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Op-Ed Commentary

 

 

VenEconomy:
Communism or state monopoly?

 

Four weeks ago, the government gave yet another blow to private enterprise in its race to impose communism in Venezuela. Gaceta Oficial of October 19 published Presidential Decree No. 4,909 authorizing the creation of a new state-owned company to be called Suministros Venezolanos Industriales, C.A. (Suvinca).

At first glance, it would seem to be a constructive initiative. Officially, the purpose of this company is to “support and favor micro, small and medium-size enterprises as well as cooperatives and other forms of productions organized as associations,” ensuring their viability and sustainability by the timely, adequate supply of raw materials and inputs, technical assistance, quality improvement and financing.

The new company’s business will be the marketing of raw materials, inputs, capital goods, and intermediate and finished goods “in the interests of the country’s endogenous development.” And to do this, it will develop and operate –with an extremely broad mandate of control and supervision- a National Industrial Supplies System, which will consist of an input bank, transportation, storage, quality control, financing, trading and technical consulting services.

Suvinca will be a stock company attached to the Ministry of Light Industries and Commerce (MILCO) and will open with capital stock of Bs.100 billion, contributed by the Bolivarian Republic.

So far, everything looks fine, but a second reading reveals the government’s autocratic intentions.

Since Suvinca is a state-owned company, it will, implicitly, have greater control over all private business in the country. With this company, the government will be usurping attributes and functions that do not fall within its sphere of competence and will be in fierce, disloyal competition with the already hard-hit private sector.

To begin with, it is assumed that this company will have and make use of broad, discretionary privileges such as access to preferential dollars, tax exonerations, and access to soft loans, and that it will benefit from an endless list of laws that exclude it from a series of bureaucratic requirements and permits.

More relevant still is that its business will affect other companies in different ways, one being disloyal competition. Suvinca could sell at a loss, as part of its declared mission and vision, to the detriment of private companies. Another is that Suvinca could end up being the main customer of many Venezuelan producers and importers and, as such, would have them by the short hairs and could force them to sell at below cost or with slim profit margins, with the consequent disinvestment and obsolescence in their industrial plant.

If to this we add the considerable delays the government allows itself to pay what it owes, using this as a political weapon, capital depletion and bankruptcy are what the future will most likely hold for these businessmen. This situation looks even bleaker if account is taken of the fact that this decree introduces barter as a means of trade.

This would come as no surprise from a government that has the fixed idea in its head of imposing on Venezuelans an out-of-date communism that involves destroying private enterprise and exercising control over citizens in all spheres of activity.



VenEconomy is a Venezuela's leading specialized publisher in the economic and financial area. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld not necessarily share these views.

Editor's Note: This commentary was originally published by VenEconomy, on 11/14/2006. Petroleumworld reprint this article in the interest of our readers.

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Petroleumworld 15/10/06

Copyright ©2006 Veneconomy. All Rights Reserved.

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