Fighting back
Lorenzo Mendoza, CEO of Venezuela’s largest private company (Polar), gave a searing press conference yesterday. In it, Mendoza thoroughly debunked the myth that people can’t find corn flour because Polar is hoarding it. Interestingly enough, in the process of defending his company, he also defended an obvious idea: Venezuela needs to embrace privatization.
The press conference came as we wait for the outcome of a sure-to-be-awkward meeting today between Mendoza, a scion of Venezuela’s dwindling upper class, and Nicolás Maduro. As such, it served as an opening salvo to what is expected to be a brutal confrontation between (what is left of ) economic power … and power itself.
The arguments Mendoza put forward were clever: Polar is working at full capacity, they can’t satisfy demand entirely, CADIVI owes Polar $140 million it needs to buy inputs, and they are actually producing more than last year.
Still, two things stuck out for me.
Mendoza blamed the government for shortages, saying that government-owned corn flour plants were not producing enough.
The solution? Privatize. He claimed that if he were allowed to buy – or even rent – one of the government’s plants, he could get it up and running in a year.
It has been a long while since a public figure came out and said what everyone knows: the State can’t handle companies that should belong to the private sector. Even Henrique Capriles has gone out of his way to reassure people that privatization wasn’t necessary.
The State shouldn’t be in charge of “producing” corn flour because it does a lousy job at it, as it does with pretty much everything else. It shouldn’t have car companies, or hotels, or steel mills, or banks, or electric companies, or phone companies, or pretty much anything else that is not named PDVSA.
Mendoza’s courage in dotting this particular “i” is to be commended. We shouldn’t be afraid to say what everybody already feels, but doesn’t quite know yet: State-owned companies simply don’t work in Venezuela. The moment for embedding this obvious notion into the minds of Venezuelan consumers couldn’t be better. The message is “you’re standing in line waiting to buy over-priced items because the government is in the way.”
The other aspect that Mendoza laid bare is the almost total lack of investment that explains the scarcity of basic staples. I believe it’s true – Polar is probably working at full capacity … because it hasn’t invested as much as it would have under normal circumstances.
Can you blame them?
Everybody in Venezuela is producing at full capacity, but that’s not enough.
This brings us to a likely scenario. So far, the government has decided to control almost everything the private sector does – it decides how many dollars you get, what price you can sell at, what you can pay your employees, which companies banks must lend to, and even how much electricity you are allowed to use.
What the government has so far failed to do is force people to invest.
Can a law forcing people to invest in production capacity be far off? I will even suggest a name for it, something like Ley del Poder Popular para la Inversión Productiva y la Máxima Felicidad Social para la Realización Plena del Hombre Nuevo. In it, companies will be forced to invest in expanding production, and if they don’t do it, they will be expropriated.
Sound too crazy? That’s what makes it likely.
In the end, the meta-story here is the change in attitudes. It strains the mind to think that Mendoza would have been this feisty in defending his company if he were dealing with Hugo Chávez at the peak of his popularity. The fact that he is willing to go to bat for his company – and his ideas – so vehemently is further proof that Maduro is a weak President, that he is no Chávez.
Caracas Chronicles 
I saw the press conference and find it amazing, he told he didn’t speak politics (but made quite a political argument).
When you speak the true it helps, most Venezuelan will believe that if you give this plants to Polar they will manage better and produce it better so cheers to Mr Lorenzo or is I read in a twitter.
There you go #IronPAN.
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Corn flour is different to Steelworks… Capriles has never said that most nationalised companies won’t go private; he’s only “kept” in those traditionally (mis)managed by the State. A more pro-private enterprise is clear in the Unidad’s program, on which’s left HCR stands.
But Lorenzo Mendoza’s is a welcome respite from that taboo, even though he did not say “let’s privatise PDVSA” or anything like that. That’ll be something.
Now, it is telling how LM has framed the whole socialist ethos: no, there is no class struggle. At Polar are a community, from the lowliest worker up to management. So exploitation, surplus value, and so forth, are humbug.
