Caracas Chronicles

A year ago, Hugo Chávez wrote a little big law that has made it very difficult for companies to do business in Venezuela.

Written from his sick bed, in the midst of a Presidential campaign, without consulting vast sectors of the public sphere, Chávez whipped out the Organic Law for Work and for Male and Female Workers (in Spanish, Ley Orgánica del Trabajo, los Trabajadores y las Trabajadoras, also known by its acronym LOTTT).

The world view that permeates the law explains many of the problems Nicolás Maduro is currently facing.

The general tone of the law is what you’d expect: companies are baaaad, and workers are goooood. All the modifications made to the previous law (which, let it be said, was no champion of free labor markets) have one goal in mind, which is to put more pressure on companies and give workers freebies, at the expense of the economy as a whole.

Just a few examples drive this point home. The old law said that December 25th was a holiday. The new law adds December 24th, December 31st, and Monday and Tuesday of Carnaval to the list of mandatory days off. Whereas the previous law was vague about day care centers, the new law forces companies with more than 20 employees to have a day care center, or to pay for its workers to send their kids to one.

More importantly, the new law forbids companies from hiring third-party companies to do certain jobs for them, which can be a much more efficient way of doing these activities. Now, these activities will have to be done by company employees. And so on …

A friend of mine brought up one of the worse aspects of the law in a conversation the other day.

As you all know, the government has made “inamovilidad laboral” (i.e., outlawing the firing of any worker) a cornerstone of its economic policy. This policy is insane, and has proved to be a huge albatross around private companies’ necks. Workers know they cannot be fired, and therefore slack off, do not come to work, and expect to be paid anyway. The huge problems at EFE industries are a prime example of how chavista laws cripple companies.

In spite of this nut-brained policy, companies got around the rule by rewarding good behavior with extra shifts. If a worker was not behaving properly, you couldn’t fire them, but at least you could reward good behavior with tons of extra hours, which workers always want. So if you work in a manufacturing plant and you want to motivate workers, you used the reward of extras shift and extra days to make them toe the line.

The old law set a limit of 10 extra working hours per week, but that gave companies enough wiggle room to use the extra hours to enhance productivity. Now, under the new LOTTT, the working week is reduced, and extra hours are limited to 2 per day and 10 per week. This makes it much more difficult to use extra hours as a motivating factor.

For example, it used to be the case that you could tempt workers with extra shifts of four or six hours per day. You could even convince them to work six hours on a Saturday. That’s not possible any more.

My friend tells me the effect on his company has been dramatic. Before, you could count on trusted employees to be loyal to the company, thanks to the promise of extra shifts. Now, few workers bother showing up for work. Even the old, loyal workhorses bring in phony medical orders saying that they can’t work, and since the order can’t be verified and the worker can’t be fired, there is nothing you can do. The company even has to pay for their food allowances (the infamous Cestatickets) while the worker either stays home or, in most cases, works as a cab driver.

The underlying problem, of course, is not with this particular law. The problem is the philosophy driving these changes.

Chavismo views private companies as enemies that must be subdued and, ultimately, defeated. Now, as Venezuelans wait in line for hours, getting their arms stamped while waiting to find basic staples, they wonder why the enemy is not producing enough!

Maduro needs the help of private business to get out of a very sticky situation. The enemy, however, is in no mood to help. The government attacks private industry, private industry stops producing, Venezuelans can’t find stuff on the shelves, and they blame the government, who then turns around and attacks industry once again.

I want to say the cycle ends when store shelves are completely empty and people overthrow the government, but last I checked, Robert Mugabe was still in power, so there goes that theory.

At any rate, we shouldn’t expect any easing of tensions between the public and private sectors any time soon. Sadly, it’s the Venezuelan consumers and its workers that are caught in the crossfire.