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Venezuela business leader says Maduro forcing 'failed' economic model

Venezuelan President Nicolas Maduro talks to supporters during a meeting outside Miraflores Palace in Caracas November 12, 2013. REUTERS/Car
Venezuelan President Nicolas Maduro talks to supporters during a meeting outside Miraflores Palace in Caracas November 12, 2013. REUTERS/Car

By Andrew Cawthorne

CARACAS (Reuters) - The man President Nicolas Maduro named as public enemy No. 1 in Venezuela's "economic war" says a discredited state-driven growth model, not private enterprise, is to blame for the OPEC nation's soaring consumer prices and chronic product shortages.

Maduro has refused to loosen state controls over the economy introduced during the 14-year rule of late socialist leader Hugo Chavez, and this week ordered military occupations of stores and aggressive inspections reminiscent of his predecessor's style.

"We profoundly disagree that this model, which has failed the world over, can be successful in Venezuela," said Jorge Roig, head of the umbrella business group Fedecamaras.

"It makes me ashamed. I feel we're a bit of a laughing stock round the world," he told Reuters, citing a World Bank 'Doing Business' study that ranked Venezuela 181 of 189 countries.

Seven months after Maduro won a vote to replace Chavez, who died of cancer, economic troubles are dominating the national agenda. Annual inflation has hit 54 percent and shortages of basics are afflicting Venezuelans across the political divide.

Maduro says U.S.-backed political opponents are deliberately sabotaging the OPEC member's economy by hiking prices, hoarding products and siphoning away much-needed foreign currency.

"I have proof - Jorge Roig is directing the economic war," Maduro told Venezuelans earlier this month, naming two other business groups with him and accusing the Fedecamaras president of a 25-year relationship with the U.S. Embassy.

At an interview in his office in Caracas, Roig, 57, said he did not take the comments personally but rather as part of the continued "demonization" of private enterprise in Venezuela.

"Fedecamaras has become a sort of joker card that you play whenever you have no-one to blame for the country's economic problems," said Roig, whose organization constantly crossed swords with Chavez during his 14-year rule of Venezuela.

A former head of Fedecamaras, Pedro Carmona, even took the presidency for a day after a brief 2002 coup ousted Chavez.

Fedecamaras, which represents 423 private business chambers around the nation of 29 million people, says some 4,700 companies have "disappeared" in a decade of nationalizations or closures of businesses owners no longer consider viable.

"Obviously, if the situation isn't corrected, this mortality rate of businesses will continue," Roig said, lamenting the reduction of national production in favor of imports.

REFORMS SOUGHT

Roig, who was once a legislator in a leftist political party and describes himself as a centrist with "social inclinations," said Fedecamaras had learned from past mistakes and now sought only to influence public policy not take power.

It was also important, he said, to recognize social achievements since Chavez came to power in 1999 and introduced welfare programs that have made inroads into poverty. For example, Venezuela's poverty rate fell six percentage points to 25.4 percent in 2012, according to the World Bank.

But the state's continuation of decade-old currency controls and refusal to maintain dialogue with business were holding back prosperity, stifling enterprise, and causing a dismal 2013 economic panorama, Roig said.

For calendar year 2013, he forecast annual inflation of more than 50 percent - "that is the combined inflation of all the countries in the hemisphere this year!" and projected flat or negligible economic growth this year.

That would continue into 2014 without long-overdue reforms such as freeing the currency market, reining in excessive local currency liquidity, and rationalizing labor laws, he said.

"There's a huge amount of bolivars, but very few dollars. That's what makes the parallel dollar reach such stratospheric levels," he said, referring to a black market for greenbacks at nearly ten times the official rate of 6.3 bolivars.

Thanks to Chavez's labor reforms, he added, "People feel over-protected at work. So they don't go. We have some data in some industries where absenteeism has reached 30 percent."

PRE-CHRISTMAS GOVERNMENT DRIVE

Starting with the electronics sector, and vowing to move swiftly on to others, the government has launched a pre-Christmas drive to force businesses to reduce prices and start prosecutions for price-gouging.

"To think that speculation, raising the prices of products, is the cause of the problem is false. It's the consequence of an economic model that is showing its most perverse side," said Roig, who works in the metals industry.

"It's as if you give a patient a medicine that makes him blue in the face, and you give him more, and his skin comes out in welts, so you give him an injection of the same medicine, and he becomes paralyzed."

Soon after winning power at an April election to replace Chavez, the new government did begin a series of high-level meetings with business leader that raised hopes in the private sector of a fresh start and smoother flow of foreign currency.

"It went no further than a photo-op," said Roig, arguing that other leftist governments in Nicaragua and Ecuador had far better relations with business and union sectors than Maduro.

(Editing by Brian Ellsworth and W Simon)

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