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“[D]urante largo tiempo en nuestra economía olvidaron una verdad elemental: debes vivir de acuerdo a los recursos que tienes. Sin embargo, esto esto es algo que ni siquiera lo entienden todo. La posibilidad de funcionar a cuenta del Estado, sin esforzarse demasiado, ha corrompido a nuestros administradores económicos. De lo contrario, ¿Cómo explicar la costumbre de las empresas de gastar mucho más de lo que ganan? Y ninguna de ellas se arruina, por extraño que parezca. Pero todos en conjunto nos volvemos más pobres.” Nikolái Garetovski, presidente del Banco Central de la URSS durante la Perestroika (1989).
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Forcing companies to invest is already happening in “strategic” sectors in Argentina, such as the utilities sector. The government approves a subsidy to Company but only disburses the funds once the Company submits an investment plan that is acceptable to the government. Otherwise, the “subsidy” does not get paid.
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OK, I agree with all you said but “pretty much anything else that is not named PDVSA.”
Primary and secondary education and a (not exclusive) health care should be in the hands of the State.
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I agree.
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Well, sure, goes without saying.
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Not sure it goes without saying…Public health care and public education pretty much suck in Venezuela. Their private counterparts are much better, again, in Venezuela. So, it’s not obvious to me that those two things cannot be mostly on private hands.
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Except that private education and health care are necessities, which gives providers the power to inflate prices and deny service to the all but the richest. I strongly disagree that they should be privatized.
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I meant “education” is a necessity, not “private education”.
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Well, everything is a necessity, right? Harina PAN is a necessity. #SlipperySlope
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Aaron, you may or may not disagree about privatizing education but your argument about providers inflating prices makes no sense at all. If there is enough competition among schools, there is no reason to think that prices are going to be high. The problem lies on whether or not there is “good” (not excessive) regulations that actually foster competition within the education sector. That by the way should reflect on quality as well.
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So, you want the poor children to pay for a private school?
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No, Kepler, I don’t. Please, don’t put words on my mouth. It’s well known that there’re a number of mechanisms to allow poor people to pay for their education ( as well as health care). One, for instance, is to let local/state governments set up public schools (kindergarden, primary and secundary, that’s it). Another mechanisms are vouchers and other types of subsidies. So, obviously, poor people can have a good education too.
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I haven’t seen a cheap private school in Latin America, because in their market, expensive is perceived as good.
Public education in Honduras is so bad it could be a crime against humanity. I see the point about the terrible jobs our governments make of it. But for many poor it is a choice between public education or NO education.
The same goes for health care. Our health care system is “Niágara en Bicicleta” horrible.
But the poor have to choose between public hospitals or death. Private hospitals are completely out of the question.
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Did you go to a public or a private school?
This often defines what your attitude is.
Public schools suck in basically all of Latin America. That is no reason to say they should suck or they can only suck.
Vouchers are not a solution.
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I actually went to both private and public. In any case, that’s not an argument against or in favor public/private education.
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The thing is that it is possible to have good public schools. They were not bad in the sixties, I am told. Some of them were still good in the seventies, early eighties.
Then things went down the drain. Most people in Western Europe go to public schools. Almost all the best scientists and engineers I know went to public schools in Europe.
It’s possible. In the US the situation is different but one thing you have to bear in mind is that the US basically became a state with a population that was mostly (90%) of European origin and highly educated for the time.
A lot of this education is based on the investment carried out by kings in Britain and Germany and the Netherlands
Anyway, sorry, we are departing from the main topic…POLAR.
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Of course it’s possible to have a good public education system. The thing is that in Venezuela something drastic has to be done. I believe that it’s also possible to have a good, affordable and socially fair (mostly) private education system. Of course, given the nature of education and the obvious externalities it has, the state has to be involved. It should regulate as well as provide to some extent education.
Btw, the main topic is privatization, not Polar.
