Archive for April 26th, 2014

Tales Of Bolivarian Inefficiency I: Sugar Processing Plants

April 26, 2014

cva

Coming to Caracas, one is bombarded with stories. Just watching Maduro in his now almost daily tirades on how he will restart the economy and save it from economic war, would give enough material for what has become a truly bizarre dictatorship, presided by someone who has no ability to diagnose neither the problems, nor the solutions to the mess created by the revolution.

But one area that has caught my attention is the ability by the Bolivarian revolutionaries to disregard or dismiss the many failures of the revolution and describe how they will certainly fix things going forward. Sometimes they don’t even bother to acknowledge that the mess created is their own, talking as if some other Government or group of people was responsible.

Maduro is the first one to talk like this. This week, he has talked about a “new economic model” and the launching of a new age of powering local production, as if it was some Martians that replaced local production with cheap imports subsidized by cheap foreign currency, while the private sector was obliterated, persecuted and nationalized by the Bolivarian revolution.

But there were some announcements this week or during Holy week, or stories, which simply need to be told as they perfectly exemplify and describe the inefficiency and improvisations of the Chavista revolution.

Part I: Sugar Production and Processing

Sugar and sugar cane processing was one of the first areas in which the Chavista revolution decided to intervene some thirteen or fourteen years ago. The Government did two things: It nationalized existing sugar processing plants and imported others from Cuba and under Cuban “expertise”. The argument was not only that the Government could do a better job, producing more and cheaper sugar, but that it would eliminate monopolies and stop the exploitation workers.

Move forward thirteen years and Government plants barely produce 26.7% of the sugar in Venezuela and the companies were losing so much money that the Government last year decide to “restructure” CVA Azucar, the holding of the processing plants in order to make it more efficient. Except that was simply an excuse. By eliminating CVA Azucar and replacing it with the “new” and improved CorporaciĆ³n Venezolana del Azucar (Coincidentally also CVA) what the Government is doing is bypassing its own decrees, which do not allow you to fire anyone. Unless, of course, the company is being shut down.

Thus, the Government that wanted to eliminate the “exploitation” of the workers, is using this legal subterfuge to fire workers and eliminate unions, as both the unions and their leaders were part of the now extinct company.

Nice trick, no? You fire workers and get rid of unions all in a single and somewhat fictional stroke!

Oh! The pretty revolution!

And this is all happening because these companies, which were emblematic of the Chavista revolution, became bloated by cronyism, inefficiency and disregard for productivity and profit.

In fact, General Wilfredo Silva, the President of the recently created new and improved CVA, defended the practice and described how inefficient these companies were. All said, as if the original companies had been bloated and created by a different Government.

The General gave the example of how in Brazil, a sugar processing plant which processes 9.6 million Tons a year, does it with only 390 workers. In contrast the Central Portuguesa plant, which processes 3.6 million Tons, does it with almost twice the number of workers with 700. Or the Sucre Central, which processes 288,000 Tons also has 700 workers.

But there is no remorse. According to the General, the Socialist system under the revolution is the correct one and under his new management, which may last just a few months if experience is any indication, what has not happened in 14 years will magically happen now. There is no reason to return the expropriated plants to its rightful owners to continue “exploiting” the workers.

Sure General, because we can think of so many successful examples under the revolution of successful enterprises, except we can’t really recall the name of a single one…

Next: part II: New Steel Projects…The “New” Venezuelan Steel Industry