Caracas Chronicles

“My three priorities as the new president of FEDECÁMARAS (Venezuela’s major business chamber), are to contribute with economic reactivation, to impulse an inclusive economic model, and to help society return to politics as the way to manage differences, as an achievement of modern civility,” says Carlos Fernández Gallardo. He talks about using his position to help bridge the gap between the private sector and the government. He sees himself and FEDECÁMARAS as a political actor not in the sense chavismo usually frames business people—as players who want to topple the government and enslave the population—but as a mediator and a source of quality employment and protection for common Venezuelans.  

Fernández Gallardo is saying this in the context of approaching the Maduro regime and the negotiations starting in Mexico, where FEDECÁMARAS would want to have a seat. Fernández Gallardo does have vast experience doing business in Venezuela: born in Maracaibo into a family with a long history of entrepreneurship, he was vice president of FEDECÁMARAS’ previous board, and has led the retail chamber CONSECOMERCIO, Maracaibo’s retail chamber, the Caracas Stock Exchange, and the foreign investment promotion council CONAPRI. He’s a lawyer with a masters from ADL School of Management in Cambridge, Massachusetts. 

In your speech at FEDECÁMARAS’ annual assembly, you said CAF offered 400 million dollars to improve power generation in Zulia and Táchira, but the process got stuck because “some group” refused to “give oxygen to a political option.” What happened there? 

While the State—which reserved key sectors for itself—can’t provide solutions because it was left without an income with the drop of fiscal income and the oil industry, private and individual initiatives can come to the rescue. One example is the de facto dollarization, the people’s response to a problem. We can solve many other problems—services, transportation, fuel, etc—by aligning with the public sector and working in coordination with it. What we wanted to say in that speech is that if proposals that actually bring solutions to Venezuelans arise, whoever gets the political credit for that is absolutely secondary. It seems to us that not bringing a solution that benefits so many millions of Venezuelans because it politically benefits some factor would be a miscalculation. It isn’t time for such pettiness in the midst of all this chaos. We can’t put political gains above the solution to the problem.

Almost three years after the March 2019 blackout, the country still has unprecedented deficits in basic services. What does FEDECÁMARAS recommend doing to solve them?

We’re trying to convince the country that we must accept reality as it is. That is the first thing to do in order to start solving our problems together. The State is concentrating on those things that the government considers a priority. We don’t want to invade any spaces, but many of the spaces currently reserved to the State are natural to the private initiative and would be working if they were managed by the private sector. We can discuss whether electricity is a strategic sector or not for them, but that isn’t the bottom line: what’s truly strategic is having electricity, not who owns it. Maybe the solution to the water problem is much simpler than what most imagine, for example. If you decide to decentralize, maybe we’ll solve it more efficiently. It’s just a matter of looking at the problem differently and not relapsing into mechanisms that have already proved not to solve them. The dynamics that brought us here aren’t the dynamics that are going to get us out of this. 

You asked the Executive to lift tariff exemptions and Delcy Rodríguez, after participating in the annual assembly in July, announced that they’d stop exonerating almost 600 imported products or goods to favor national producers. What other things did you request from the Executive?

We have no news about the proposed solutions to come out soon. It’s likely that a little more bank credits and microcredits in bolivars will be activated, due to the issue of reserve requirements and inflation. President Maduro has already spoken about that.

But Maduro also spoke recently of credit in euros and yuan. Why, if the official rhetoric seems to have already given the green light, do we not see a regulation?

Credit in dollars is born as a response from the market. Then the government paralyzes it. I think there are ideological issues there.

The government allows some companies listed in the Caracas Stock Exchange to issue securities in dollars, but not loans in dollars, when it’s precisely the adoption of this currency that’s allowing the economy to reactivate.

Of course. And I believe that the fall of the Venezuelan economy would have been less dramatic if they hadn’t restricted bank credit as they did. One of the things that has allowed some activities today is that commercial credit is reactivated thanks to dollarization. If we manage to reactivate bank credit, obviously that would have a great effect on the economy.