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Public education didn’t suck in the 60s the same reason it didn’t suck in the US. The money was put into teaching and not into those endless programs that don’t even touch the students in many cases, and administrative staff pensions. The schools were not luxury resorts but hey, they were okay. I think the administrative staff is much bigger in the US than the teaching population. And they built these gigantic schools with all kinds of shit. THERE is the problem right there. No brain surgery. When you have a populist president, name Chavez or Obama offering this and that and the other, and hefting all that bubble of programs, then you have a big problem. Even the meal programs are so deficient and so expensive. In the tier one (poor) school I have taught, the breakfast is a little meal (good) a little box of rice chex (bad) and a cereal bar (bad too). How can you explain the millions of dollars put into meal programs and give the kids that crap. Not even a hard boiled egg and a banana. The only direct beneficiary is the cereal company. Good thing is the mexican moms are usually good moms and feed their children before, like any family should do. I feel sorry for the kids who had like drug addict parents and people like that you could tell they were hungry, their minds totally out. And also the other problem is the public teachers teaching their communist agenda to kids. It also makes a great GREAT case for privatizations too, at least primary school. When things get too big, too public, millions of unionized admin staff then everything turn to shit. The only way something work coming from the gov is when is small and ran by (percentage wise) a few people.
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typo: little meal meant little jar of milk…
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Manuel; post-secondary public education is much better than post-secondary private education in Venezuela.
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Oh, I’d like to see the basis for *that* claim.
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“Por favor, abstenerse egresados de derecho de la Santa María”
Probably that’s the reason why Cilia Flores became revolutionary.
Engineering: USB versus anything else?
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Juan; I guess it depends on the field, but my personal experience in Mathematics is that no university in Venezuela is better than the USB, UCV or ULA. I hear the same from friends and professors about other natural sciences. The publication impact indices is also much higher in these public universities. Many university rankings are based on these indices, and they always position Venezuelan public universities above the private ones. Is this a good basis for my claim? Do you have a source that suggests the opposite?
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Oh, I misunderstood you, I thought you meant *secondary* public education.
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Not sure about that either. I guess it depends on the field.
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El problema con la educación superior privada en Venezuela, es que cualquiera con el dinero en mano puede ingresar sin importar sus méritos o aptitudes. Además la universidades privadas al ser relativamente jóvenes, no tienen la tradición de exigencia extrema al estudiante como la mayoría de la universidades públicas, lo que las convierte en la opción menos difícil. No todas las universidades privadas carecen de un nivel académico respetable, pero si la mayoría. Y en comparación con cualquier universidad privada, una pública siempre será de mayor nivel académico sin importar el campo o la carrera.
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I am sorry but in the case of Public Health in Venezuela you have to take into account that is not the horrible thing everyone thinks. The system How you get into medicine makes you , either you want it or not to work in public hospitals
First since the 50’s The government worked with the companies, such as Polar to provide to Venezuela in this case Corn flour that has vitamins , etc. No other corn flour in Latin America has a corn flour like that. Another example because of Bocio, was to as part of public policy, that salt should be iodized.
Now let me explain the medicine part: In Venezuela, anyone that wanted to go into a specialization could only go through the postgrados universitarios in the teaching Hospitals (Public Hospitals from Ministerio de Sanidad o the Social security, by the way if you ever worked , yo paid for that). You had to compete , according a baremo to see if you could get in the department and specialization of your choice. Depending of the specialization you would rather go to the specialization in El LLanito or one in Perez carreño… very competitive, and unlike people used to think “palanca”to get in a postgrado was almost non-existent. The principal problem in the Hospitals was the mismanagement of resources for the POLITICAL chief ( Directores de Hospitales) finger-elected, A MD in Venezuela that did not work in a hospital , not only could not get the specialization, but cannot even publish and go to conferences, Public hospitals was the only way to get enough samples for their papers. Those Dr, thanks to the mismanagement went to private practice, but at least dedicated to go half time to the Public Hospital to TEACH. B the way, maybe you don’t know but in order to practice in Venezuela in a specialization in a Hospital (Public) or in a good private one, You have to belong to the BOARD of the specific specialization, and you have to be graduated or had the equivalent made by one of those postgrados in the PUBLIC SYSTEM ..When Chavez arrived with his policies….he just put hospitals worst than ever, and hey the only way a doctor could learn about a disease, is watching and treating a lot of patients! As my mother said when she was tired of going against current Ï want to help them but I can’t not practice medicine or making and endoscopy with the power of my mind” . The postgrados started not having even candidates , because thanks to the lack of investment , persecution by bolivarian circles, a resident cannot learnt anything , How come a resident in ophthalmology could only practice with TWO cataracts operation a YEAR ( because there was a point that even they could not say to the patients look if you bring the materials, I do the surgery?)
