The potential for jokes is endless, but it’s no laughing matter for Venezuelans. Thanks to an onerous currency policy, the Kimberly Clark production facility in Caracas could no longer afford to buy the necessary raw materials for the manufacture of its sanitary products. After laying off 900 workers because of the lack of work, the Maduro regime seized the plant on behalf of the “workers,” the Wall Street Journal reported last night (via Fausta’s Blog):
Venezuela’s government said it occupied Kimberly Clark Corp.’s local plant, days after the diapers maker had halted operations because of shortages of raw materials in the crisis-stricken country.
“Kimberly Clark will continue producing for all Venezuelans and is now in the hands of the workers,” Labor Minister Oswaldo Vera said Monday in a televised address from the company’s plant in central Aragua state, before signing an order to take it over. The labor ministry claims Kimberly Clark had violated Venezuelan law by firing over 900 workers without consulting the government.
Good luck in getting production moving again, so to speak. The problem is that currency controls make it impossible for the manufacturer to import materials, and they can’t be produced domestically. Locally made profit cannot be used to buy US dollars under the Maduro-Chavista policy, and using outside dollars to buy materials would be like throwing money down a sinkhole … which pretty much describes the Venezuelan economy now.
As one business consultant points out, seizing the plant from Kimberly Clark doesn’t solve the underlying problem of obtaining raw material for production. It just means that the “workers” will not work for another set of bosses, and these will be much less competent:
“It doesn’t matter who’s running the factory,” said Henkel Garcia, director of the Caracas business consultancy Econometrica. “The bottom line is that there are no raw materials that anyone can afford to import.”
Mr. Garcia called the plant takeover a last ditch effort by the government to show that it is tackling a worsening crisis. “It’s impossible to restart the factory given the conditions in the country,” he said.
Why can’t the government buy its own imports? They can’t afford it either, and their one avenue for foreign exchanges just got shut down. While Maduro claimed that Kimberly Clarke had been part of an international conspiracy to damage the Venezuelan economy. Citibank just canceled the country’s credit card yesterday:
Speaking on television and radio on Monday, Maduro also announced that U.S.-based Citibank, which has handled some of the state’s international transactions, notified authorities that it would close the accounts of the Central Bank of Venezuela in 30 days. Maduro linked both actions to the economic war on Venezuela, calling it “the new imperialist inquisition” of U.S. President Barack Obama.
As Reuters points out, both of these crises have the same root — the Chavista currency controls meant to keep the failure of their socialist utopia from becoming too apparent:
Due to strict currency controls in place since 2003, the government relies on Citibank for foreign currency transactions.
How bad has it gotten? The crisis forced Maduro to open a closed checkpoint with Colombia for 12 hours to allow Venezuelans to seek food and other necessities. Maduro claimed to have closed the checkpoint because of bandits and smugglers, but it’s much more likely to expose their utter incompetence even further. Thirty thousand Venezuelans poured into Colombia, who all noticed something very different about markets in the neighboring country:
Supermarkets were crowded with Venezuelans buying basic supplies such as rice, oil, flour and sugar, which are expensive in their country because of the shortages.
Gloria Archila was all smiles. “They had everything,” she said, comparing the situation here with the empty shelves in markets back home.
Everyone seemed to have a story like this – a mother who was looking for medicine for her daughter, another who described being “happy to see so much food together”.
They complained about how devaluated their Venezuelan bolivar was, limiting their purchase power. They also found goods smuggled from Venezuela being resold here. But, by and large, as they returned home in packed buses, they were triumphant – and with full bags.
It’s the difference between an economy that assumes shortages, and an economy that orients its resources and its policies toward plenty. Socialism is based on an assumption of shortage and rationing, used to attack those who succeed in producing more by claiming it as exploitation. They demonize success in order to exacerbate and exploit envy for their own political power, and claim to champion the poor while imposing shortages and poverty on everyone but their own clique. Then, when their failures become too evident to ignore, they use the power they acquire to oppress those who want an end to the incompetence and maliciousness of the socialists who impose it.
That is what Maduro wants to keep Venezuelans from seeing … but he’s failing. It won’t be much longer before Venezuelans become so desperate that they have no choice but to bring the Maduro regime to its logical end.