Multinationals flee Venezuela

Continued from FP1

The seizure last week of a General Motors plant in Valencia, about 150 km west of the capital Caracas, understandably drew protests from the company, but really, it wasn’t anything new. During his 1999-2013 regime, Chavez seized many private enterprises in the name of the public good, effectively nationalizing the energy, metal, utilities, telecommunications and agriculture sectors. Maduro is just following in his boot-tracks.

To be fair, losing Venezuela will hardly put a big dent in General Motors’ revenue. Last month, auto sales from all brands in the country totalled 293 units, including cars, trucks and buses. In Canada, which has only a few million more people than Venezuela, auto sales in March were more than 100 times larger — and that’s only for light vehicles, and only for GM.

Indeed, with its recent shutdown, GM is simply joining the swelling ranks of multinationals that have fled the country. The departed include Bridgestone, General Mills, Clorox and KimberleyClark. Ford idled its Venezuelan plant in December. Last year, Coca-Cola also halted operations, vaulting Venezuela into the exclusive company of North Korea and Cuba as one of the only places in the world where you can’t officially buy a Coke.

Multinationals are leaving not just because demand is so poor, but also because they can’t get the materials they need to make their goods. Ordinary Venezuelans face the same problem, only worse: they can’t find the stuff they need to live.

Food, whose distribution is controlled by the government, is expensive — the minimum income doesn’t cover its cost for a typical family — and in short supply. According to one survey, the average Venezuelan has lost more than 15 pounds over the past year. Even bread has become scarce. Bakers can’t find flour to bake with. The government alleges they are hoarding it to make expensive pastries for the rich. So it has begun to seize bakeries and arrest their owners.

On the streets, violence is rampant. Maduro is unpopular, and government forces have put down widespread protests with a strong arm, killing at least 20 over the past three weeks. Even before that, Venezuela was already among the most dangerous countries in the world. Caracas is the most dangerous city in the world, with a murder rate of 130 per 100,000 residents — about a hundred times greater than, say, Toronto’s.

So far, international pressure has been ineffective. At the Organization of American States, Canada, the U.S. and more than a dozen other countries approved a resolution decrying Maduro’s “violation of the constitutional order.” Venezuela dismissed the resolution as “a plan aimed at the disintegration of the great homeland.”

Is there a way out? The easy way for Maduro would be for oil to more fully recover. Crude is pretty much the country’s only export, and accounts for a quarter of its GDP. Understandably, Venezuela has been one of the loudest voices at OPEC in support of production limits (which, by some accounts, it has blithely exceeded). But it would take a big, and unlikely, increase in prices to dig Venezuela out of its current hole.

A recovery in energy prices would also serve to support a government that has largely dug that hole for its own people over decades. During the oil boom years, Chavez spent his way to popularity. It did some short-term good — poverty rates declined, for instance — but it wasn’t sustainable.

And now Venezuelans are paying the price. Foreign reserves are dwindling. The economy is undiversified. Private capital has fled. Corruption is rampant.

Even without an oil boost, Maduro may survive. He has allies, notably China and Russia. For other countries where that’s the case (Syria, North Korea, and so on), the recent track record of western concern does not bode well for change anytime soon.

So there’s no easy cleanup. But amid economic collapse, suppression of political opposition and violence on the streets, Venezuela might at least provide lessons for a world where populism and economic nationalism are on the rise. If nothing else, it might demonstrate the damage those forces can do over the long term — and just how hard it can be to reverse.