Imagine a poor family living in the swamps of Latin America. The family owns hundreds of acres of land, but fails to farm the land effectively (if at all). Thus, the padre familias has difficulties feeding his children, let alone providing them with education, healthcare and access to information. As a government official, how would you support your citizens?
During my two week visit to Venezuela, I met such a family. Six months ago, Chavez’ government gave a big truck to the family, for use on their farmland. With a truck, the number of cows could be increased, more meat could be produced and sold, which would lead to increased budget for the family’s basic needs. The truck was given to the family without either constraints or explanation. Within weeks, the family had completely stripped the truck, selling different parts – bodywork, cylinders, wheels – to locals who would use the parts for other purposes.
Handing out free equipment is clearly an ineffective (or worse, counter-effective) method to develop a nation, but much used by Chavez to win the favor of voters in his country. As Chavez is expected to leave his position as Venezuela’s president for health reasons, maybe it’s time to find other strategies to further develop the country.
Another regular harmful government action is to socialize private companies. During our stayin Venezuela, we heard stories about shipping companies, telecom companies and expensive hotels whose ownership had been claimed by Chavez’ government. If there is a significant chance that your company will be “taken” from you once it grows, you will surely think twice before starting in Venezuela.