Finance Minister Ali Rodriguez Araque – the revolution’s court jester, as we have remarked in a previous post on this blog – said last week that “within 15 days” the government would announce a package of measures to manage the severe economic shock Venezuela will suffer in 2009.
Ali jests again, of course; the thrust of the regime’s “economic measures” already are crystal clear: President Hugo Chavez plans to steal everything that the revolution hasn’t stolen already.
Since the 2006 presidential elections, Chavez has “expropriated…nationalized” (i.e. stolen) foreign/local privately owned assets in practically every sector of the economy. For example:
Petroleum: The 33 foreign-controlled oilfield operating contracts (aka marginal fields) and the four majority foreign-owned Orinoco extra-heavy crude production/upgrading ventures were nationalized by force, literally, as Chavez sent troops to occupy the production assets of the Orinoco companies on 1 May 2008.
Steel: Ternium Sidor was forcibly nationalized in 2008, and the former Argentine majority owners still have not been paid a penny’s worth of compensation.
Electricity: La Electricidad de Caracas was nationalized in 2007, and folded into new power mega-utility Corpoelec together with 13 other regional power utilities, of which three were also taken away from their majority foreign owners. And Edelca was transferred administratively and operationally from CVG to Corpoelec, setting in motion a plan to dismantle the CVG.
Telecommunications: CANTV was nationalized in 2007.
Cement: The Venezuelan operations of Mexico’s Cemex, Lafarge of France and Holcim of Switzerland were forcibly nationalized in 2008.
Banking: President Chavez announced that Banco de Venezuela Santander Group would be nationalized last year, but by Januarty 2009 the government appears to have reserved couse, though the bank’s Spanish majority owners reportedly would dearly love to sell their Venezuelan holdings and hightail it out of this country.
Other economic sectors harmed by state takeovers include petrochemicals, paper manufacturing, downstream aluminum transformation firms, agro-industry (beef, milk, sugar, rice, etc.), food imports-distribution-marketing, airports and seaports, at least 85% of the print and broadcast news media, and a very substantial portion of the banking industry.
How many Venezuelan banks are in the government’s direct/indirect clutches? Look at the published balance sheets. The banks with the largest portfolios of government deposits and debt are essentially owned by the state, though they haven’t been seized de facto.
But there is still a lot left to steal, and the Chavez regime is wasting no time in “consolidating” its revolution.
Since 27 February, Chavez has ordered the government takeover of rice processors Primor (Polar) and Mary, justifying the “legality” of his action by invoking the July 2008 Agro-Security Law.
Chavez accused the rice processors of marketing only “flavored” rice not subject to government price controls, and literally eliminating production of “popular” rice for the poor.
Primor’s owners called a press conference to refute Chavez, arguing that 1) the state already controls 48% of the national rice market, and 2) there isn’t enough “raw material” (i.e. rice) because the regime’s agriculture policies have basically ruined agricultural production – which is why Venezuela imported $50 billion of food and other consumer/intermediate goods and raw materials in 2008.
Chavez says the government takeover of these rice processors will be “temporary.” But Chavez is lying as always, of course. Now that the revolution has intervened, it won’t let go.
On 2 March local officials in Catia seized the Marina Grande beach club illegally.
Today, “consumer protection” (Indebapis) chief Eduardo Saman announced the government this week will seize control of the Portuguesa sugar mill owned by the Cisneros Group.
Saman also announced “fiscalizations” of other food companies that produce sugar, cooking oils, etc. Obviously, more state takeovers of privately owned food companies are on the way.
Simultaneously, the regime moved up the imposition of production quotas. Henceforth, companies that produce a dozen basic food staples must produce 90% price-controlled popular products and only 10% of their production can be items not subject to controls.
This quota guarantees that a lot of food companies will soon be taken over by the state.
And state intervention/seizure of these companies means that Venezuelan consumers could be suffering severe food shortages as soon as mid-year.
This is not a regime willing politically or capable administratively of conceiving and implementing sensible/orthodox economic adjustment measures.
Any cuts in government spending on infrastructure and social programs will be forced by harsh reality (i.e. no cash to spend), but will not respond to a coherent plan.
Controls and interventionism will be at the top of the “menu” of regime policy options.
Chavez and his thieving/incompetent lackeys will blame Venezuela’s steep economic contraction over the next 12-24 months on the collapse of the US Empire, the failure of Yankee capitalism, low oil prices, the CIA and Venezuela’s conspiratorial private sector.
More state repression is likely if social tensions spark an eruption of public protests.