The Public health and the lie of MD do not wanting to see poor people it was just a lie. Ok lest say that they did not like it, well the only way they could graduate , and even advance in their careers or have fame as good doctors were treating and having success in the public hospitals.
Now try to go to a private Hospital? how do they look? as what you think a public Hospital look in 2000… why ? because now anyone go and pay a little insurance and go to any private clinic or hospital, because at least they would get treatment. Private hospitals in Venezuela are collapsed, because Barrio Adentro, or de CDI does not deal with the complicated cases…
And of course let’s not forget that the government or at least Chavez had a really war against private clinics.
In summary, shamefully because a lot of the middle class never went to a Hospital they believe that everything was horrible, well no, and a lot of the doctors that see people in the private clinics and practices worked years, if not trying to keep working in public hospitals.
Now we have to worry, there is maybe 7 years to 10 , of MD that thanks to not being able to get a decent specialization as before just went away to france, USA, Canada,
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Oh yes I almost forgot there is a private specialization of ICU in HCC
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PDVSA is on the top of my list. It is a failed experiment that has turned into a dark black hole that mingles production, marketing, and worse regulating into a political entity. Most countries levy heavy fines and put people in prison for what is commonplace in Venezuela.
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Maduro y compañía (es complicado llamarlos “gobierno”) están implementando a su manera el paquetazo que tanto han criticado. Devaluaron el bolívar dos veces, aumentan los precios y, por la fuerza de los hechos, están recortando el gasto público. Claro que ellos jamás hablarán de paquetazo. Preferirán los eufemismos, como el que usó ayer el vicepresidente Arreaza para anunciar el aumento de precio de algunos rubros: “También se decidió, dentro del gabinete económico, adecuar los precios del pollo, carne y leche en 20%”.
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“pretty much anything else that is not named PDVSA.”
Are you suggesting that a government run PDVSA would outperform a privately run set of competing oil companies? If you do, Quico needs to make 6 slides for you…
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Oh, extorres, you know how I feel, I just threw that out there because PDVSA cannot be privatized according to the Constitution, if I remember correctly. That, and so people wouldn’t say I’m a reactionary (which they will say anyway).
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I guess my confusion stems from the irony of such a cautionary comment being made under a post that commended “Mendoza’s courage in dotting this particular “i” “.
:)
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Well…. here is a conundrum. As much that I believe that private companies run for profits better, something was achieved in 90s in terms of PDVSA corporate culture. PDVSA was then a well manage company. Well manage even compared to Shell or Chevron. So well manage that many of its former employees have been most welcomed in their competitors. I don’t think you can say that of PDVSA today, but it certainly was true then.
The thing is that Quico’s slides don’t have anything to do with management. A healthy management has to do with rewards and incentives which are heavily distorted under chavismo.
I actually don’t have a good argument for or against here. Maybe playing a bit of devil’s advocate. But PDVSA had world class technicians and managers throughout the 90s. PDVSA directives understood the business and ran the company as it was a for profit company.
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Well put. Before Chavez took PDVSA over, it was a well-run company- much better run than the generic government owned oil entity. Can PDVSA ever shake off the ruination of a decade of Chavista control? That is another issue entirely.
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But it was run like a private company, that’s the answer to your conundrum right there, no? With the same goal as any private company, maximize their return to their shareholders, in this case, all Venezuelans. The management was autonomous of the executive, the people who ran the company were engineers who earned their spot by years of working in the fields. Nobody got into management “new” or mandated by the president. That’s why.
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I know. Buy who the shareholders were didn’t mattered right? What mattered is the company culture.
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but*
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I don’t understand what you said about the shareholders… but… I understand what you said about PDVSA’s company culture. You meet anybody from PDVSA and they are always so proud to have been part of it. And they are transmitting that now to the Alberta companies. Good for them and for Canada. They were not public employees or related to the president with no education or experience like the leech we have in turn right now… they had degrees and experience. That part doesn’t go against state own companies unless you have a brute as a President who put the tia, el hermano and el primo in the management.
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I agree. That line sounds like a justification for 4th republic business as usual. Where is the economic theory that a government should own and run the most lucrative part of the economy?