Read more: The Caracas Stock Exchange: an Investment Oasis or a Mirage? 

What would it mean for the Venezuelan economy if loans in dollars were approved en masse from deposits in foreign currency currently held by banks?

The multiplier effect of credit is something that has been absolutely proven in all economies throughout history. It’s essential to understand that money is the key to getting out of the recession. A virtuous circle of wealth generation would be created: that money that reaches the banks has to go back out as productive credit to have that effect, in order to feed the economy. 

What does FEDECÁMARAS recommend to the current economic cabinet to get Venezuela out of its recession?

Delve into new schemes of productive relationships. It’s very difficult to reactivate the economy while you have consumers without purchasing power or with salaries of 10, 20, 50 or 70 dollars a month. We must find a way for the worker to have a higher income without affecting the company in its subsistence and future sustainability. There are many functional schemes, in the world and in the country, that exist informally and should be given visibility, impulse and protection. The economic world needs trust and trust is nothing other than institutionality. I would tell them, for example, to be very careful with this fiscal voracity, because its excess and the disorder that it brings could bring very vicious elements because people lose the incentive to continue working or feel the incentive to “informalize”. And the informalization is much worse for tax collection.

You question the Labor Law of 2012.

This law protects those who already have a job, but it doesn’t stimulate creating new jobs. This law should focus on encouraging productivity, so that the worker can benefit from that productivity or from that wealth that it helps to produce. And I also believe that wages must be recovered, rather than focusing on what the worker will take at the end of his career. We must recover the value of work, as a source and guarantee of a dignified life. You have to find a way to get people to want to get back to work. There are a lot of people on their own now, a lot of entrepreneurs and a lot of people in the informal sector, but I’m not sure they are all there because they want to. Many people would perhaps prefer to be in a dependent employment relationship, but they aren’t in a position for that dependent relationship to guarantee a sufficient income now.

How do you rate the new currency redenomination?

This redenomination isn’t addressing the substantive issues. It must be recognized that inflation growth in 2021 has been lower than in previous years, but at the cost of a significant drop in the economy. By putting bank reserve requirements as high as the one they established, you replace the currency and the monetary pressure, but you aren’t solving any underlying problem. We must insist on fiscal discipline and I think the government could think of issuing debt in the domestic market, instead of printing money. The government could finance itself with those dollars that banks have in custody today and that the government doesn’t allow to go to the productive market. Perhaps, by issuing debt in dollars against those dollars saved in banks, the State can finance itself. Obviously, the debt will increase, but it will generate less pressure because it’s money that the economy already created and that should be circulating. 

FEDECÁMARAS was highly questioned for the participation of Delcy Rodríguez in its annual assembly and for having approached the Executive in early 2021. What’s the story there and who built the first bridges for that to happen? Was it the government that sought you out or did the initiative come from you? Was this worth doing?

In our assembly last year, we gave that message of the return to politics. It became very clear that one has to speak with whomever it is and not with whom one wishes. And from there we began to raise the need to build something beyond our differences. Then we brought something called Negotiation Paths, to tell the country that there are societies that have gone through deeper conflicts than ours and have come out of them through negotiation, and that if we don’t pay attention to it, we could still end up in worse conflicts. Thank God, for now, Venezuela is a political conflict and hopefully it will be resolved. We knew that after the elections and the installation of a new National Assembly, sooner or later, that call would come and it did. First it was a visit by the Boston Group, of parliamentarians of all tendencies, both from the previous National Assembly and the current one. We talked about how politics had to be understood not only as a search for spaces of power, but also as a place for solving the problems of our society. And not a week had passed when the government called to meet us and we offered our facilities for that meeting to take place.

Read more: The Fantasy of a Functional Autocracy

Which members of the Boston Group had the leadership?

In those previous meetings, I believe that the man who presided over it, Pedro Díaz Blum, who isn’t a member of parliament, was present, and then we met with Luis Eduardo Martínez (AD), Oscar Ronderos (AD) and Francisco Torrealba (PSUV), who form part of the Peace, Dialogue and Reconciliation Commission (of the current National Assembly). 

