‘Not open for business’
Venezuela is not exactly in the pink of health: the country’s economic indicators are pointing southward, the value of its currency has been hammered beyond recognition, and steps taken by the government, led by President Nicolás Maduro, only seem to have further fueled the anger of everyday citizens.
As seen in the previous article of this series, the country is swimming in crude oil reserves, but is unable to make use of them to help alleviate the abysmal state of public finances as it does not have enough resources to pump oil at any meaningful volume.
One would assume that in such a grim state, the country would be going out on a limb to attract alternative sources of economic activity, or at least make efforts to keep the ones that are already present in the country. The reality is quite different though.
The case of General Motors
General Motors (GM) was forced to exit the country after the Venezuelan government seized its plant in Carabobo in April. The company had to let go of 2,700 employees at its production facilities, and had its auto stock taken over.
Industry group Conindustria maintains that since 1999, when Hugo Chávez was the President, the government has confiscated the assets of over 1,400 companies. This has forced the exit of several of these businesses.
However, the case of GM was a bit different. The government says that the company’s assets were expropriated due to a lawsuit by a former dealer of the firm filed in 2000. On its part, GM holds that it has been wrongly accused by the dealer.
The company had to take a $100 million charge to write off its operations in the country, effective May 1.
GM had last produced a car in its plant in December 2015 according to the Venezuelan auto industry group Cavenez. This is because the plant did not have enough resources to pay for imports of parts required for assembling vehicles.
Not alone
GM is not the only company to have shut down operations in Venezuela. Exxon Mobil, Clorox, Owens-Illinois, and Kimberly-Clark are some other major names which have had to cease operations in the country.
However, there are some which are holding on to their businesses. Among automakers, Ford, Toyota, and Fiat Chrysler continue to be present in the country, while Colgate-Palmolive, Proctor and Gamble, and Chevron are also waiting it out, hoping for the situation to improve.
Given the socio-political state in the country, will the aforementioned companies blink?
In the next article, let’s look at how some of the latest developments in Venezuela stack up, and how it can impact the future of the country.