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There is no theory. But there are reasons why States should hold a stake or some influence over the most important sector. It happens in all over the world in both developing and developed nations. In the US it is kinda backwards in the sense that instead of government holding influence on the companies, the companies have an influence in the government.
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There is a reason *that I don’t agree on* the lobbies, they are constituted by citizens, therefore they have the same rights to influence their government. Of course they have much weight than a regular citizen, they operate like mafias in some instances and we all know they like to pay good ol’dollars here and there under the table.
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It’s in the Constitution, article 303.
http://www.tsj.gov.ve/legislacion/constitucion1999.htm
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BTW, the moment when we start arguing whether PDVSA should or should not be in State hands is, honestly, generations away. Not really an issue worth exploring when you have Corpoelec and Venirauto to deal with…
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Perhaps. But you could offer 49% to the general public while having the state keep 51%. With a ‘real’ international accounting firm auditing the books, a ‘new’ PDVSA could be quite attractive.
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Artículo 303. Por razones de soberanía económica, política y de estrategia nacional, el Estado conservará la totalidad de las acciones de Petróleos de Venezuela, S.A., o del ente creado para el manejo de la industria petrolera, exceptuando las de las filiales, asociaciones estratégicas, empresas y cualquier otra que se haya constituido o se constituya como consecuencia del desarrollo de negocios de Petróleos de Venezuela, S.A.
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Well, Hugo changed the so-called constitution on a whim, why couldn’t Capriles? Besides which the Venezuelan state STILL owns PDVSA.
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Mr Nagel: read the wording carefully , it actually allows for totally private oil companies to be set up in Venezuela because it refers to companies ( ’empresas’) ‘.. which are formed as a result of the developement of the businesses of Pdvsa ‘ which means that Pdvsa may promote the creation of private oil companies within the general framework of its business objectives even if it doesnt retain a shareholding interest in them .
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Sure, there’s some wiggle room in there. But not regarding PDVSA itself.
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They do something similar in Norway with their state oil company and other resource company. It works well, you the best of both options.
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I was thinking about Statoil as well while reading the debate above, along with the Norwegian Pension Fund. Not every country has to succumb to Dutch Disease. Just those willing and desirous of doing so.
Professional management and accountability to the government and people actually count for something there.
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As long as it is well managed and implemented… that’s my quibble in principle with Obamacare… not that is public but the way they are making it a whole hot mess… oh well…
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Re: >>> a scion of Venezuela’s dwindling “upper class”
upper class is so nineteenth century.
Venezuela’s powerful FUCK-THIS-CRAP class is
still well and thriving.
Bco Central is coming to its senses,
Prices on chicks meat and milk are rising,
The ‘government’ is turning its back on revolution,
Psuv getting more fascist by the day,
The Economy is up for grabs,
Opportunity calls, and the real CLASSy Venezolanos
are here to pick up the gauntlet. More power
to them.
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Caracas movers and shakers are Deng-Xiaoping-ing.
That so-called socialist market economy of China,
so hand-in-glove with the imperio, is coming our
way. As Zimmerman once said ” Your old road
is rapidly agin’, Please get out of the new one,
If you can’t lend a hand, for the times they are
a-changin’
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Lorenzo Mendoza had a great speech, glad he decided to talk publicly in response to this bodrio:
Great comment left “Con botellita de agua Minalba…. producida… por EMPRESAS POLAR… gafo.” that’s right lol
I am afraid that Mendoza was heard that all Venezuelans but understood only by a few. Even though he also came with slides (like Quico). The mental fog is great.
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Gosh… these Chavista people don’t get it, Polar or anybody for that matter, they can leave and close the door any moment and leave them with no beers and a heap of people without jobs. No, Nicolas, you don’t know what is to produce shit. Stomach ache after listening to this… uffff
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“rublos” lol OMG this is too funny after the stomach ache
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I’ll clarify, in reply to the PDVSA thread but keeping the generality more in tune with the non PDVSA crux of the post.
The key to determining whether government should or not provide a good or service is the measure of success used in making the determination. If long-term profits is how the business will be judged, then people whose incentive is to make money will, statistically, outperform people whose incentive is to win votes, or increase their influence over others, for example. So, regardless of how well a government ever ran or could run a profit making company, it goes against all logic to think that such a model is the rule rather than the exception.