In this process, in addition to the matter of tariffs, what other things have you asked for?

There are several things that we’ve asked for that are fundamental and that have not yet been resolved. Vaccination, for example.

Your predecessor Ricardo Cusano said that the government requested the databases of the employees of the companies to start the vaccination process and that it stopped because many companies didn’t trust them.

Yes. We made a proposal to accelerate this process, to those who have the responsibility and competence to do so, and we haven’t received a response, but there have been some approaches and solutions that the government has already implemented in some sectors of the economy, especially those with more contact and risk of contagion: clinics, pharmacies, etc.

In those cases, did the government offer the vaccine for free? Did you establish any other conditions for them, in addition to the one we talked about before?

No, no, no. They’ve been public and free vaccination plans, like any other, understanding that they are vulnerable personnel.

And will they vaccinate other business sectors soon?

We understand that what the vice president said in her speech at FEDECÁMARAS was pointing that way, but since it hasn’t been formalized, I don’t dare to announce it. We hope we can protect all workers in the country soon.

The Maduro administration also announced that they plan to make the 7×7 more flexible, but it hasn’t happened.

This has been affecting certain sectors in a special way. In continuous processes, such as construction or factories, if you stop on a Sunday because a flexible week is ending, then you stop for a week and come back eight days later, the next Monday the processes don’t flow well. It interrupts planning, the value chain, your logistics processes and an economy doesn’t work that way. There’s evidence that it isn’t in the workplace where people are infected, because the protocols are respected. There are companies that even prevent their workers from using public transportation and have established safer transport mechanisms to facilitate this issue and protect them, but in the end this is a matter of collective awareness. We understand that it isn’t easy and that the priority is to take care of health, but you can definitely work carefully. And another issue that’s important to solve is gas.

How do you propose to solve the gas shortage in Venezuela?

With some legislative modifications. It could be resolved soon if they let private initiative participate in that sector. We also believe that they should put an end to fiscal voracity, and not only national but also municipal fiscal voracity. There’s a lot of disorder, everyone has their own criteria because they are autonomous in their municipalities and there should be harmonization on certain key issues. We must eliminate a number of laws that have a punitive vision of economic law.

What are these laws and what specific reforms would allow raising that punitive vision to reactivate the economy?

Perhaps the flagship of these laws is the Law of Fair Prices, because it gives a lot of discretionality to the enforcer and doesn’t establish a relationship between the irregularity and the penalty. With these laws the economy can’t prosper. It must be understood that business activity is a human activity and worthy of recognition, like any other, and that a State and an economy will develop much better if society considers it so. It’s necessary to generate stimuli so that economic activity grows and develops, not punishments and penalties for the opposite.

What do you expect from the negotiations in Mexico between the government and the opposition?

We believe that the re-institutionalization of the country would allow recovery of trust and an increase in the level of investment. Trust is nothing but having robust and independent institutions. We also hope that after resolving political issues at those tables, some other issues will also be incorporated, such as economic ones. The country needs to give itself a new model that tells us where to go in economic matters and how to bring benefits to all. We can offer help in this regard, we’ve just come from visiting 16 states and not only have we personally known the realities of each case but we’ve also verified the potentialities of each region. The private sector that continues to work for Venezuela has understood that the oil income is over and is willing to participate in the construction of that productive and inclusive system, investing and contributing its best skills and capabilities. This recovery is going to be long, difficult and complex, it can’t be the product of a model imposed by force or of a model suggested by only one group, it has to be a model that all social forces claim as their own, therefore defending it and participating in its construction. Like the one we had in the last century, which wasn’t only successful in terms of economic development but also brought a very important social mobility that had rarely been seen in history. The education issue is fundamental, that of the relationship of society with wealth and oil, with the generation of work, in short … It’s about empowering the productive citizen and the private sector to play their role in the development of any 21st-century society.