Modern XXI century highway robbery in Venezuela

Thou shalt not steal

Ex.20:15

Se garantiza el derecho a la propiedad. [...] Solo por causa de utilidad pública o interes social, mediante sentencia firme y pago oportuno de justa indemnización, podrá ser declarada la expropriación de cualquier clase de bienes.
{The right of property is guaranteed. [...] Only for causes of public need or social interest, through a final [court] ruling and prompt payment of a fair indemnity, will it be possible to declare the expropriation of any type of property.}

Article 115 of the 1999 Venezuelan constitution!

Well, stealing is exactly what the bolivarian revolution has been doing, since its very beginning. However, after having spent years stealing the public coffers it seems that it is not enough and we are witnessing pure and simple expropriations of private citizens holdings.

Now, before I get into this it is important to point that most modern societies, even the empire of Capitalism, the good ole US of A, do preview expropriations for public interests with at least reasonable compensations. not even real market value but at least a value that does represent something. There is nothing wrong with that as collective interests on occasion goes above private interest, if duly compensated of course.

The constitution of 1999 does state this normal public policy, in a series of articles (113 through 116) which define the property rights and what to do when those are abused through monopolies for example. The article 115, cited above, is totally explicit on this subject. And it has been repeatedly violated since the constitution has been approved. It seems that lately these systematic violations are reaching a new level. A list follows, not necessarily in order of importance, though the first case is presented in detail for the reader to be able to understand the modus operandi of the regime.

A Polar/Remavenca plant in Barinas has been taken over

Polar is the largest private business in Venezuela and its family as a shareholder group (a la Walmart) are the wealthiest group of people in Venezuela (outside of the illegal fortunes that are being currently built on the public dole by the present administration). Polar is the number one brewery, the number one corn/maize flour provider and of many of other popular staple foods. And it is not a monopole even if it frequently occupies the principal share. It is oriented for mass production, and most of its items are price controlled anyway. It is also probably the company most closely followed tax wise.

However Polar has been suffering. It has been suffering because being a colossus it has a hard time to adapt to the fast changing conditions of Venezuela. It is suffering because of the missteps of the Venezuelan economic team which would have run the economy into the ground if it were not for oil at soon 60 USD the Venezuelan barrel. For those who do not agree with this blogger, I would like to remind them that when Chavez reached office the Venezuelan currency was around 550 for the USD. Now it is at 2150 officially and 2700 to the dollar on the parallel market. A 5 fold decrease in 6 years does not speak of economical mastery.

Thus Polar has been shifting its production centers in a more rational way, not only to face the normal economic cycles, but also to face the unfair competition offered by the government when it imports subsidized food at the expense of the Venezuelan worker who loses his/her job. One of these installations, a Remavenca subsidiary, is in Barinas state, where it was a collecting center for cereals and a processing center for oil and flour.

Polar in 2002 decided to stop production but still kept the center for storage and distribution, thus maintaining the agricultural importance of the area if not its productive capacity for processed product. Those did not have too far to come as the Chivacoa Remavenca center is located barely 5 hours drive and thus Barinas is fully provided with Polar products while its farmers can sell their crop, even though Barinas state is at the end of the road. I know all of this well as Polar is one of my clients and I have visited their installations more than once.

But that has not stopped the government, led by the minister of agriculture and lands, to seize last Monday the Barinas facilities. Antonio Albarran, a minister of limited capacity but whose loyalty to the regime cannot be questioned, lamely today stated that he was only following what the cues provided by the leader of the revolution on his Sunday comic hour. So we are expected to believe that a minister hears a talk show and acts, without even waiting for the cabinet meeting? We would be so luckily if Chavez ministers were so efficient on matters such as personal security or Vargas disaster rebuilding... Meanwhile Polar is trying to demonstrate the illegality of the move, if the High court pays attention.

The workers of Remavenca Barinas, on the left side, barred access to work by the Nazional Guard, are not amused since basically they are kicked out, as are their clients, to be replaced by pro Chavez workers and supposedly pro Chavez farmer providers who nobody knows quite well where they come from or what they can possibly provide. It would seem that this Remavenca facility was actually rented to some local producers that were discriminating against some other local producers. We could thus conceive the same picture but with pro Chavez folks protesting. That of course is not enough to justify the manu militari grabbing of the plant, as for the time being there has been no judicial papers showed by the governmental side.

