Venezuela Declares War on Business

Venezuela Declares War on Business

Venezuelan President Nicolás Maduro is an apt pupil of his predecessor, the socialist firebrand Hugo Chávez. Like Chávez, Maduro distrusts business, and capitalist profits give him hives. But on Nov. 11, he took this wariness to a new level when he announced plans to directly set corporate earnings.

It’s been a rough few days for what remains of Venezuela’s private sector. This weekend, Maduro ordered Venezuela’s people, together with the army, to force electronics stores to sell their stock at bargain prices. "Let nothing remain on the shelves!" he said during a television broadcast asking people to go to these stores and force bargains on sellers. The army complied, promptly occupying the stores and changing prices at gunpoint.

What followed was a frenzy as masses of people lined up outside electronics stores on Nov. 9. Many left with handfuls of appliances they either purchased at low prices, or for nothing at all (some looting was reported). In one particular store, some items ended up being sold for a third of their listed price. The military and the police also took part in the bounty.

The use of cheap appliances to shore up political support is nothing new in Venezuela. Last year, Chávez handed out more than a million Chinese appliances to his supporters as a way of convincing them to vote for him. I witnessed one of these acts, in which unsuspecting citizens were gifted free washing machines, courtesy of Comandante Chávez. The ailing Chávez coasted to a 10-point victory at the polls in October.

But Maduro does not have the deep pockets that Chávez had a year ago. The new president faces a mayoral election a month from now, yet Venezuela’s reserves are low, and oil prices are dropping. The budget deficit is enormous, and with inflation running at more than 50 percent a year, the government is finding it hard to make ends meet.

Faced with this reality, Maduro has decided that if he can’t give away appliances, he will give away someone else’s.

Another factor may be at play. Maduro’s increased emphasis on chaos as a way to govern may signal he wants to precipitate a crisis in order to weed out disloyal people from the Armed Forces.

This is a tactic that comes straight out of Chávez’s playbook. In 2002, Chávez precipitated a political crisis by publicly firing thousands of managers at the state-owned oil company PDVSA. This prompted people in the Armed Forces to speak out, and he publicly fired them as well. The result was a coup attempt that he survived. In the months after, Chávez had identified who his enemies were, and he was left with a bureaucracy and an army entirely made up of loyalists. In one of the most bizarre moments in recent Venezuelan history, Chávez himself confessed to having engineered the crisis.

Maduro may be looking to do the same. Unlike Chávez, Maduro does not have deep roots within the Armed Forces. The transition from Chávez to Maduro has been surprisingly wrinkle-free, but there are indications that Maduro does not feel entirely comfortable in his standing with the men with the guns. Just last week, he announced he was installing anti-aircraft weapons in Caracas’ hillside slums, a not-so-veiled attempt to use civilians as a human shield in case the Air Force ever wishes to engage in a coup. He is constantly visiting military groups, and he has made sure the members of the military know that he is willing to give them perks the rest of society does not have access to.

This theory holds up when one analyzes the weekend’s events. Some members of the military are intimately linked to the import sectors. Perhaps Maduro is looking to meddle with military interests, ruffle some feathers, and see what effect that has. In fact, opposition leader Henrique Capriles has said that the weekend’s events are just part of a war amongst rival gangs inside the government.

Zimbabwe’s Robert Mugabe — an ally of Hugo Chávez — once famously declared war on inflation and on private businesses. In an eerie, prescient move, he ordered stores to lower their prices by force, and consumers obviously responded, leaving bare shelves in their wake. The story of Zimbabwe’s economic evolution is well known: Mugabe’s strategy brought about hyperinflation and chaos, and only when the economy was forced to get rid of its currency and adopt the dollar did it begin to stabilize. As terrifying as it seems for Venezuelans, Maduro seems to be taking a play or two out of the Mugabe handbook. His policies will surely cause more scarcity and instability. The difference is that, unlike Mugabe, Maduro does not represent a significant time in his country’s history, nor does he have the unwavering loyalty of the Armed Forces. The next few months will show whether Maduro has the mettle to survive the demons he has created through his policies.

"We need to increase the role of the State," Maduro stated in October, "to diminish the role the private sector plays in the economy, and accelerate the transition to socialism."

In other words, Maduro’s socialist vision for Venezuela means minimizing the private sector by running it out of business. Judging by recent acts, his plan is marching ahead at full speed.

Juan Nagel is the Venezuela blogger for Transitions, co-editor of Caracas Chronicles, and author of Blogging the Revolution. Read the rest of his posts here.