Monday, January 30, 2006

Import substitution charges ahead 

This item appeared on the Bloomberg news channel:

Venezuela to Spend $3.25 Bln on State Industries, Alvarez Says
Jan. 30 (Bloomberg) -- Venezuela, the world's fifth-largest oil exporter, will spend $3.25 billion to create 11 new state companies that will produce goods ranging from cotton to steel, Basic Industries and Mining Minister Victor Alvarez said.

The new companies will include a new state steel mill, an aluminum laminating company and ventures in cotton, iron ore, mining and paper pulp, Alvarez told reporters in a televised press conference. The government expects to create as many as 5,000 new jobs through the plan, Alvarez said.

``Many of the products will replace imports,'' Alvarez said. President Hugo Chavez will release details later tonight during a televised address.

Venezuelan President Hugo Chavez pledged earlier this month to invest the country's oil surplus funds in ventures that will create jobs, while developing the nation's industries.

The 11 companies will be part of the country's new heavy industries holding company, Compania Nacional de Industrias Basicas.

This sounds good, sort of. One of the frequent criticisms of the opposition is that there isn't enough investment in Venezuela. Yet, in this one news bulliten we hear of $3.5 billion in new investments. So this is good in the investment respect.

On the other hand, it would be nice to know what exactly these companies will be, how they will be run, what they will produce, what markets they will serve. I hope all that kind of preliminary analysis has been done. But we will have to see what Chavez says. Latin America is littered with failed State industries. Lets hope these don't wind up in that grouping.

BTW, just doing the arithmatic things don't look good. $3.5 billion to create 5,000 new jobs. That winds up being $700,000 per job. I hope there is a mistake and those aren't the real numbers, otherwise they would do better to just hand this money out as stipends in the Missiones!!!


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