ICYMI – Venezuela: Private Sector Crowded Out

The Financial Times
By Benedict Mander

Huge sums of money have been ploughed into social programmes that, by government estimates, have reached more than 20m people, and Mr Chávez has overseen a reduction in poverty by more than half.

But beyond simply crowding out private sector efforts to help the poor, some argue the government has also played an active role in ensuring there are fewer opportunities to do so.

“It’s not only that the government doesn’t like [corporate philanthropy], it’s actually doing something to put a stop to it,” says a Venezuelan who runs a private non-profit organisation involved in microfinance and who preferred to remain anonymous for fear of reprisals.

“The government has pulled the rug from under our feet, as it doesn’t like microfinance. It’s exactly what they don’t want because it enables people not to have to depend on them.”

He says changes to banking laws have made microfinance increasingly less viable for his foundation and many microfinance organisations have been forced to move into conventional banking to survive.

But in spite of persistent attempts to diminish the affluence and influence of the rich, who Mr Chavez considers his political opponents, as well as a generalised hostility to the private sector, corporate philanthropy is surviving. Pressing social needs mean there remains plenty of room for non-profit organisations in sectors such as healthcare, education and housing.

A proportion of the most important private sector philanthropic work is carried out by some of Mr Chávez’s most high-profile adversaries.
One of the country’s biggest charities is the Polar Foundation, the social arm of the largest privately owned company.

Mr Chávez has repeatedly threatened to expropriate Polar, the food group, and he once said, Lorenzo Mendoza, its president would go to hell for being rich.
Private philanthropy has also flourished in areas where the government struggles to deliver.

Many public hospitals are in poor condition, for example, but the Children’s Orthopaedic Hospital in Caracas, a non-profit private foundation set up in 1945 by Eugenio Mendoza, a relative of Polar’s president, is flourishing.

But for many companies, being socially responsible is a challenge, and often not a priority. “With so much regulation and low profit margins there’s not much room for manoeuvre,” says Asdrubal Oliveros, an economist at Ecoanalitica, a consultancy.

“The government wants to monopolise the social arena to generate political returns … It is part of the DNA of ’21st century socialism’ that the state just keeps growing.”

“We are very happy we have been able to survive in this environment and to do the work we do,” says the philanthropist involved in microfinance.