Polar workers check the boxes of cornmeal at the Turmero plant FEDERICO PARRA (AFP)
The American cosmetics company Avon operated in Venezuela for seventy years. The company, which operates in 75 countries, announced the sale of its assets in June. Then there was the legendary restaurant chain TGI Fridays, which arrived in Caracas in the late 1990s. There are multinationals that have not been able to resist the economic chaos, the official siege, the uncertainty, and for whom the economic opening advocated by Nicolás Maduro comes too late. However, a different formula of cooperation between multinationals and local capital is gaining ground in the country, prompting foreign groups to temporarily cede their brand and leave open the possibility of medium-term return under a so-called buyback agreement.
Venezuela’s economic crisis, hyperinflation, and the practices of Bolivarian socialism, including Hugo Chávez’s expropriations, resulted in wealth flight and alienated foreign investment. In recent years, large corporations such as General Mills, Bridgestone, Kellogg, Clorox, Goodyear, Kimberly/Clark, Ford, Colgate Palmolive, Zara, General Motors, Louis Vuitton, Wendy’s, Intercontinental, Cargill, Citigroup, Pirelli and various international airlines. However, other multinationals continue to operate in the country, including Nestlé, Parmalat, DHL, Samsung, IBM, Heinz, McDonald’s, Mapfre, BBVA, KFC, Johnson & Johnson, Meliá, Diageo, Kraft, Toyota, Chevron, Coca-Cola, Hyundai , Marriott, Repsol and Procter and Gamble.
The exit of multinationals in a year in which economic growth of up to 10% is forecast, after eight years of a sharp fall in GDP, speaks to the decline of the Venezuelan market and the loss of consumption. But it also suggests that in the new economy, where restaurants, bodegones (gourmet shops) and casinos are thriving, the rules are still unclear. The costs of formalities can be very high for some businesses, not only in terms of taxes but also in operations dependent on irregular services and fuel, in addition to repeated complaints from Venezuela’s industrial and commercial sectors.
The closure of some foreign companies in Venezuela began in 2014 and began to accelerate in 2016. The exhaustion from the political situation in the country, the difficulties of the legal and economic framework of Chavismo, the deterioration of the purchasing power of the population and the shrinking of the local market.
Some multinationals such as Nestlé and Marriot have excellent relations with the Maduro government. In the antipodes, there are stories like that of Kellogg, who abruptly left the country four years ago. Its factories were occupied by the government, which continued to produce versions of its brands for which it faced international demand. However, in numerous cases, many companies, instead of abandoning it permanently, give up the brand and the available production environment to national entrepreneurs, who continue to operate under the brand’s name at an agreeable price and on terms that allow the parent company to return the company, if better conditions arise in the future. The instrument for regulating these agreements is the so-called repurchase agreement.
In the midst of Maduro’s turnaround, these changes have sometimes favored Chavismo-affiliated businessmen with negotiations who have been criticized for a lack of transparency. “There are new national capitals adapted to these circumstances, to cope with Chavismo, which is permeated by a smaller market,” says economist Luis Vicente León, managing partner at polling firm Datanalisis. “Business people who want to keep their money in the country for many reasons. Connected, some but not all necessarily. They know the country, they have contacts, they can solve permit and bureaucracy issues.”
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The sanctions and sudden account suspensions of Venezuelans due to strict compliance with banking surveillance have fueled the exodus, as have foreign exchange barriers, which prompted some companies – notably many pharmaceutical companies – to leave due to their inability to replenish dividends.
Economic change is taking place in Venezuela without the political actors having changed. “A new generation of national capitals is emerging, occupying empty spaces of production, this is Venezuela today. This incipient recovery process collides with the credibility of the government team,” says economist at Think Anova Omar Zambrano.
Since 2019, Maduro, with his Ecuadorian advisors led by Patricio Rivera, Rafael Correa’s former finance minister, has opened up to the private sector and the dollar and lifted price controls, achieving a slight recovery in the economy from the brink found and will be Emerging from four years of hyperinflation in late 2021. Recent Chavismo reforms include the sale of stakes in state-owned companies such as the Cantv telephone company and the Bank of Venezuela, which Chávez then nationalized in the hands of Grupo Santander.
For businessman Jorge Roig, the departure of a number of multinationals is not a trend. “I know many multinational companies that are determined to continue in Venezuela. At this point, the Maduro government plans to return some expropriated industrial sites. The return of farms and ranches has happened, not at the pace expected, but it’s definitely happening.” New opportunities for businessmen who have already started crossing the border also arise with the establishment of commercial relations with Colombia, after the change of government in Bogotá, with the arrival of Gustavo Petro.
Maduro is trying to attract new capital to a country where, by various measures, more than 90% of the population lives in poverty. Financial analyst Alejandro Gristanti points out that although fatigue in the face of ongoing instability in the country may have prompted the exit of some international companies, “there are private groups close to the government that are interested in keeping these companies afloat ‘, and at the same time , clarifies: ‘In any case, Venezuela will need many years of strong economic growth to get back to what it was and to be in the interests of multinational corporations.’
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