business in venezuela for good or for bad
TRANSCRIPT
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Business in Venezuela for good or for bad
By Kerly Siavichay Yagual
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Introduction
There exist several reasons that justify the creation of
new rules or procedure, in order to regulate the functioningof the economy 1 , imposed by the State. Nevertheless the State
always has been criticized by the double morality on having
intervened with policies of economic regulation, which on the
one hand look for a really collective benefit, limiting, in
certain form, to the private sector. On the other hand, when
the regulations 2 concern seriously the private sector, the
State looks for the nationalization, and assumes the functions
of the sector. Focusing on the Venezuelan economic sector, we
can realize that the state has a strong control over most of
the companies that provide higher incomes. After positioning
Nicolas Maduro as President of Venezuela, the National
Assembly passed the so-called "Enabling Act ", which allows
Maduro, govern by decree for one year. During his rule Maduro
has approved a law that increases controls and regulations on
market prices for imported products, like cars, electronic
products, etc. The Organic law for the control of prices,
costs and profits of the private sector according to
1 According to the Organisation for Economic Co-operation and Development(OECD)1997; Economic regulation generally aim to improve the efficiency ofmarkets for goods and services. These are restrictions imposed by the statepower company decision on prices, quantities, and input-output servicesmarket.2 (OECD)1995; the term "regulation" "include in this concept the full rangeof legal instruments through which public institutions at all levels,impose obligations or restrictions on the private sector. They can be
considered as regulation: constitutions, statutes, implementingregulations, decrees, ordinances, rules, licenses, plans, codes and evencertain types of administrative instructions ".
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Venezuelan President has one central objective is to defend
economic liberties and economic rights of the people you work
with. With that, it ensures the protection to "economic
freedoms and economic and social rights of the working
people."
The answer here is: how this regulation can affect the
business in this county? Searching for information on economic
sector in Venezuela, it appreciates that the government
practically dominates all the country economy due to the
seizures of different enterprises. The state oil company,
PDVSA, controls the petroleum sector. Government companies
control the electricity sector and important parts of the
telecommunications and media sectors. In 2008, the government
nationalized cement and steel producers, as well as select
companies in the milk and meat distribution sectors. In 2009
it nationalized assets in the oil (including assets owned by
U.S. oil services companies), chemicals, tourism, agribusiness
(including a processed rice plant owned by a U.S. company),retail, and banking industries. In 2010, the government
nationalized companies in the agricultural and construction
sectors as well as U.S. assets in the petrochemical and
packaging industries. Threats of continuing nationalizations,
as well as other threats to property rights and an uncertain
macroeconomic environment characterized by high inflation and
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foreign exchange controls, have led to reduced space for the
private sector and low levels of private investment. 3
For implement regulations Venezuelan Government is basedon the imperfection of the market and the redistribution of
richness that justified the state intervention in order to
get a national fortune. 4 Thats why the foreign investment is
not attracted to this country. Making business means gets an
advantage from the sales, however, Venezuela President pretend
that companies sell their products in accessible prices,
affecting their incomes because of the payments of different
taxes and quotes.
Other question is: these regulations are made for good or
for bad? According with the investigation the Latin America is
a riskily sector to invest. 5 And Venezuela government wants to
benefice the people that cannot purchase the products in
higher price established by foreign companies. On the other
hand the increasing interventionism of the government, with
regular nationalizations, is obstructing the diversification
of the economy and damage productivity. The fixing andcontrols on prices (for this to be equal to the average cost),
the government releases of the aid to maintain economic
3 All the information about the companies that form part of Venezuelan
Government seizures was taken from: Global Business Knowledge net pagehttp://globaledge.msu.edu/countries/venezuela/economy 4 Roosevelt, (1944) "The really big fortune, the swollen fortune, by the
mere fact of its size, acquires qualities which differentiate it in kind as
well as in degree from what is possessed by men of relatively small means.Therefore, I believe in a graduated income tax on big fortunes." 5 Steve Johnson made an analysis in a web page:
http://www.ft.com/cms/s/0/3ccd9d6e-6965-11e2-8d07-00144feab49a.html#axzz2o6Rvymew
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activity, even if a certain degree of inefficiency remains. It
is a simple and intuitive solution, but that does not
stimulate the production efficiency.
