Business

The perils of doing business in Venezuela

Alejandro Martinez
Image caption Alejandro Martinez has not been able to do any manufacturing work since December

Alejandro Martinez hasn't been able to go to his factory for five months, for fear of being killed or kidnapped.

The Venezuelan entrepreneur has a manufacturing facility in a rough part of the capital Caracas, where the local armed gang demands that a "tax" be paid by every business, to ensure that owners and staff are not attacked.

"And those who don't pay are threatened at gunpoint, threatened with death, or being kidnapped," says Mr Martinez, 40.

With the Venezuelan economy continuing to be mired in its worst recession for more than 70 years, Mr Martinez says he simply doesn't have the money to pay the criminals, so he is having to stay away.

The fact that he is a wheelchair user, paralysed after a surfing accident when he was 20, appears to be of no concern to the local gang. Nor that his business - Discapaland - is the only company in Venezuela that designs products for disabled people, such as crutches, access ramps and parallel bars.

Mr Martinez last visited the factory in December, but says he could no longer cope with the intimidation from the mafia group, which calls itself "the unionists".

Image copyright Alejandro Martinez
Image caption Mr Martinez (right) still hopes to open a new factory

After seeing a friend kidnapped for not paying the protection money (she was eventually released unharmed after her family paid a ransom), he feared that it would only be a matter of time before it was his turn to be bundled into the back of a car.

"I was subjected to a daily psychological harassment," he says. "Thinking that I could be the next one [to be kidnapped] didn't let me work in peace."

For the past five months, Mr Martinez and his two employees have been surviving by selling some of the products they had stockpiled. Yet with the unemployment rate in Venezuela now at 17%, and disabled people often struggling to find work at the best of times, business has been slow.

But even if you aren't threatened by armed gangs, it is a very tough time to try to run a business in Venezuela.

Worse than Syria

Venezuela is the fourth worst country in the world in which to try to run a company, according to the World Bank's 2016 Doing Business report.

The organisation found that only South Sudan (civil war), Libya (civil war) and Eritrea (military dictatorship) were judged to be even more difficult. So, according to the World Bank, it is easier to run a business in Syria than it is to do so in Venezuela.

Image copyright Getty Images
Image caption Food shortages have led to long queues forming on a daily basis in Venezuela

The report found that Venezuela was very poor across the 10 criteria on which it judged each country, from the ease of starting a business, to protecting investors, and importing and exporting.

This situation might be bearable if the Venezuelan oil-dominated economy was performing well, but it is expected to shrink by 8% this year after contracting by 5.8% in 2014.

For the country's small businesses, the knock-on impact is having to deal with an inflation rate of nearly 700% - the highest in the world - and continuing strict controls on access to the US dollars required to make overseas purchases.

Add government enforced limits on private sector prices, and widespread corruption, and the situation is pretty bleak for Venezuelan entrepreneurs.

Smuggling

At Caracas-based small brewery Coronarias, its three founders, friends Juan Manuel Torres, 24, Daniel Dimas, 24, and Rafael Rojas, 24, have had to resort to smuggling their key raw materials into the country - the barley and hops they need to make their beer.

"We bring back ingredients inside our luggage every time we go abroad," says Mr Torres. "This seems to be the only way."

Image caption The makers of Coronarias beer smuggle their raw materials into the country in suitcases

The three co-founders, who set up the business in 2013, admit that they also need to resort to buying dollars on the black market.

Yet despite their struggles, they are able to make 1,000 litres of beer a month from a house in eastern Caracas. Mr Torres says: "For the time being it is enough to satisfy our clients."

Image caption The three brewers, pictured here with a friend, want to help improve Venezuela

Looking forward, Mr Torres says he hopes for a more benign economic backdrop, and that the three co-founders "want to [help] make Venezuela more productive, and to be the place it deserves to be".

While 1.5 million Venezuelans, or almost 6% of the population, are estimated to have left the country since 2010, there are numerous other young entrepreneurs who are also determined to stay and try to improve things.

Brothers Alejandro, 27, Enrique, 24, and Carlos Maduro, 30, are three such people.

Image caption The Rapikito supermarket chain currently cannot sell you a healthy meal

They run Rapikito, a mini-chain of four supermarkets, which they set up in 2012 using savings from DJing as teenagers, and a bank loan.

Due to the country's mass food shortages, they currently cannot source bread, vegetables or meat, which - if available - go to the big, established supermarkets. So instead Rapikito focuses on selling crisps, sweets, alcohol and soft drinks.

Alejandro Maduro says the sky-high inflation rate, and controls on the prices they can charge, makes making a profit very difficult, but that they were committed to the business and Venezuela in general.

He says: "If we leave the country, what would be left?"

Jorge Roig, ex-president of the Venezuelan Chamber of Commerce says that while authorities have supported new businesses in the past, more needs to be done. The government was not available for comment.

Back at his business making products for disabled people, Alejandro Martinez says he plans to open a new factory in a safer part of Caracas.

He says: "We need to get used more to saying 'made in Venezuela'."