A look at one of the results a massively-centralized government produces in a country’s economy: Financial controls backfire in Venezuela
General Motors Corp. is halting production in Venezuela for three months starting Friday. Ford Motor Co.’s subsidiary announced 10 percent cutbacks last week. Other automakers also are shrinking their business, but not because Venezuelans don’t want to buy cars.
They are closing down because the government won’t give them enough dollars to import parts.
It’s a crisis entirely brought on by the currency controls imposed by President Hugo Chavez, Gabriel Lopez, president of Ford Motors for Venezuela and the Andean region, told the Associated Press…
Apparently Mr. Chavez didn’t see this coming:
These controls have backfired with a vengeance – businessmen, companies and private citizens transferred about $72.7 billion out of Venezuela over the past six years – nearly double the outflow of the six years before that, according to the Central Bank of Venezuela – distorting the economy, fueling inflation and discouraging private investment.
Trickle down sacrifice:
Many will be affected, including transport worker Franklin Gonzalez, 40. He said his employer, Tegma Venezuela, a subsidiary of Brazilian firm Tegma Gestao Logistica SA, will have to find business elsewhere or its roughly 20 drivers will see their salaries slashed by 60 percent or more.
“How is one supposed to work?” asked Mr. Gonzalez, who stopped supporting Mr. Chavez years ago because he thinks the president’s policies have strangled private business.
Mr. Chavez has assured that “Venezuela won’t go under,” but said spending must be regulated carefully until oil revenues rebound.
Even hair salons – a weekly staple for many Venezuelan women – have been affected.
“You try to get one hair dye and you get another. Or you ask for 10 shades and you get six,” said hairdresser Judy Morales, 42, whose salon is now using more local products than those from France, Brazil or other countries.
“We’re not used to this in Venezuela,” she said.