The commercial havens of Venezuela: what do the experts think of the new law?

A new law that designates five special economic zones in Venezuela is an opaque regulation, favors patronage and will hardly be successful in attracting investors, as the government of Nicolás Maduro aspires, experts warn.

Last week, Maduro promulgated the legal text that establishes “special conditions” in the industrial zones of Paraguaná, in the state of Falcón; from the ports of La Guaira and Puerto Cabello/Morón, in the center of the country; and tourist, in the eastern Isla de Margarita, Nueva Esparta, and La Tortuga Island, in the north.

The law provides for a “special socioeconomic regime” for private, public and mixed investment developments, as well as “tax and customs incentives.” The National Assembly elected in 2020, with a Chavista majority, approved the regulation at the end of June and Maduro approved it publicly highlighting that its content follows the example of “experiences” of Asian nations, such as China and Vietnam.

“We already know well the experiences of China for 40 years,” said the head of state last Wednesday during a ceremony broadcast by official audiovisual media.

Manuel Sutherland, an economist with studies in industrial engineering and a member of the Venezuelan Workers’ Center for Research and Training, points out that there are nearly 5,500 Special Economic Zones in 138 nations, of which at least half have failed in their objectives. That level of failure increases in countries with weak institutions, such as Venezuela, he indicates.

One aspect of the recently sanctioned law that worries him is the “opacity” regarding the allocation of projects in these commercial paradises.

In his opinion, the regulations pave the way for an “elite” exploitation of businessmen close to the spheres of Chavista power.

The “little transparency” of the development of these special economic zones will make it difficult to audit and monitor labor goals.

“The vice presidency is going to take care of it. It is going to be a supra-state area, with a regime that is going to move parallel to mayors’ and governors’ offices. It seems like a space where it will be impossible to verify the progress or progress of those businesses,” says Sutherland.

The economic sanctions applied against the Maduro government by countries like the United States also make it difficult for these areas to succeed, he considers. “It will be a weak economic zone if it doesn’t have strong international connections,” he says.

The precariousness of public services in Venezuela, but particularly in those five special economic zones called by Chavismo, is another factor that worries experts like Sutherland. “These areas require a lot of electricity, drinking water, gas, road infrastructure. It is not given, ”he points out.

Also, he fears that there are new companies or some old ones that want to move their headquarters to those regions with special economic regimes to “divert taxes”.

“There is an incentive to launder or divert funds, very strong illicit activities. It happens in countries with strong institutions and imagine what will happen in countries with weak institutions”, the expert told the Voice of America.

Lots of discretion

Leonardo Vera, an economist and professor at the Central University of Venezuela, warns that these potential commercial paradises that Chavismo glimpses point to becoming “new enclaves” of bingo halls, casinos and tourist projects in natural parks, such as La Tortuga Island, which is difficult to access. access.

He criticizes that the regional governments, most of which are managed by Chavismo officials, “were left out” of the administration of these economic zones.

Also, it warns that the law does not contemplate “any environmental care” and reproaches that the special economic zones are managed “discretionally by special agencies in charge of the circle of Nicolás Maduro.”

Vera considers that the economic and social context of Venezuela is far from that of countries where special economic zones “have run with some success.”

Remember that the country does not have stable energy, nor frequent sources of fuel or transportation, with “abandoned” universities and where corruption and centralism prevail as a form of administration.

In an opinion piece shared with the voice of americathe professor anticipates episodes of influence peddling by businessmen before the political power of the Miraflores Palace to achieve better tax incentives.

José Guerra, economist, deputy elected in 2015 and member of the Venezuelan Observatory of Finance, of opposition tendency, criticizes that a government that promoted expropriations and confiscations of companies is now, in his opinion, “desperate” to attract investments in dollars in the country south american

He estimates that a businessman faces a scenario of institutional opacity to know if his investment will bear fruit in these so-called commercial havens.

“In a country without economic statistics and without credibility, how does an investor assess whether an investment is worthwhile? He has no way to do it”, he comments to the VOA, referring to the non-existence of periodic and credible reports on the state of the economy from the Venezuelan State.

He emphasizes that other Chavista projects that allegedly would bring welfare and investment “failed”, such as the endogenous development nuclei, the social production companies and the so-called empanada route.

“With three-digit inflation (170% between January and June), starvation wages, with the ‘matraca’ (official extortion) on the roads and without good ports, these Special Economic Zones are not going to work like in other countries”, He says.

He wonders why tax incentives, security and other facilities contemplated in this new law are not given to businessmen, who, according to Guerra, “have endured all kinds of abuses and stayed in the country.”

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