CARACAS, Saturday November 17, 2012 | Update

Management of state-owned companies is filled with inefficiency

Chávez promises "iron fist" and inspections as a response to the lack of results

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Saturday November 17, 2012  12:00 AM

In the midst of the transition into the second socialist plan and after fourteen years in office, the President of the Republic promises to implement tougher measures against inefficiency in the state-owned companies.

The reason: the failure of a big share of projects initiated by the National Executive in the last years.

Last Monday, Venezuela's President admitted that the ice cream industry Copelia, inaugurated two weeks ago, was not on track.

"I remember having monitored the industry, and then we ate some ice cream, even Fidel (Castro) texted me!" a Hugo Chávez filled with doubt- expressed.

Lack of raw material and a broken machine thwarted in a few days the new-born plan. "And if we are going to inaugurate an industry, how come that nobody took raw material into consideration? Then you are inaugurating it as if it was only to operate for just one day."

In his speech, Chávez admitted that "this is not the first time this happens" and cited the case with a milk producing plant, an expropriated ranch in the region of the Venezuelan plains and a corn producing plant based in Cojedes state. "From now on, Nicolás (Maduro, the Executive Vice-President), must we use iron fist! We need to assign responsibilities."

But the roll of failed plans goes beyond the ones listed by President Chávez. A review of  the results of some state-owned companies confirms the disaster repeats itself.

According to José Antonio García, executive director of Unión Regional Trabajadores Sucre (Regional Union of Sucre Workers), La Gaviota company, based in Sucre state, barely produces between 80 and 100 sardine cans per day three years later after the Bolivarian Government took office for the 2006-2012 term.

The company is able to process up to 60 tons of sardine per day and four tons of clams, but García highlighted that prices have not been updated and that they count on no containers, raw material and investment in technology. At some point, both Venezuela's President and former Minister of Finance, Eduardo Samán, cited the case of La Gaviota company as an example to follow.

"La Gaviota company has been reborn and is now producing high quality sardines. The company was closed and the company's owners had abandoned it; it has now been recovered by the workers," expressed Chávez in May 2009.

The case of the basic industries from Guayana is perhaps one of the most emblematic ones. Orinoco Steel and Iron Industry (Sidor) was nationalized back in 2008. Nowadays, the company's losses amount to USD 580 million, whereas its debt is around USD 900 million, according to the numbers issued by Pedro Acuña Grahan, senior director of the plant, in representation of Class "B" stockholders.

In regards to production, it is estimated that 2012 will close with a production rate of 1.8 million tons of liquid steel, just 41% of an installed capacity that reaches 4.3 million tons.

"We need to conduct an audit regarding the situation going on at the company; we also need to hold the pertinent people responsible for the patrimonial damage," Acuña demanded.

The story repeats itself

During much expropriation activity, the National Executive Office also decided in 2008 to seize the cement industries Lafarge (now named as Fábrica Nacional de Cementos), Holcim (now Industria Venezolana de Cementos) and Cemex, called nowadays Cementos Venezuela.

Out of the three aforementioned companies, Fábrica Nacional de Cemento is the one which has gone through most challenges. Its production until 2011 was constricted by mechanical failures of smelting furnaces and extraction machineries, as well as the lack of raw material.

According to representatives and workers from the building sector, the company is still facing challenges. Sources from the building sector indicate that the cement is mostly supplied by Cementos Venezuela and Invecem. Recently, Minister of Industries Ricardo Menéndez pointed out that the production rate was around eight million tons, which constitutes a similar rate existing back in 2007, a year before the nationalization.

Venirauto's failure is also well-known in the automotive industry. "We were considering what to do in order to keep the company operating, but last year, the production rate went down because of lack of components," Chávez acknowledged back in February of the current year.

The Automotive Assembly Plant, in which the Venezuelan Government possesses 64.08% of the shares, has been operating since 2006. It is able to assemble 16,000 cars per year, but it has never gone beyond the 4,000 units per year.

The Comptroller's Committee of the National Assembly (AN) formally questioned this year the board of directors of the automotive assembly plant; nevertheless, the investigation into its functioning has been stopped by deputies from ruling United Socialist Party of Venezuela (Psuv).

"We have faced some issues due to the blockade on Iran; now that we have an Iran-Venezuelan industry, it is quite difficult for us to bring car spare parts, the (auto) parts, and even to pay the corresponding share in US dollars to the parent company," President Chávez explained in February.

Excessive supply of resources

Additionally, in February of the current year, President Chávez had to provide Agropatria company, formerly Agroisleña, with USD 300 million so that the company could keep working. A little bit more than a year has elapsed after the expropriation of the main distributor of fertilizers and materials for producers.

"We need to tackle the issues existing at Agropatria, we need to enhance it and make it grow throughout the country and also give priority to the agricultural areas," Chávez asserted.

The food sector has been among the ones most subject by the government control. According to the estimates of the Venezuelan Chamber of the Food Industry (Cavidea), the Government leads 42% of the market regarding precooked cornmeal; 75% of coffee; 40% of rice; 25% of oil; 52% of sugar and 25% of milk.

Companies like Lácteos Los Andes and Industrias Diana present positive numbers according to the Ministry of Food; however, it tends to happen that the production maintains on track due to the huge amounts of raw materials imported by the government.

Coffee production in Venezuela is also in the same path. Operations from the expropriated coffee maker industries Fama de América and Café Madrid maintain on track due to imports, as the ground coffee production has decreased since 2009.

The Venezuelan Government runs 11 out of the 17 sugar mills that exist in the country. It only built the Ezequiel Zamora sugar mill; it obtained the other 10 through expropriation. Those sugar refineries only process 19% of the sugar cane produced in the country and just 12% of the refined sugar. The rest of production is shouldered by the private sugar mills.

As a response to such situation, Chávez has proposed to accompany the "iron fist" measure with unexpected visits to state-owned companies. "Inspection, be prepared because there will be a huge number of inspections. So do not be surprised."

Translated by Adrián Valera Villani
The end of a cycle

Hundreds of thousands of demonstrators took to the streets of Brazil on March 13 to demand the ouster of embattled President Dilma Rousseff, carrying banners expressing anger at bribery scandals and economic woes. A banner read "We don't want a new Venezuela in Brazil."

fotter Estampas
fotter Estampas