not allowed the prohibition on firing to expire for anyone hired since 2002.

This means the only employees who actually work have a natural inclination or are interested in keeping a good professional reputation. Many use this political maneuver as an excuse to stay home and not go to work or to perform at the most mediocre level. After all, this is socialism and the worker is always right.

What has been the response of the employers so far? Very simple, businesses just don’t hire people unless they are absolutely critical — even if this means to overload the employees they already have with more work, or to make the company less productive.

If they choose to lay someone off, they have three options:

  • The first way — the legal way — is for the company (a.k.a. the capitalist monster) to ask for permission from the labor inspectorate in order to dismiss a certain employee. Then, the labor inspectorate, a government body in the socialist regime, will determine whether or not the company can proceed.
  • The company can fire the employee without the decree, but the employee (a.k.a. the abused worker) can report this incident to the labor inspectorate. Then the company faces a penalty, and most likely will have to give the job back to that employee.
  • The other way — also illegal, but the most common — is for the company to pay a large sum of money to the employee and “suggest” that he sign a resignation letter. This one also entails a risk for the company, since the employee can easily report this practice and make the company face legal consequences.

Has this decree has worked? Yes and no, depending on your goals.

The regime is still in power, despite its terrible economic management skills, declining levels of approval, and an absent leader (Chávez). So we can say this measure has helped to solidify an illusion of “normality” in Venezuelans. When any country enters into an economic crisis — and Venezuela is already there — the first thing companies do is lay off people. Workers don’t feel the consequences “that much” because they have superficial job security.

On the other hand, this has worsened the economy; inflation is a ticking bomb; the climate for doing business is plummeting; and the regime still wants everyone to believe they are open for private investment.

Maduro called upon investors “to have a concept of loving the fatherland,” and to bring their dollars to invest in the country. Why would anyone in their right mind invest in Venezuela? There are no institutions or rule of law to protect investors or employers; you have to face immense foreign currency (CADIVI) and price controls; there is insecurity, corruption, a ridiculous number of taxes, and a lack of basic services. Then, let’s not forget, the firing freeze decree. We are not number 140th in Forbes’ Best Countries for Business for nothing.

A lot of international corporations keep their offices open, because all their value is locked-up in the country due to CADIVI. Others try to at least survive, and there are those adventurous ones who are willing to take the risk and invest in a little cronyism with this socialist paradise.

The regime, however, has maintained its savior rhetoric — that they are the ones who protect the helpless worker from the capitalist monster. The reality is that an economy cannot be run without that “evil private sector,” and even the state-owned oil company recruits private help.

Unfortunately, workers have in general bought the story of “exploitation” and mistakenly believe they are the ones who end up winning with this decree, when it is just the opposite. If the company loses, the employees lose as well.

Even though the government may have achieved another short-term political gain — some electoral points and more time in power — the long-term harm will be severe. One thing is for sure, every time this “revolution” rolls forward, it imposes a greater economic cost for businesses and citizens, whether it is through taxes or the rising prices in their daily lives.

María Gabriela Díaz María Gabriela Díaz

María Gabriela Díaz reported from Caracas, Venezuela, and led the PanAm Post internship program. She has a Bachelor of Arts in political science with a focus in international affairs.

¿Chile va camino al comunismo?

By: Frank Worley-Lopez - Dec 16, 2013, 1:59 pm

EnglishNo sé mucho acerca de Chile, pero sí sé lo que el socialismo es capaz de hacer a los países. Un domingo, Chile eligió a Michelle Bachelet como presidente. Una socialista declarada, que fue presidente con anterioridad hasta 2010. Durante su primer mandato cumplió su rol como política moderada, pero esta elección es diferente. Diversos artículos de PanAm Post exponen la alianza de la candidata con grupos militantes socialistas y comunistas para la presente elección, así como su estrategia durante la campaña, caracterizada por una mayor agresividad. Estas noticias son malas para Chile. El país se posiciona como una suerte de rareza entre las economías latinoamericanas. Es la economía más fuerte en el mundo hispanohablante de Occidente - se destaca por su desempeño en el ranking de competitividad del Foro Económico Mundial. Todo eso, sin embargo, podría llegar a un punto de freno si Bachelet sostiene su orientación y cumple su promesa de una "profunda transformación". Entre esas promesas se sitúan la de  una educación universitaria "gratuita" para todos, a expensas de profesionales que tendrán que pagar mayores impuestos, lo que conducirá a menores niveles de gasto e inversión por parte de los profesionales de la economía real, hecho que traerá como consecuencia un aumento del desempleo y disminución de la productividad. La decisión de Bachelet de alinearse con el socialismo y el comunismo de línea dura y de plantear la reescritura de la Constitución Nacional podría significar un desastre para uno de los países más libres de América Latina. La economía de Chile se nutre de la libertad. Al igual que China, ha crecido gracias a una apertura parcial de su economía al capitalismo; los mercados relativamente abiertos de Chile han allanado el camino para que el país crezca y se mantenga fuerte. Estas elecciones han puesto a Chile en un camino similar al de la calamidad económica venezolana. Mientras que algunos observadores han indicado que el nuevo presidente puede simplemente haber buscado a la izquierda comunista con el fin de ganar las elecciones, su gran demostración en la segunda vuelta electoral le dará una suerte de cheque en blanco para poder implementar algunas de sus reformas. No hay duda alguna acerca de su capacidad como líder o su experiencia como previa como presidente (se puede consultar su biografía aquí). Pero lo que está en juego ahora es el movimiento continuo de América Latina hacia el colectivismo. A pesar de décadas en las que se suceden pruebas de que el socialismo ha fracasado y siempre lo hará, los líderes socialistas continúan siendo electos y las reformas socialistas siguen siendo implementadas a expensas del mercado libre, la libertad personal y el pueblo. Tal vez sea demasiado pronto para definir si la nueva presidente seguirá siendo una socialista defensora de la "ligereza" europea o si pondrá de hecho a Chile en el camino hacia el comunismo. Solo se puede esperar que siga una senda moderada y libre a sus ciudadanos del malestar y la disconformidad de una sociedad sin papel higiénico, como Venezuela. Traducido por Ana Lía Turi Gargano.

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