Education, for example, would only be better privatized if the long term goal were making profits. People wanting to make money would sometimes cater to the rich by offering the best education at high prices, while sometimes good enough education for masses. For this reason, privatizing schools becomes a social issue, because we wish an equal opportunity contraint to kick in and not have a subset of the people limited to a substandard schooling. The immediate conclusion is to make the school system public. But… Are there ways to provide an equal opportunity within a 100% private school system? Yes, for example, by increasing everyone’s income to sufficient levels to afford school ( there are other examples). Do private schooling systems tend to outperform public school systems in measures of success other than profit? Yes, if they didn’t no one would pay for them. Do monies going into the public school system suffer inefficiencies because they are not in a competitive profit making context? Yes, so the conclusion that the schooling system should not be privatized is not so obvious.
In a nutshell, the measures of success used by people in government tend to be, for elected government officials, votes, for those not up for electoral contention, political clout. These are people that we as voters should not want running any business whose measure of success is not the same. Note how chavismo turned PDVSA into an electoral machine that coerces people into submission. That cannot come as a surprise to anyone upon learning that it had been taken over by government. It was to happen sooner or later. Think ring of power…
We as voters should want government to stick to making sure businesses behave, that’s what it’s good at, but not to become a business, itself; others are better at that than government, or should be, at least.
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I think the main issue is that companies such as EADS, Petrobras, EmbraAir, large utilities and some other state own or with mixed ownership companies is that they are mutipurpose. Their only purpose is not to maximize profits, but in some cases, like you said, there are issues like national security, employment creation and economical stability long term.
And in such cases it is a little harder to argue for one case or the other, but granted that in a healthy debate of what the ultimate goal of PDVSA’s role in Venezuela is has not happened in a while. Or many other companies for that matter. Is PDVSA’s ultimate purpose to be cash cow? Is it a company that can create wealth beyond drilling natural resources? All good questions. But the debate should first establish, as you suggest an agreement of what the company should be doing and then determine what is the best formula to obtain those goals.
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Rodrigo Linares, it can be a real simple debate if we turn the question into a single one: What is the measure of success of the government? An easy answer is long term sustainable taxation as its single source of income. This measure of success gets both the government and the market working towards a common goal: maximizing market profit, which will indirectly maximize government income. Add to that the constraint that the government has to protect individuals and it becomes a nation on the high efficiency track because not only are the individuals protected, businesses too, and government maximizes its taxation, which feeds right back into the loop. Clearly, the higher the educational and health level of the individuals, the greater the chance that the market will produce greater profit, so even social issues become a common goal for government as well as business. The key, once you take the debate to its end, is the money cycle: every individual must make a minimum amount of income, the market must work within a context of freedom and competition, and the government must get its revenue from the success of the market, so it will invest it right back into developing the individuals and the free, competitive context in which they’ll work so that it gets even more investment money.
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It is a good metric. But perhaps such a metric would do great things for the short term, but not so much for the long term.
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Why wouldn’t it be great for long term, too?
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Because to improve your metric today you may over tax increasing your revenue today but ruining tomorrow’s
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But I did specify “*long term* sustainable taxation as its single source of income”.
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extorres,
Sounds good in theory, but the key is “the government must get its revenue from the success of the market.” Profitable corporations don’t like paying taxes. It cuts into profits and reduces shareholder dividends. Note the loopholes for corporate taxes and the ballyhoo that’s raised whenever there’s a mention to raise taxes or even close loopholes for the wealthy or corporations. They’ll just move offshore to a third world country where they don’t have to pay taxes and can get cheap labor. At least this seems to be the case for big business in US and I imagine it applies to anywhere.
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Typical american extrapolation of market and corporate behavior to the rest of the world. Sorry, but no, the rest of the world is way more diverse.
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The Gringo, your argument is not a counter as much as it is simply a factor that the government would have to consider in deciding the taxation level so that it behooves companies to stay within the market and not go offshore. As to loopholes, there is a way to make the taxation unevasible, but before we go there, let’s first agree that, assuming no loopholes, it would work.
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The answer is making it more costly to not pay taxes than to pay them.
Sounds frivolous at first, but when referring to the byzantine and ridiculously high American corporate tax laws and rates, compared to other market economies, of course they desire to keep funds offshore.