By the end of the 1980s, the structure of different
economic sectors as banks, mining, even manufacturing, were
dominated by thousands of small firms in the private sector
and a few hundred large, mainly public-sector, enterprises.
For these reasons governments also had established specialized
institutions to propel the development of agriculture,
industry, urban areas, tourism, and exports.
Thats why Venezuela became a very nationalistic economic
approach, so if both the Governor seeks to ensure good living
citizens should make the companies of the public sector must
be employed in an efficient way at terms of production,
productivity, quality and costs with the purpose of producing
goods of good quality and of low costs. It should give
subsidies and credits to the small and medium companies. To
raise the productivity and the competitiveness, doing that the
workers and employees are part of the benefits. To createstrategic alliances between domestic and foreign enterprises
to produce and to commercialize national and foreign products.
The changes in regulations could be taken as Economic
Barriers. Nowadays, in Venezuela there are many industries
which are not developed as it should be due to lack of
investment. Furthermore, government in Venezuela has created
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some restrictions and business difficulties according with the
Organic law for the control of prices, costs and profits of
the private sector that do not make this country attractive
to invest.
Conclusion
A constitutional rule of law is not achieved when there
is an obvious inequality in theoretical terms. On the other
hand government intervention and the importance of the
Constitution are not questioned. There is good evidence that
constitutional changes create conditions favorable to economic
growth, although it does not generate an automatic economic
and social improvement of a country. The Venezuelan government
through its policies intended to encourage and strengthen the
economy. "Benefitting" the people, but in turn forcing
companies to lower the prices of their products and limiting
the develop of private sector. Duties affect all industry
sectors, excluding foreign exchange outflow, transfers, sends
or transfers of funds abroad.
Create strategic alliances between domestic and foreign
enterprises to produce and to commercialize national and
foreign products, is an strategy to be a successful country
and expand sales to other countries and increase the national
economy. Thats why the State should support small and medium
companies, in order to increase the employment, revenue and
production. The State must stimulate the development of the
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scientific and technological research that makes possible the
creation of own technology.
Bibliography
1. OCDE (1995): Recommandation du conseil concernant l
amelioration de la qualite de la reglementation
officielle, Pars.
2. OCDE (1997): Reformer la Reglementation environnementale
dans les pays de lOCDE, vol. I. Etudes sectorielles y
vol. II. Etudes thematiques, Pars.
3. Roosevelt, F. 1944. The Second Bill of Rights,proposing.
4. Study Document: La Regulacion Economica el Preblema del
Monopolio Natural.
References
1. Latin America could be risky business By Steve Johnson:http://www.ft.com/cms/s/0/3ccd9d6e-6965-11e2-8d07-00144feab49a.html#axzz2o6Rvymew
2. Venezuela ECONOMY:http://globaledge.msu.edu/countries/venezuela/economyhttp://www.mongabay.com/reference/country_studies/venezuela/ECONOMY.html
3. Maduro anunci la regulacin de los alquilerescomerciales y prohibi transacciones en dlares:http://www.infobae.com/2013/11/29/1527178-maduro-anuncio-la-regulacion-los-alquileres-comerciales-y-prohibio-transacciones-dolares
4. Nicols Maduro anunciar nuevas regulaciones en losprecios de automviles:http://elcomercio.pe/actualidad/1667015/noticia-nicolas-maduro-anunciara-nuevas-regulaciones-precios-automoviles?ref=ecr
http://www.ft.com/cms/s/0/3ccd9d6e-6965-11e2-8d07-00144feab49a.html#axzz2o6Rvymewhttp://www.ft.com/cms/s/0/3ccd9d6e-6965-11e2-8d07-00144feab49a.html#axzz2o6Rvymewhttp://www.ft.com/cms/s/0/3ccd9d6e-6965-11e2-8d07-00144feab49a.html#axzz2o6Rvymewhttp://www.ft.com/cms/s/0/3ccd9d6e-6965-11e2-8d07-00144feab49a.html#axzz2o6Rvymew