HomeVenezuela’s Socialists Embrace Business, Making Partner of a ‘Parasite’BusinessVenezuela’s Socialists Embrace Business, Making Partner of a ‘Parasite’

Venezuela’s Socialists Embrace Business, Making Partner of a ‘Parasite’

CARACAS, Venezuela — As Venezuela tumbled deeper into economic crisis in 2017 and its people searched for a way out, one name kept coming up: Lorenzo Mendoza.

The family name is universally known in Venezuela. Empresas Polar, the food conglomerate started by Mr. Mendoza’s grandfather, had grown into the country’s largest private company. Its corn meal, used to make the national dish, was in every pantry, and its beer a welcome part of social gatherings.

As President Nicolás Maduro’s disastrous economic policies set off food shortages and a refugee crisis, Mr. Mendoza emerged as an outspoken critic of his administration and its persecution of the private sector.

Polished and eloquent, Mr. Mendoza also offered a stark contrast to the gruff president. His popularity was such that pollsters measured him against Mr. Maduro in mock presidential matchups.

Then, suddenly, Mr. Mendoza disappeared from public view, and Mr. Maduro stopped calling him a “thief,” a “parasite” and a “traitor.” The government quit harassing Polar with disruptive raids and began, in time, to adopt the economic changes Mr. Mendoza had proposed, like ending crippling price controls.

The story behind Mr. Mendoza and Mr. Maduro’s truce, sealed in a previously unreported meeting in mid-2018, describes the rapprochement between Venezuela’s self-styled revolutionary government and the business class it waged war against for nearly two decades.

The unlikely thaw has been the cornerstone of Venezuela’s recent transformation from a country where the government closely controlled the economy — and derived its legitimacy from the benefits it was able to offer its people — to a place ruled by an autocrat willing to allow de facto capitalism in order to stave off collapse and assure his continued grip on power.

The surprising turn has hardly solved Venezuela’s economic troubles. But it has reignited sectors of the economy, encouraged some investment and allowed Mr. Maduro to withstand American sanctions and international isolation. And for the businessmen, the changes have meant getting back to business.

“It’s very difficult to explain that we’re in a very bad economic situation, but that there’s optimism,” said Ricardo Cusanno, head of Venezuela’s biggest industry group, Fedecamaras. “Serious people, traditional people are deciding to continue investing.”

As Venezuela’s once-mighty state firms grind to a halt, Mr. Maduro’s ministries have quietly handed back to private operators dozens of companies, including iconic hotels and sugar mills, that they had expropriated, according to a government adviser who helped draft the program.

Tracts of land expropriated by Mr. Maduro’s firebrand predecessor and mentor, Hugo Chávez, from the landowning elites in the name of the country’s “Bolivarian Revolution” are being leased to anyone willing to work them. Raids on private companies have given way to cordial meetings between ministers and business leaders.

The stringent labor laws that had barred companies from firing anyone without government approval are now disregarded as the administration turns a blind eye to dismissals and dismantles unions. Byzantine trade restrictions were replaced with tax holidays and export incentives.

Mr. Maduro’s biggest concession was ending the rigid currency controls that had hung over every economic transaction. Suddenly allowed to use dollars, Venezuelan businesspeople imported supplies and paid better wages, partly offsetting a collapse in state production.

To be sure, after six years of unremitting contraction, Venezuela is a shadow of its former self, a bare-bones extractive economy kept afloat by shrinking oil exports, illegal gold trade and small-scale private initiative. Under Mr. Maduro, the country has lost almost three-quarters of its gross domestic product, with almost nine of 10 Venezuelans struggling to meet basic needs.

Almost five million of the country’s 30 million people have fled, depriving companies of clients and workers. And local officials continue extorting businesses.

But the recent economic liberalization has created opportunities for companies able to adjust to serving the one in 10 Venezuelans with dollars to spare. The economy is much reduced, said Mr. Cusanno, of the industry group, but “the fact that it’s still half alive is thanks to the private sector.”

The working relationship reached by the government and big business is a startling turnaround from decades of tension.

In 2002, the president of the business group then led a failed coup against Mr. Chávez. Later, the country’s biggest companies, including Polar, joined a 90-day national strike against him.

But Mr. Maduro’s ability to crush the opposition and withstand international pressure left Venezuelan business leaders with a stark choice: adapt or leave. For its part, the government realized it needed private capital to survive.

Mr. Mendoza’s Polar has come to represent this accommodation.

The Mendoza family, who built Polar from a small brewery in the 1940s into a ubiquitous food conglomerate, has epitomized the traditional elites that Mr. Chávez promised to sweep away on taking power in 1999.

