Wednesday, May 19, 2010

In the good old days I'd have gotten all giddy over this... 

Back in the days when I actually believed Chavez when he talked about new projects and plans I would have gotten all worked up and excited over this:

We are told the Chinese will help set up factories in Venezuela to build appliances such as refrigerators, ovens, and washing machines. Additionally, they will set up a research and design center for Venezuela to increase its technical capacity and be able to design its own appliances in the future. If what is said in the video is true, within little more than a year Venezuela will be producing more than a million appliances annually.

Let me first say, IF this is true and is really carried out this is very good news. This is EXACTLY the sort of thing that Venezuela should be doing... on a massive scale.

Further, the choice of appliances is excellent and one I have always favored. The reason is that while many countries start out making very simple things like textiles, toys, and other very simple products Venezuela probably can't do that because its wage rates are already too high (due to oil) to ever allow those industries to be feasible.

On the other hand, big industries such as autos and ships require huge investments and lots of technology in a addition to a very highly trained work force - hence it is hard to start off your industrialization process with those sophisticated industries.

Things like appliances strike a happy medium - they are high enough value added that they can support and justify the higher wages of a country like Venezuela yet not so sophisticated that they are beyond the technical capacity of the country. They are not the ONLY thing Venezuela should be building - Venezuela needs to start LOTS of industries - but they are certainly a key industry that Venezuela is absolutely right to target and invest heavily in. In short order all appliances sold in Venezuela should be MADE in Venezuela and exports should be actively promoted.

So this all sounds awesome, right??? Yeah, it does. But sadly the reality of the last several years has taught me not just to take this news with a grain of salt, but with the whole salt shaker. Here are some key reasons why:

First off, this project should have been started, at a minimum three years ago. Why, for gods sake, have they waited until now?!?!?!? What prevented them from doing this years ago?

If they had begun it earlier they could have these factories fully up and running and possibly even be almost self-sufficient with these important products. Yet because they have done NOTHING on this up to this point they are now having to import 300,000 appliances from China (not even counting all their regular imports of this over the past years)!?!? Those are appliances that should already have been made in Venezuela.

Once again, this is very late in coming and Venezuela has wasted huge amounts of time and money - two very precious things it can ill afford to waste.

Then there is an even bigger reason for skepticism. That is, although many industrial projects get announced very few actually get built, particularly of the larger ones, or turn out to be much reduced shells of what we were told the would be.


The Venezuelan-Iranian car company housed in a tiny warehouse in Maracay - how many cars is it assembling? Who knows, we almost never hear of it any more.

The Venezuelan-Iranian tractor factory was supposed to be producing multiple tractor lines by now and have mainly Venezuelan made components. Again, its seems to have fallen off the earth as we almost never hear of it or how much it is producing.

We've been hearing about what is supposed to be the largest car parts factory in South America for years now. Yet when we last looked into it it turned out almost no progress had been made in building it. And since then, not a word.

The Venezuelan-Chinese cell phone factory? They were supposed to make hundreds of thousands of them, yet apparently only made less than a third of the projected number. Sadly, that probably makes it a success relative to other projects.

The seamless pipe plant and petrochemical plants are presumably (hopefully) progressing - but very slowly.

As you can see just from the few examples presented above Chavez has a long and sad history of announcing things with much fanfare which then never come to pass - or only as a shadow of what they were supposed to be.

It would be great to believe this announced factory will be different. But would it be realistic?


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