- Associated Press - Monday, July 19, 2010

CARACAS, Venezuela | It’s President Hugo Chavez’s biggest economic battle cry, and it’s getting louder as Venezuela suffers a recession: “We’re going to bury Venezuelan capitalism.”

Yet creating a socialist economy is one of Mr. Chavez’s most elusive goals - a stark example of the disconnect between the president’s rhetoric and the reality on the ground.

In fact, the private sector still controls two-thirds of Venezuela’s economy - the same as when Mr. Chavez was elected in 1998, according to estimates by the Central Bank.

The reasons are political and practical: Mr. Chavez knows most Venezuelans recoil from the idea of Cuban-style state control, and his government is far from being capable of taking over and running the majority of the economy.

“Basically, he recognizes that in this day and age in a global economy … complete state control would just doom the country,” said Michael Shifter, an analyst at the Washington-based Inter-American Dialogue.

So his strategy has been to selectively nationalize companies, set up state-run supermarkets and promote worker-managed businesses while trying to persuade Venezuelans to accept his vaguely defined brand of “21st Century Socialism.”

It is a hard sell for a country hooked on consumerism.

Shopping malls are filled with middle- and upper-class Venezuelans browsing through Lacoste shirts, Guess jeans and Montblanc pens. Sales have declined in the recession, but just about everyone who can afford it seems to own a BlackBerry, and Scotch whisky flows liberally in upscale restaurants at the equivalent of $110 a bottle.

Just as Mr. Chavez has ramped up his anti-capitalism tirades, he finds himself facing one of the biggest scandals of his tenure, involving a state-run food distributor. The company, PDVAL, left more than 2,700 shipping containers of rice, flour, milk, chicken, beef and other foods in a port rotting or beyond their expiration dates.

Its former chief and two others have been arrested, and some Venezuelans have begun to mockingly call the state company “Pudre-val,” using the Spanish word for rotting. One newspaper cartoon depicted Karl Marx wearing a gas mask to ward off the stench.

It’s a glaring example of the problems and delays that regularly plague Venezuela's government-run operations.

In a review of 15 state-run companies, economist Richard Obuchi found that all “were producing well below goals or production capacity.”

The vast majority - some of which were nationalized by Mr. Chavez - now rely on government subsidies, said Mr. Obuchi, a professor at the Institute of Higher Administration Studies, or IESA, in Caracas.

One of the expropriated companies, industrial valve maker Industria Venezolana Endogena de Valvulas SA, or Inveval, has been limited to refurbishing old oil-industry and water valves for years - instead of producing them as it once did.

Port workers in Puerto Cabello, where much of the rotten food was found, say six of the port’s eight cranes are out of order and the pace of importing cargo has slowed since the government took over management last year.

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