Category Archives: Business in Venezuela

Venezuela Economy Choked by Bureaucratic Red Tape

The challenges of doing business in Venezuela

By Sarah Grainger
BBC News, Caracas – 28 October 2011

Hugo Chavez may be a fan of baseball, yet the Venezuelan president’s economic policies have driven many Major League Baseball academies out of his country. However, it’s not just the business of baseball or foreign investors who have to deal with mountains of red tape.

Getting things done in Venezuela can sometimes feel like an uphill struggle.

Some form of identification is required for even the smallest purchases. I have to give my passport number every time I buy a pack of gum or a carton of milk in the local store.

But the biggest chores are banking ones. Cash machines have strict daily limits on the amount of cash that can be withdrawn, but taking out money over the counter is no easy task.

Venezuelan baseball fans.

Venezuelan baseball fans. While there were once a dozen major league baseball training academies in Venezuela, there are now only five.

It requires two signatures, fingerprints and in some cases a photograph. So it is not unusual to queue for more than two hours in a bank for a simple transaction.

Imagine then, the challenges to businesses based here.

Greater suspicion

There are tight currency controls in place, a measure brought in by the government to stop people withdrawing all their capital from the country and investing it elsewhere.

Businesses wishing to buy US dollars with their Venezuelan bolivares fuertes must apply at the offices of CADIVI, the central currency authority. There is a daily limit on how many dollars can be bought.

“I go and queue up for my dollars myself and wait for them to be issued,” says clothing importer and retailer Katiuska Viana.

“If you love your business, then you are prepared to work hard for it.”

Such strict measures, however, mean a black market for US dollars is thriving.

But this also leads to greater suspicion around financial transactions, even when they are of a relatively small nature.

Buying a plane ticket a few months ago, I was asked by the cashier to explain where I had obtained the money to do so.

The lady from whom I bought my car had to submit supporting documents when she deposited the money in her bank to explain how she had come to obtain such a lump sum.

Standing empty

Business owners themselves are suspicious of the government. The policy of expropriation has created fear and uncertainty amongst property owners.

President Hugo Chavez has nationalised dozens of companies and expropriated tens of thousands of hectares of land since coming to power in 1999.

Targets have included pasture belonging to Britain’s Vestey family, which raised cattle for decades, and the local subsidiary of US bottling company Owens Illinois.

Even small property owners are worried.

“It’s not good to have your property standing empty for too long,” one landlady in Caracas tells me.

Empty apartments and houses can quickly become accommodation for the homeless.

A grandiose example of this is the Torre Confinanza in Caracas, a 45-storey tower block begun in the early 1990s.

Squatters moved into the semi-completed building after its owner could no longer finance the construction project.

Few in the private sector believe the judicial system would rule in their favour instead of the newly arrived squatters.

High inflation

The paperwork involved in importing and exporting goods is formidable.

“Whereas I used to have to fill out one or two forms to import a container of goods, I now have to go through roughly 40 different steps to get clearance for that container,” one manufacturer says.

Caracas is notoriously dangerous and business owners are increasingly concerned about security.

But keeping employees, assets and property safe is also costly.

Switching from paying your staff in cash to paying them by transfer, for instance, takes time and money, says Victor Maldonado, executive director of the Caracas Chamber of Commerce.

President Hugo Chavez is proudly left-wing and does not pretend to be a friend of business.

His policies are designed to share the country’s wealth more widely between all Venezuelans. Those who have benefited by moving onto expropriated land, or have received free housing or subsidised food from the government, are extremely grateful.

Opponents, however, say the government’s policies end up affecting everyone adversely.

They point to the country’s sky-high inflation rates, currently over 20% for this year, as proof that the economy is out of control.

Foreign organisations – such as Major League Baseball teams – can always choose to do business elsewhere. Few Venezuelans have that option.

But there is a silver lining to the current difficulties, according to one manager.

“If I can run a factory here in these conditions, I can succeed in any business, anywhere.”

