Venezuelan government controls more than 500 businesses
Bicycles, coffee, medicine, cellphones, aerospace components, petroleum, milk, hotels. Venezuela’s state-run companies are producing a dizzying array of products and services, as the socialist administration has morphed into a sprawling conglomerate that would be the envy of any capitalist.
The nonprofit Transparency International says it has identified at least 511 companies that are either wholly or majority owned by the government of Venezuela — and 70 percent of them are losing money, potentially adding to Venezuela’s economic meltdown.
The sheer number of companies under state control seems to put Venezuela in a class of its own, the group said. Brazil, which has about six times the population of Venezuela, has 130 state-run companies, and Argentina, a third larger than Venezuela, has 52.
“We started this study because nobody really knows how many companies the state is running,” said Mercedes De Freitas, the director of the Venezuelan branch of Transparency International. “The state has invaded every sector imaginable.”
Transparency International, a Berlin-based anti-corruption organization with chapters in more than 100 countries, will be producing its full report in April with the hope of developing a better picture of the government’s role amid a crushing economic crisis.
Even so, De Freitas said the initial findings paint a picture of an oversized state hemorrhaging money — at a time when the country desperately needs it. The organization found that 70 percent of the 511 companies have produced losses in 2016 totaling 1.29 trillion bolivares — or about $129 billion dollars. That amount is 14 percent higher than what the government earmarked for education, health, housing, and social security that same year.
Those losses come as payrolls at the ventures appear to be soaring. In the early 2000s, for example, the state-run oil company PDVSA, the crown jewel of Venezuela’s state-run enterprises, had about 20,000 employees. Now it’s thought to have 120,000 workers, even as oil revenue and output have fallen, De Freitas said.
“What does this mean?” she asked. “It means that the company has turned into a burden on society. Many jobs have been created that are simply not sustainable.”
The government is likely to dismiss the findings. Transparency International, which receives U.S. and European funding, is often accused by the administration of being an opposition mouthpiece. And its annual “Corruption Perception Index,” where Venezuela ranks 167 out of 170 countries, is a continual source of tension.
During his 14-year tenure, the late President Hugo Chávez was a fierce advocate of state control of strategic sectors, and he went on to nationalize steel mills, agribusinesses and, most importantly, the critical oil industry.
The process was sometimes chaotic, with Chávez announcing the seizure of companies on national television. At one point, he walked through the center of Caracas — again on live TV — pointing to buildings and ordering his ministers: “Expropriate it!”
The threat of government seizure was also used against those he saw as obstacles to his “socialist revolution,” and his successor, Nicolás Maduro, has carried on the tradition.
Over the weekend, Maduro threatened to expropriate industrial bakeries, saying they were behind a “bread war” responsible for widespread shortages. Last year, he told workers to seize any company that was promoting anti-government demonstrations.
Of the 511 state-run entities Transparency International has identified, 70 percent were created starting in 2001, as the socialist administration was building up steam.
The study comes as Venezuela’s oil-dependent economy is in crisis. The government hasn’t released inflation figures since 2015, but private groups estimate the 2016 rate at more than 700 percent. The economy is shrinking, and shortages of food and medicine sweep through the country.
Maduro routinely blames the private sector and his opponents of waging an “economic war” against him. But his critics say it’s government policies — particularly expropriations — that are at the root of the problem.
“Maduro is causing deaths in Venezuelan society with the weapons of shortages and lack of economic productivity,” Omar Gonzalez, an opposition congressman from Anzoátegui state, said recently. “He pulls the trigger on shortages and expropriations that kill thousands of citizens daily.”
The government takes pride in its state-run companies. Caracas’ subway, which is government owned, is often full of posters and banners touting the success of state-run coffee, steel and sugar companies.
But the full scope of government’s business activities is something of a state secret. Transparency International said a team of researchers have spent eight months trying to track down basic information that is publicly available in other countries.
After releasing an initial list of 505 state-run companies, researchers stumbled across an additional six in recent weeks. Russia’s state-run Sputnik news agency last year said Venezuela had “thousands” of state-run companies.
Even basic questions have been hard to answer: How much revenue do they generate for the country? How many employees do they have? Who’s on the board of directors?
Investigators had to comb through the national registry and press clips to begin developing a snapshot of state enterprises. The secrecy is not simple disorganization, but a matter of “state policy,” De Freitas said.
“If you ask for the information, you never get it,” she said. “And they consider you an enemy of the state for simply asking for it.”