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Editorial Commentary
Veneconomy:
Not reflected anywhere, not even in China!
In 2006, China received $662 billion in foreign direct investment, equivalent to $510 per inhabitant and an increase of 54% compared to 2005.
It can be deduced from these figures that the communist Government of China considers foreign investment to be important for the development of the nation and the progress of its inhabitants.
However, its new ally, the communist government of Chávez, does not seem to share this point of view. In recent years, its persistent anti-investment policy, the lack of legal certainty, and the proliferation of “socialist” laws and decrees that snarl up the economy have generated a substantial decline in foreign direct investment in Venezuela. According to the latest report from the United Nations Conference on Trade and Development, today Venezuela is at the back of the queue in the region when it comes to foreign direct investment.
Between 2002 and 2005, according to SIEX (Foreign Investment Superintendency), foreign direct investment in Venezuela was merely $500 million a year, equivalent to only $16.6 per capita. And in the first nine months of 2006, foreign direct investment came to a measly $76 million, equivalent to $3 per Venezuelan per year.
In 2007, the outlook is even worse. Before, there were grounds for thinking that at least the companies already established in the country would remain. However, the indicators show that this is not the case. Now the problem is one of underinvestment: on the one hand fresh capital is not coming into Venezuela, and on the other, domestic and foreign capital is stampeding out.
Many companies are leaving Venezuela of their own according in search of better opportunities or to safeguard their capital from the advancing communism represented by the radical changes to the 1999 Constitution proposed by the President. Some of the new destinations of this capital are Colombia, Brazil, and Costa Rica.
Other companies (particularly from countries Chávez labels imperialist or that do not kowtow to him) have been shown the door by the government, either by passing them over to state ownership or by unilaterally and arbitrarily changing the terms of the contracts under which they were operating their businesses, among them AES, previously the majority shareholder of La Electricidad de Caracas, Verison (former shareholder of Cantv), and the oil companies ENI, ExxonMobil, and ConocoPhillips.
On top of that, there is the flight of capital from the small and medium-size enterprises that daily close their doors as a result of punitive legal and tax harassment meted out by the dictatorial Chávez administration.
One of this government’s biggest mistakes is its insistence on implementing an economic model that has failed wherever it has been attempted. The best example is China, a country that was plunged in the direst poverty in the times of Mao Tse Tung and that today is the world’s third largest economy.It is worth noting that China’s new constitution guarantees private property. He who has eyes to see, let him see.
VenEconomy is a Venezuela's leading specialized publisher in the economic and financial area. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.
Editor's note: This commentary was originally published by VenEconomy, on 10/18/2007. Petroleumworld reprint this article in the interest of our readers. Petroleumworld does not necessarily share these views.
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Petroleumworld News 10/22/07
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