Three Months in Paradise: A Chinese Businessman’s Life in Venezuela

Chinese team Inspecting equipment in Venezuela

Chinese team Inspecting equipment in Venezuela

I recently came across a description by a Chinese businessman of his trip to Venezuela. It seems he is an employee of the China Machinery Industry Corporation and was sent to negotiate a corporate contract. In any case I found his narrative of his three months in Venezuela to be interesting. It’s essentially a press release on the corporate website, and the actual name of the businessman is not given. I see in it elements of the Chinese culture which requires putting everything in the best possible light, and in which social harmony is the ultimate goal. I am reprinting it here:

My Life in Venezuela

2008-05-07

The airplane just took off and the home-departing trains of thoughts engulfed me like overcast dusts. The airplane, like a giant hand, picked me up by my collar and turning around, put me down in a strange city over the other side of the Earth.
Landing in Caracas from the Air
The irregular changes of colorful clouds outside the plane over more than 20 hours and the beautiful scenery I saw in transit at Pairs could not be compared with the happy surprise I felt at the first sight of Venezuela, which could not be described just with the word of “gorgeous”. Caracas, the capital of Venezuela, is a city grown in forests and mountains. Green trees, distant mountains and the perpetually clear sky are surrounding the simple groups of buildings. Just thinking about it could calm you down and once in the city, you felt contended with the peace of mind. The road from the airport to our residence was full of colorful slogans. “Marching towards socialism!” and “Support Chavez!” were most common words bumping into your eyes, from which one could not help but feel strongly the surging emotions of Latin American people.
Life + Work = Intimate Family Members
To share your spare time together with your boss for the first time indeed made you feel somewhat uneasy. Fortunately, my colleagues had already managed to separate work from life. During work, we were dedicated and hardworking and united as one for good cooperation, and thus turning heavy pressure into joys of common struggles. In life we were forthright and unrestrained, passing good mood to everyone near you. In this intimate environment, colleagues gradually became friends and friends gradually became family members. Unconditional support and trust became the biggest motivation to drive you to grow, for each of your small progress could invite loving watches of leaders and colleagues.
Fighting!
In work, we seemed to be fighting everyday and so it was not strange for our colleagues in China to call where we were as the “front line”. Morning always elapsed in a hurry without notice and we had to handle more than ten e-mails everyday. Telephone calls from subcontractors seemed endless. Each entry of payments had to be recorded for files and the thick contract copy was full of notes and remarks. Running here and there all the time with documents in hand, when at last you touched down on the chair, you could be dragged away at the next moment. This was the routine for everyday. It had already been noon time while you were still thinking as if the day had just started.
The negotiation seemed more like a seesaw battle, and a competition of wisdom and willpower. Both sides were so highly absorbed in their state of mind and the ashtray would be full of cigarette stubs in a while. The negotiation venue changed from the long table into the dining table and again changed back from the dining table to the long table. More than often, the battle would last until it got dark. Touching the hungry belly and looking at the revised contract filled with dotted remarks, one would feel contented in heart for at least something had been accomplished out of the hard efforts. With a piece of bread and two hands still busy on the keyboards, I was racing against time to finish the translation of the revised contract, which would be sent back to China for review. It was already dead night after the day’s work. After a quick bath, I dragged my worn-out body to bed. I was still wide awake enough not to forget to set up my alarm clock.
Together with You!
To keep in touch with the company in China was an indispensable part of our work in a foreign country. The time difference between Caracas and Beijing was exactly 12 hours. The overtime in the evening after a day’s regular work was normal routine of the day. Under such environment, to adjust and relax promptly was more than necessary to keep good working morale. Weekends were the time when everybody felt most relaxed. There were quite a few options to choose, such as watching movies, Karaoke, strolling along the streets, enjoying sumptuous meals, going to beaches or hot spring spas. It was all up to the mood of everybody. But most of time, people would feel excited to respond once there was a suggestion or a hint as what to do. Could not remember who had said something to the effect that “What matters is not what, but who.” No matter where we went, there would be joys and laughters as long as we were with our colleagues.
At twinkling of an eye, three months had passed by since we came to Venezuela. More than 1000 pictures were stored in the camera, very faithfully recording each and every smiling face and little bits of our life here. Do you need a reason to love a city? Perhaps, the answer would lie in our smiles.