You can argue that corporations pay nothing like the 35% ctr, but when you add in legal and accounting fees, local and state taxes, payroll for the army of staff accountants, etc. The costs are pretty high. America’s problem, which is not the same in many other places, is that rather than having good little tax paying companies, the government has created a tax regime that encourages OCAs.
Simplify and reduce and I suspect that the cost of compliance versus holding the funds forever abroad (cf. Apple) would resort in increased remittances.
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Don’t forget that it also gives the government an incentive to reduce inefficient regulation and bureaucracy, both from an optimization and cost perspective. Which is something of the opposite of what we have seen in Venezuela in recent years.
Regulation should be limited to protecting individual and organizations from overly obtrusive and/or abusive practices. Fencing off as it were. Things such as externalization of costs (environmental, social) and generally accepted human rights. Beyond that and you begin to cripple the market.
When you overly burden the market place, you incentivize individuals and businesses to seek “alternative” paths to profit and tax-avoidance.
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“Education, for example, would only be better privatized if the long term goal were making profits.”… not necessarily Torres, the Catholics are great educators and they are not in the business for the money…
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feathers, is it really my bad not to include Catholic schools in the bucket of “privatized”?
I agree that Catholic schools have a different measure of success than making profits, though that can be argued, but you must agree that they are not to what most people refer when we speak of the generalization of public versus private schools.
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I watched a short video andI liked a lot what I saw.
Now, unless he said something else, I did not see anything about privatization of service companies, Juan. He was just saying that they know how to do their job quite well and that given the tools, Polar will be able to insure that the supply of Harina Pan for the whole country is there.
I did not see anything about electric companies being private, or telephone companies or any other service company.
I think you are using Mendoza’s speech to promote your Thatcherian ideology that everything has to be privatized….
Mine is “ni calvo ni con dos pelucas”. The government has no business in food production, but some public services can be run efficiently by the state (Hydro-Quebec, for instance) and others should always be run by the state (education and health).
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Did you guys see how Mendoza’s speech was edited on Tele Sur??? Outrageous!!!
Where do they get these journalists? Are they working at gunpoint? They do such a miserable job. They’re a disgrace to the profession of journalism.
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No, I did not see. Do you have a link?
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it was on their website…
It basically shows only fragments where Lorenzo says “yes we will increase our production”, where he seems submissive to Maduro’s request, when in reality he’s telling Maduro “it’s seems you’re not very well informed, allow me to educate you…”
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Drawing absolute lines between private/public ownership of infrastructure, utilities and mining/exploitation companies is a very bad habit and a mistake we often make. There is no such thing as a perfect company in any of those two scenarios. There are bad companies in both sides, but good ones too.
Actually, the ownership is the least important thing with regards to performance or profits. It’s the operational model that contributes the most, along with the business model, and corporate culture. So, private or public ownership is more of a strategic decision to make than a financial question.
In the Venezuelan context, public ownership is a must, given the weak local economy, the weakened private sector investment capabilities, product of over 10 years of government self-sabotage, and the global investment market conditions. But in saying that, government ownership in this case should be STRONGLY orientated by 3 key principles:
1) Ownership should only be a partial majority, not 100% ownership. Keep the control, but do not exclude private investment, especially in juicy industries. This will help grow the local private sector and enable foreign investment flow into the country, and help redress public finances. The Chinese will hate this, as they always shoot for a 100% ownership, but that’s where good negotiations should kick in.
2) Government should not put a blanket in the share of the ownership. They should seek proportional percentages, relative to the strategic function of the industry and the market value of the business. Build an ownership model, discuss it publicly, and agree with the widest possible political floor, so it’s sustainable over time. This is not a party’s model, it’s the public good that is being discussed, so it should be beyond party differences.
3) The business model and its operation should be completely decoupled from public interference. No more populist clientele, job, contract, project or product. Put an end to using ownership in companies as payoff for political favours. This has been in place for over 100 years. Time for a real change.
To guarantee fairness, justice and social responsibility during the transition to real and solid public institutions that frame such businesses (judiciary, regulatory, financial, etc.), special transitional provisions should be made to prevent unjust treatment of standing working relationships (jobs, contracts, services, etc.). Otherwise, another Chavez will come, and it will be the same song all over again.