Before the economic crisis, the company employed 34,000 people and claimed to produce 3.3 percent of the country’s gross domestic product outside of oil. As Mr. Chávez showered Venezuelans with the proceeds of the oil boom to build what he called “21st century socialism,” Polar’s old-fashioned corporatism offered an alternative.

The company’s generous benefits, including everything from summer camps to school uniforms, had earned it the fierce loyalty of its workers and the admiration of most Venezuelans.

The charismatic Mr. Mendoza, 54, skillfully combined egalitarianism on the shop floor with a detached elitism in his own social milieu. The billionaire Mendozas had become Venezuela’s social royalty, gathering together the country’s elite at parties that drew up to 1,500 people to the family mansion.

To their supporters, the Mendozas represented the opposite of the principles espoused by Mr. Maduro: They stood for professionalism over improvisation, tradition over revolution.

The long-running tensions between the company and the government spilled into open conflict when the economy went into recession in 2014. As revenues dried up, Mr. Maduro began to accuse Mr. Mendoza, without proof, of hoarding products and worsening shortages.

The threats were accompanied by escalating harassment. Tax inspectors constantly raided Polar’s facilities, pro-government unions instigated labor unrest, and security forces hijacked its food trucks and detained its managers.

By 2017, Polar was nearing bankruptcy. Its food division was hemorrhaging money because price controls forced it to sell products for a few cents. The beer division reeled from the loss of subsidized barley.

Under family pressure, Mr. Mendoza sought contact with Mr. Maduro’s economic czar, Tareck El Aissami, a savvy business operator charged by the United States with drug trafficking, according to two people familiar with the talks.

Mr. El Aissami, who has denied the drug charges, had long argued that the government had to abandon its Marxist dogma to ensure its survival. In him, Mr. Mendoza had found a sympathetic ear.

Mr. Mendoza’s entreaties culminated in a 2018 meeting with Venezuela’s powerful first lady, Cilia Flores, according to five people familiar with the meeting. The encounter yielded an informal pact that has held to date: Mr. Mendoza would exit the public stage, and the government would stop harassing the company.

“The government was hitting them very hard,” said Jhonny Magdaleno, a veteran union leader and retired Polar worker. “Then, it suddenly stopped.”

Polar did not respond to detailed questions for this article.

As Mr. El Aissami’s economic overhaul accelerated over the past year, so did the thaw between Polar and the government.

The raids on its facilities ceased. And Mr. Maduro stopped talking about Polar and its peers, finding a new scapegoat in the United States.

The government stopped coercing Polar into handing over its products at reduced prices. Today, the government provides major private producers with raw materials and negotiates food purchases on market terms, according to industry sources. Shops are full again, even if products are out of reach for most Venezuelans.

Market conditions remain difficult for Polar. Many of its plants are shuttered or operate at a fraction of capacity, and the company has shed about 15,000 workers. The changes, however, have allowed it to reinvent itself as a smaller, nimbler operator focusing on Venezuela’s wealthier customers and balancing domestic decline with foreign expansion.

The biggest changes have occurred in Polar’s relationship with staff. Gone are the legendary benefits that supported workers and their families from childhood into old age, even bankrolling their funerals.

The company has suspended thousands of workers, with the government’s acquiescence.

“They ignore the complaints, they fire the troublemakers,” said Mr. Magdaleno, the union leader. “They didn’t used to do that before.”

A union activist at Polar, Miguel Pirona, said he was suspended last March from his job in the industrial city of Valencia for protesting benefit cuts. Mr. Pirona said that when he gathered a group of workers outside the plant to protest, they were dispersed by soldiers.

“Before, they would come to help,” Mr. Pirona said of the government. “Now they come to threaten.”

Despite the cuts, many workers remain committed to the company, which they say still offers the best blue-collar jobs in the crisis-stricken economy. A worker at the flagship corn meal plant earns about $50 a month, the equivalent of 20 times the minimum wage.

But maintaining that loyalty also means letting go of the idea of what the company was.

Darwin Carmona, 35, worked his entire adult life at Polar’s beer plant in Caracas. He was suspended without pay in 2016, along with thousands of others, because the company said it had run out of raw materials.

After a court ruled in their favor, Mr. Carmona said the company reinstated him last February, only to suspend him again months later. When his newborn daughter fractured an elbow in December, he found Polar’s health insurance no longer covered her.

“When Chávez was alive, the laws were respected,” Mr. Carmona said about Polar. Now, “the government lets them do whatever they want.”

Mariana Martínez and Isayen Herrera contributed reporting from Caracas, and Tibisay Romero from Valencia, Venezuela.

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