The airplane just took off and the home-departing trains of thoughts engulfed me like overcast dusts. The airplane, like a giant hand, picked me up by my collar and turning around, put me down in a strange city over the other side of the Earth.

Landing in Caracas from the Air

The irregular changes of colorful clouds outside the plane over more than 20 hours and the beautiful scenery I saw in transit at Pairs could not be compared with the happy surprise I felt at the first sight of Venezuela, which could not be described just with the word of “gorgeous”. Caracas, the capital of Venezuela, is a city grown in forests and mountains. Green trees, distant mountains and the perpetually clear sky are surrounding the simple groups of buildings. Just thinking about it could calm you down and once in the city, you felt contended with the peace of mind. The road from the airport to our residence was full of colorful slogans. “Marching towards socialism!” and “Support Chavez!” were most common words bumping into your eyes, from which one could not help but feel strongly the surging emotions of Latin American people.

Life + Work = Intimate Family Members

To share your spare time together with your boss for the first time indeed made you feel somewhat uneasy. Fortunately, my colleagues had already managed to separate work from life. During work, we were dedicated and hardworking and united as one for good cooperation, and thus turning heavy pressure into joys of common struggles. In life we were forthright and unrestrained, passing good mood to everyone near you. In this intimate environment, colleagues gradually became friends and friends gradually became family members. Unconditional support and trust became the biggest motivation to drive you to grow, for each of your small progress could invite loving watches of leaders and colleagues

Fighting!

In work, we seemed to be fighting everyday and so it was not strange for our colleagues in China to call where we were as the “front line”. Morning always elapsed in a hurry without notice and we had to handle more than ten e-mails everyday. Telephone calls from subcontractors seemed endless. Each entry of payments had to be recorded for files and the thick contract copy was full of notes and remarks. Running here and there all the time with documents in hand, when at last you touched down on the chair, you could be dragged away at the next moment. This was the routine for everyday. It had already been noon time while you were still thinking as if the day had just started.

The negotiation seemed more like a seesaw battle, and a competition of wisdom and willpower. Both sides were so highly absorbed in their state of mind and the ashtray would be full of cigarette stubs in a while. The negotiation venue changed from the long table into the dining table and again changed back from the dining table to the long table. More than often, the battle would last until it got dark. Touching the hungry belly and looking at the revised contract filled with dotted remarks, one would feel contented in heart for at least something had been accomplished out of the hard efforts. With a piece of bread and two hands still busy on the keyboards, I was racing against time to finish the translation of the revised contract, which would be sent back to China for review. It was already dead night after the day’s work. After a quick bath, I dragged my worn-out body to bed. I was still wide awake enough not to forget to set up my alarm clock.

Together with You!

To keep in touch with the company in China was an indispensable part of our work in a foreign country. The time difference between Caracas and Beijing was exactly 12 hours. The overtime in the evening after a day’s regular work was normal routine of the day. Under such environment, to adjust and relax promptly was more than necessary to keep good working morale. Weekends were the time when everybody felt most relaxed. There were quite a few options to choose, such as watching movies, Karaoke, strolling along the streets, enjoying sumptuous meals, going to beaches or hot spring spas. It was all up to the mood of everybody. But most of time, people would feel excited to respond once there was a suggestion or a hint as what to do. Could not remember who had said something to the effect that “What matters is not what, but who.” No matter where we went, there would be joys and laughters as long as we were with our colleagues.

At twinkling of an eye, three months had passed by since we came to Venezuela. More than 1000 pictures were stored in the camera, very faithfully recording each and every smiling face and little bits of our life here. Do you need a reason to love a city? Perhaps, the answer would lie in our smiles.

Smiling Chinese visitors to Venezuela

Smiling Chinese visitors to Venezuela