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Igor: Interesting comments although the most important is the third comment , the other two being basically ways of making good on whats proposed in the third one. Split ownership is always difficult where control is shared because the goal of the stockholders dont always match , for example in the old days Shell used to have a company in the US with a 30% shareholding trading in the stockmarket . The minority shareholders where always looking for short term profits , something which would inmmediately translate into an increase in the value of their stock , the mayority was interested in long term goals , in strategic positioning which would strenghten the company to utimalety achieve more . Also it made it difficult for synergies between Shell Europe and Shell USA to be realized because regulators saw them with suspicion . Ultimately Shell Europe bought out the US stockholders and unified the company with its European branch . Also control can be used (like it is used by Pdvsa now) to operationally and commercially marginalize its minority shareholders to oblivion , to become ‘back seat’ passive investors in a business they dont control which prevents the minority shareholders to act as a counterweight to the State stockholders propensity for using the company to its own politized ends. The key topic left unmentioned is the need to build and develop strong cómpetent organizations via a meritocratic career model capable of maximizing or optimizing the advantages and gains of the business which the government owns or half owns and for that you need to isolate the internal life of the organization from political or populist interference , which goes back to your point number 3 . the problems is that building that kind of organization is not easy and takes years and years of wise leadership and effort and thats what we in Venezuela are short of . This last is the true challenge in a culture where amigismo and political connections now and traditionally count for so much.
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Not bad Bill, but to me the oil industry is an outlier in terms of potential behaviour of mixed ownership. Although, I can quickly think of a good long term partnership where Shell has joined competitors (BP) and local investors in a mixed joint venture that’s been going strong since 1955. It’s not easy, but can be done, and in a profitable way.
When it comes to mixed ownership these days, especially in infrastructure, we are talking mostly investment funds, Chinese capitalist, and a few other private companies floating around. Not all of them, maybe the majority, work outside of the typical short term stock market speculation. They prefer unlisted, low profile, hands off approaches that guarantee stable, asset backed, long term revenues. Again, maybe the American economic model is not the best to refer to in the Venezuelan case.
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iaap…, Long ago I had access to a study of mixed corporate ventures and was surprised at the high level of failures , looked almost like an statistic on failed marriages. Still there were many succesful matches . Specially were the phocus of the venture was narrow and specific. But my point is different , What I find most relevant is the technocratic strenght and competence of the organization that runs the business or activity , the solidity of its corporate culture . its operational or functional capacity which is where most Venezuelan corporation fail miserably including practically all government organizations but also quite a few private venezuelans organizations . Some of them are nothing but cheap profiteers with good political or business connections. It is this lack of competent technocratic organizations in Venezuela that really poses a huge problem for any attempt at becoming a developed country .Private ownership in Venezuela is not in and of itself a panacea , there have always been many rotten , badly run private business in Venezuela who survive mainly because of govt protection or subsidies , and surprisingly some very well run govt owned organizations (e.g the Old Pdvsa, the Old Edelca),
Although govt organization are made imcompetent by the politization of its organization and activities , lots of private business also take advantage of political connections to thrive despite being run by a corrupt and or incompetent organizations or group of owners .
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“It has been a long while since a public figure came out and said what everyone knows: the State can’t handle companies that should belong to the private sector.”
Not true.
María Corina Machado ran on this platform less than two years ago, and was ridiculed by many.
To quote from her stump speech:
“La única manera de erradicar la escasez es con producción y para que haya deben haber inversiones. No creo en un Estado haciendo areperas, alpargatas, celulares, quebrando empresas de cemento o centrales azucareras. Creo en un Estado que se dedica a darnos seguridad jurídica y personal”
http://www.eluniversal.com/nacional-y-politica/111030/el-capitalismo-popular-le-dara-a-la-gente-el-poder
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So far as political ideology, MCM is my kind of girl. But, we need to defeat Chavismo first, and HCR is the leader of the Opposition. Maria Corina Machado has long career ahead of her, and may one day be president, but first things first.
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Talking about expropriations… :o
http://www.lapatilla.com/site/2013/05/14/miss-chavista-quiere-expropiarle-el-negocio-a-osmel/
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I am imagining a Miss Venezuela that looks like Iris Varela…
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