1970s China Revisited? Venezuela's "Special Economic Zones" Are A Desperate Scam
Venezuela is to create free economic zones to attract foreign capital into the Venezuelan economy, but who would take "clean" money to a lawless land run by rapacious revolutionaries?
With full pomp and surrounded by flatterers and opportunists purporting to be Venezuela's new breed of businessmen, President Nicolás Maduro recently announced the promulgation of a law to create Special Economic Zones (SEZs). The concept is from communist China, which began implementing it in 1970 as part of the economic modernization plans associated with its late leader, Deng Xiaoping — a response to the hardships and shortages suffered earlier under Chairman Mao.
SEZs differed from the rest of China's territory for enjoying more liberal norms and fewer restrictions on production or the arrival of direct foreign investment.
That is what Maduro's regime claims it wants to do: attract foreign capital. He expects to succeed even after wasting over a trillion U.S. dollars' worth of oil revenues, shrinking the economy 90% and confiscating thousands of businesses. They declare that Venezuela needs investments, as if this were a revelation and shortages were a new problem, somehow unrelated to 20 years of misrule by himself and his ally and predecessor Hugo Chavez.
With this law, Maduro wishes to give the general impression that Venezuela is "back in the saddle," with yet another step toward the hoped-for recovery. It rather looks like another crass bid to deceive opinion. Maduro talks as if Venezuela were fit to receive foreign capital, its public services were working and the country had regained its place in the concert of nations.
Rule of law matters to business
For so many reasons, these business zones will inevitably fail. An evident first reason is the state of the country's institutions. Venezuela is under a dictatorial regime that has buried the rule of law and thwarted democracy.
Presently one can only dream of businessmen planting their money there. There are no juridical or political guarantees that are the bedrock of investor confidence. Anyone may be taken to task by some sly police officer or see their assets frozen — or stolen — by a government official with an axe to grind.
How will they operate in a country with constant power outages and water rationing?
The second reason is economic. Venezuela still has the world's highest inflation rate, which stood at 170% in June. People are paid meager wages, production is down 90%, and the regime has left our principal engine of growth — the oil industry — in a state of near-collapse.
And there are of course, structural reasons. Supposing those businessmen decided to ignore such reasons and invest anyway: how will they run their operations in a country with constant power outages and water rationing? How will they function in a country that is disjointed due to fuel shortages and deteriorating roads and power lines? Beyond issues of institutions and legal guarantees, there is a basic problem of mechanics.
A view of the ''Jose Antonio Anzoategui'' industrial park for crude oil and petrochemicals in Venezuela
Kleptocrats like Russian oligarchs
You needn't be an analyst or soothsayer to foresee that the SEZs will neither benefit Venezuela nor break the stagflationary cycles that have been its lot for some years. Their utility is likely to be in allowing Maduro and a shady coterie to launder vast amounts of money earned from illicit activities, trafficking or embezzlement of public funds, and serving the propaganda claim that Venezuela is "open for business."
Like their friends the Russian oligarchs, Venezuela's own kleptocrats have been flaunting their ill-gotten gains through flashy building projects in eastern Caracas or indecent ostentation. Struggling Venezuelans can only observe the facilities available to the regime's friends, which is a small number of people indeed.
For they are the only ones cheering the new law, which would turn Venezuela into a haven for dirty practices, and filthy money.
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