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Crisis and high costs to run a business result in street venders

Venezuelans tend to get by, yet the choices in informal economy are scanty and just for survival

Over 5,530,486 Venezuelans carry out informal economic activities, based on a survey conducted in 2015 by the Venezuelan National Statistics Institute (INE)

Gustavo Bandres

16 de septiembre de 2016 23:59 PM

Actualizado el 19 de septiembre de 2016 10:57 AM

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Crisis and high costs to run a business result in street venders

Oneal Mata, 23, has been a street vendor since he was 15. He used to sell sweets; now, he has supplied vegetables for eight months in Fuerzas Armadas Avenue, downtown Caracas. Mata elaborates on his daily routine from 6 a.m. to 9 p.m.: “Here everything is marketable; I lower prices because sales are hard. Sometimes I sell six little packages of red pepper at discount prices.” Like him, in the city main avenues, the world of informal economy features new faces. Housewives, people with disabilities, public servants, lawyers. All of them make room on the sidewalks to cope with the crisis.

Víctor Maldonado, executive director of the Caracas Chamber of Commerce, Industry and Service, estimates the informal sector of economy over 50%, a percentage characteristic of poor-performing economies, where no enterprises are opening; the existing ones are winding off and there are no high-quality jobs. “Venezuelans tend to get by and the businesses that emerge in informal economy are scanty and for survival.”

Maldonado recalled that Venezuela is the country with the lowest per capita density of enterprises in Latin America, due to an anti-enterprise economic policy and disregard of property rights.

Additionally, he pointed to the inconvenience of a huge State, as 33% of the economically active population with formal jobs (2,700,000) work in the public sector.

“Half population is jobless; hence, scalping, which is the response to a collapsed labor market. Inside the informal sector of the economy, some 800,000 work as maids or carry out any activity per day.”

“These people are subject to a meager salary with no insurance or benefits. Nobody backs them; in case of getting sick, they cannot go out to work, so they stop receiving a wage because they are unprotected.”

Alfredo Padilla, director general of the Association of Entrepreneurs and Micro-Businesspersons, explains that high costs to keep on running even small businesses and the troubles to pay employees encourage growing informality. “Not long ago, the owner of a printing house in Catia (western Caracas) fired six out of his eight employees because he could not sustain the payroll. For small businesses, lots of costs facilitate the transit from formal to informal economy: excessive collection of services, municipal taxes, oversight by the regulatory authority Sundde, and sometimes bribery. Moreover, the crisis makes many people to devise a business and get by, sometimes by selling deteriorated or poor-quality products that lack control.”

Padilla thinks that people try to engage in something in order not to succumb to crime. “As production of services and goods drops, people have to enter the informal economy, even those who had never tried it before,” added Mabel Mundó, a sociologist and researcher of the Development Studies Center (Cendes).

Translated by Conchita Delgado Rivas

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