Nicolás Maduro’s government is burdened with the bankruptcy of hundreds of companies, so, to collect some contribution, it has started to cede them to investors.
CARACAS Venezuela (Agencies) – The Venezuelan government, saddled with hundreds of bankrupt state-owned companies in an economy in free fall, is abandoning the socialist doctrine and handing over key enterprises to private investors, offering profits in exchange for a share of revenues or products.
Dozens of chemical plants, coffee processors, grain silos, and hotels seized over the past two decades have been transferred, but not sold, to private operators in so-called strategic alliances, said nine people with knowledge of the matter. The managers cover payroll and investments and turn over products and a percentage of their revenues to the government.
“We believe this is positive because it is the synchronization of the public sector with the private sector,” commented Ramón Lobo, a legislator from the ruling socialist and former finance minister. “The state acts as a supervisor and receives a retribution.”
The change is noticeable in agriculture, part of President Nicolás Maduro’s effort to feed a hungry population after seven years of economic and social collapse. It is unclear how much money the new policy, which follows last year’s passage of an “anti-blockade” law that sought to reduce the impact of U.S. sanctions and encourage investment, brings in. The government now allows dollar remittances to flow and private enterprise to flourish in small pockets.
Maduro took power eight years ago after the death of Hugo Chavez. The latter launched the socialist revolution by confiscating more than a thousand companies and numerous farms and properties, including multinationals such as Kimberly-Clark, Cemex, and Kellogg.
However, the new state-owned enterprises failed due to mismanagement. Using its vast oil revenues, the government replaced local farming and manufacturing with imports.
Venezuela’s state oil company, PDVSA, was placed in the hands of allies and became inefficient, becoming an arm of the ruling party. It was driven into ruin and forced to cut production. Between that and recent U.S. sanctions, which increased significantly during the Trump presidency, they have shattered a society that was once among the richest in the world.
More than 5 million Venezuelans have fled the country in a desperate attempt to avoid ruin.
Strategic alliances began quietly forming in 2017. Last year’s publication of the anti-blockade law gave the deals a legal basis, circumventing regulations such as bidding processes.
But the precise nature of the new agreements, whether leases, licenses, or commodities, is unclear. The anti-blockade law prohibits disclosing such information, theoretically to protect companies from US sanctions, which target entities doing business with the government but exclude private companies.
The Ministries of Agriculture and Information did not respond to requests for comment. The new agreements affect major companies and mostly involve businessmen with ties to the government, but not exclusively. In some cases, seized properties are returning to those from whom they were confiscated. In others, the owners are refusing to participate.
Some analysts point out that what is happening in Venezuela has precedents in other left-wing authoritarian states.
“This process is similar to the privatization process in Russia in which assets are transferred to local private companies and investors from countries allied to the government,” explained Asdrubal Oliveros, head of the economic consultancy Ecoanalítica, speaking of the 1990s.
“But unlike Russia, there has been no deep stabilization program with the help of multilateral organizations. Being isolated and under sanctions makes it a different situation,” he remarked.