Chavez’s and Maduro’s Socialism closed 10,200 companies in Venezuela

The number of companies currently operating in the country is 2,500 industries, while when Chavismo assumed power, it was 12,700.

Exchange controls, price controls, labor laws, expropriations, and threats are, for the most part, the reasons why the industrial sector becomes a business cemetery every day. (iberoeconomy)

95% of the companies operating in Venezuela before the arrival of socialism are inactive in the regimes of Hugo Chavez and Nicolas Maduro.

Juan Pablo Olalquiaga, the president of the Venezuelan Confederation of Industries, reported that, currently, 2,500 industries are operating in the country. The number was 12,700 when Chavez assumed power, implying that 10,200 industries have disappeared.

The Venezuelan Confederation of Industries (Conindustria) presented a report pointing out that at least 85% of the 2,500 companies that still survive in precarious conditions could close in no more than two years if there are no political and economic changes in the South American country.

The survey of the industrial situation reveals that 53% of the companies in the Venezuelan industrial park functioned with less than 20% of their operative capacity.

“When industry hits rock bottom, employment opportunities are sparse. In Venezuela, for every formal job, there are three informal ones. If 75% of enterprises say that they are of little use, many Venezuelans will lose their jobs. We, at Conindustria, believe that 1.5 million jobs have been lost over the years of the revolution,” the report of the survey stated.

Exchange controls, price controls, labor laws, expropriations, and threats are, for the most part, the reasons why the industrial sector becomes a business cemetery every day. Additionally, merchants face difficulties in replenishing their inventories, and over time, they run the risk of having to close their businesses.

More than 20 multinational companies have left Venezuela thanks to socialism. According to Conindustria, the multinational companies give the following reasons for leaving Venezuela: the severe shortage of raw materials, the lack of access to foreign currency, the laws and regulations that have hindered economic activity, and the “absurdly” controlled prices that generated heavy losses in their operations.

Víctor Maldonado, director of the NGO Cedice Libertad and former director of the Caracas Chamber of Commerce and Industry, told the PanAm Post: “Venezuela is the most aggressive country in terms of entrepreneurship.”

“Socialism of the 21st Century does not only intervene, but it also affects and threatens the property right of companies. Venezuela is a country where the status of entrepreneurs is as one of the most dangerous occupations. Venezuela does not recognize or guarantee rights to companies,” he added.

“It is dangerous to be a business owner in Venezuela as entrepreneurs are considered enemies of the government. Where there is a cost and price law that disables decisions, where there is an exchange regime that does not allow access to foreign currency to buy the necessary inputs or services, and where labor rigidity prevents the ability to handle the work factor freely. All this combined in the framework of the highest hyperinflation in the world, where everything is scarce, and citizens are insecure. Thus the most rational decision is to close the company even if it hurts us,” he said.

A country without economic liberty

The Heritage Foundation, a think tank that analyzes the economic freedom of the countries of the world, ranked Venezuela last among the nations of the Latin American continent, even below Haiti, as the country with the least economic freedom.

On the world list, Venezuela ranks 179th out of 180 countries, just above North Korea, with a score of 1.8 points.

“Venezuela’s overall score has declined due to a sharp drop in monetary freedom, business freedom, and government integrity indicators. Venezuela ranks last among the 32 countries in the Americas region, and its overall score is well below regional and global averages,” the report says.

The document adds: “The legal, bureaucratic, and regulatory policies of the government deter foreign investment. The state closely controls the financial sector, and credit is often allocated based on political expediency.”

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