Eleven years without making an industrial policy

So far this year, the Executive Office kicked off the expropriation of two industrial estates (Handout photo)

Economy
"I want it to turn into an actual industrial estate of socialism." This was the order given by President Hugo Chávez as a rationale for the government decision to intervene the industrial estate in San Francisco, western Zulia state.

The president's announcement unveils the aim of the national government in the industrial field, that is, a new production model. However, one decade after Chávez's inauguration, some pointers reveal a deteriorated production apparatus and increasing oil rent-seeking.

Based on the numbers provided by the Central Bank of Venezuela (BCV) in 1999, oil exports accounted for 79.83 percent of domestic revenues. Ten years later, there is increasing dependence. In 2009, that segment represented 94.54 percent of the income.

President Chávez himself talked about the need for a stronger, diversified production. "We cannot keep on depending only on that exogenous variable which is oil prices," he said on February 2, 1999, during a hearing at the National Assembly (AN).

In his inauguration speech, he also proposed "a new national driving force" and a "long-term" project. Nowadays, both of these goals seem unattainable.

"Here, in Venezuela, there is no industrial policy," Ángel García, an economist and professor at the Central University of Venezuela (UCV), said regarding the collapse of the local industry.

Last year, the Gross Domestic Product (GDP) shrank by 3.3 percent. In the manufacturing sector, though, the shrinkage was still stronger, as it dropped 6.4 percent. While there were clear signals of wear and tear some time ago, in the last quarter of 2009, manufacturing suffered the strongest impact and closed as low as 6.9 percent.

Víctor Álvarez, former minister of Basic Industries and Mining and a current researcher at the Miranda International Center (CIM), thinks that, rather than receiving support, the production apparatus weakened.

"I think that it is basically due to the lack of a consistent, dedicated, hinged economic policy to boost the industrial sector."

A breakdown of the GDP shows the country's lack of industrialization. In the late nineties, the contribution of manufacturing was around 18 percent, compared with 15.4 percent only of the GDP in 2009.

And the number of industries has also plummeted. In 1998, the national territory counted on 11,198 industrial sites. Nowadays, there are 7,800, that is, an industrial density of 0.3 businesses every 1,000 inhabitants, as noted by Álvarez.

Such indicator puts Venezuela behinds several countries in the Western Hemisphere, such as Colombia, for a ratio of 1.2 businesses every 1,000 inhabitants, and Mexico, 1.7.

"We have opted for the easy way of using the oil income to buy from the rest of the world what we ought to produce in the country," Álvarez added.

José Manuel Puente, a professor at think-tank IESA and specialist in public policy, identified another alarming signal in the X-ray of the industrial apparatus. In 2009, non-oil exports amounted to USD 3.32 billion, that is, 44.65 percent less than in 2008.

The last year yield is even lower than that reported in 1999, when non-oil exports stood at some more than USD 4 billion.

"Official numbers are telling that there has been massive destruction of the industrial apparatus, the manufacturing apparatus and the tradable apparatus of the economy," Puente admonished.

Errors and mistakes
In the experts' opinion, the government has made many mistakes; the most serious one, they agreed, has been the management of the exchange policy.

"Many stopped producing to become importers because the policy led them find that import was a better business," Álvarez said.

Puente added two more elements: an environment of "hyper-regulation" and the policy of expropriation and State intervention of the economy.

On the increasing State share in the economy and the trial of formulas such as cooperatives and social production enterprises, García noted that these schemes are filled with risks and inefficiency.

"In private business there is an owner, who can win, but also lose; has incentives to monitor, to try to make the business as productive as possible. In a production process based on cooperatives, public administration, state property, these incentives are missing because in the event of losses, they are transferred to society by means of taxes."

The private sector feels that the "siege" that has been laid by the State is increasingly narrower. A poll prepared by the National Council of Industries (Conindustria) and conducted in the fourth quarter of 2009 found that the used capacity of companies amounted to 54.04 percent, a number similar to that of 2004, when the economy was still undergoing the aftereffects of a nationwide strike.

Puente fears that the government attempt at "getting rid" of the private sector in the industrial field is a "mistake." "The proposed model is causing terrible costs, terrible results and it is driving the Venezuelan economy and society to a sad destination."

For his part, Álvarez thinks that the government should clearly define the areas for the exclusive use of the State, the private sector and the so-called "social economy."

"All of the three sectors are nonexpendable; none of them can be ignored; otherwise, it would be like replicating the failed experience of those countries which opted for State absolutism or market fundamentalism."

The researcher's view is very similar to the promise made by a brand-new President Chávez on February 2, 1999. "Our project is not a statist project. Nor is it the extreme of neo-liberalism. We seek to strike the middle point: as much State as necessary and as much market as possible."

Translated by Conchita Delgado

Roberto Deniz
EL UNIVERSAL