No compensation has been offered as the government seems to be figuring ways to put up trumped charges to get it cheap or free if possible (Polar did slow down work in the 2002 strike but never shut down completely, the few shutting due basically to the lack of gasoline for transport, so even such charges would not stand in a normal court of law, something that has ceased to exist in Venezuela; and Polar is still seen as an enemy of the regime, even if its president travelled with Chavez to Spain a few months ago). Thus the mystery remains as to the real motives of the minister. Is it to favor one group of producers above another? Is it to allow acces to all producers? Is it to force Polar to sell cheap? Is it to incur favor with Chavez whose home state is Barinas? Is this really a Chavez expressed wish (it would be really hard to think that such an important move which would affect the economical climate would not be attempted without Chavez approval)? Is it the coming moves of the revolution which is announcing clearly its march towards communism to a people that do not understand it and will ratify communism through the vote thanks to a gigantic abstention? All speculations are open, but one sure is certain, at the very least Chavez has decided to replace the present business class with one of its making (whose skill outside of government credits is far from been proven).

Expropriation or confiscation?

A Heinz tomato processing plant has been taken. This plant located in Monagas state operated briefly and was closed as the area proved itself unable to provide for the amount of tomato required to make the plant break even. Heinz reports that it tried to sell it but could not find any taker. One is left to suppose that since tomatoes are red they will probably grow spontaneously to support the regime.

A slaughter house in Barinas state was also taken.

Early this year a paper mill and an auto part and bearings plant were seized. As far as we know nothing was paid to the ex owners. And let's not start with Hato Piñero and other cattle ranches just invaded at will. And we will pass on sudden change of fiscal code, applied retroactively to foreign oil companies to milk them further. They did accept since oil is so high, but a precedent of tax code modification in a retroactive ways has been set and it could apply whenever politics justify it.

And the future is not very promising. The government as announced a survey of closed plants and partially closed ones to decide which ones it will just give to the ex employees (or more likely chavista ex employees, let's not kid ourselves). 700 facilities would be targeted. Whether they closed for economical reason or for speculative reasons is not the question. Actually the official line is that the owners closed the plants to piss off Chavez. How cutting one's nose to spite one's face has become a capitalist law market is of course not explained by these amateurs who take their lessons from outdated economic books and outdated Cuba. Reason has nothing to do with this whole affair.

Invest in Venezuela?

Obviously it is highly risky as your business can just be hijacked anytime by disgruntled opponents, envious workers, politicos seeking a cheap point, etc, etc... Venezuelans know that very well as all the money taken overseas for decades is not coming back, at all. Oscar Garcia Mendoza, a neo liberal but lucid opponent is certainly not encouraging investment by pronouncing these maneuvers as a direct attack on private property. He also stresses that there are other ways the government is limiting property by forcing for example banks to dedicate 10% of their total loans to popular housing projects even if the targeted people are simply unable to satisfy the conditions imposed by the government itself. But the government is only trying to pass the buck on its incompetence in building public housing.

That the government uses its oil resources for all sorts of political projects overseas that do not benefit Venezuela present and hard needs is not helping bring investor confidence (the UNPD has dropped Venezuela a few positions once again in its annual index of human development, thus restating that the bolibanana revolution is not improving Venezuelans' lot). The latest is yet another oil agreement with central America and the Caribbean where discounted oil, is basically given it away for some sugar and plantain that Venezuela could well produce. But Chavez is more preoccupied with OAS vote buying in his favor than the well being of his people. why invest in Venezuela when you can do Venezuelan deals outside of Venezuela? Still there are some investments that the regime brags about but which are very hollow investments when one looks at them. These investments are only in two areas.

One group, such as communications, are too complex for such an incompetent administration. Thus they will have time to get enough return to recover their investment before the government eventually decides to take them over. One of these particularly hollow investments is the purchase of Telcel, the largest cel-phone comapny in Venezuela, from Bell South by the Spanish communication giant Movistar. Well, where is all the cash received by Bell South? Still in Venezuela? You can bet that Venezuela overall has not acquired much from this transaction.

But even that media/communication sector is targeted and might see its profits dwindle fast. Just today the National Assembly lead by the ineffable Maduro, a servilest servant of Chavez, has pushed through a law that will force cable companies to give the government free of charge 8 channels. Voila! Too bad for the expenses of these companies for carrying channels that probably few people will want to see. This is just another form of expropriation (not to mention censorship and force feeding of the government propaganda drivel) .

The other group of business where investment is observed is in those ones that have a high risk perhaps but also a high return, in the 20 to 30% order or more. That is, oil industry. The price of oil is big enough that enough US companies are willing to take the risk, no matter how nasty to the US Chavez is. But in general there is very little local investment, just enough to keep established business running and any expansion is made on borrowed money, not on repatriation of capitals. We know better: even chavistas are careful to stash their gains outside, as reported for example by the Miami Herald.

But all private investment in long term business with moderate returns and employment creation is very limited. Unless, of course, you like to be despoiled by a rapacious administration who first sends after you the Seniat, Indecu, Work Ministry, and then, when there is nothing left in your account simply invades the premises and takes your property away.


PS: I have modified a little bit the Remavenca story as new information was sent to me. If it nuances it some it still does not change the basic point of illegal property grab. It is thus possible that I might add an additional PS as more info flows my way.