SUNS  4359  Monday  25 January 1999

Venezuela: Investors sitting on the fence



Caracas, Jan 21 (IPS/Jose Zambrano) -- Representatives of some 800 companies considering investment in Venezuela are wavering between uncertainty and confidence here this week.

For while proposals for political changes have them worried, they are largely convinced that the nation will remain fertile ground for the private economy.

President elect, Hugo Chavez, due to assume power on February 2, will call a plebiscite for the people to decide if they want a constituent assembly to "refound the republic" this year by establishing a new Constitution, with deep-running changes in the political system and
State operation.

At the same time, the Chavez government will start with a fiscal deficit of nine billion dollars (nine points of gross national product), although he has promised he will make no brusque economic
changes and, as a sign of this, ratified renowned technician Maritza Izaguirre as finance minister.

The superposition of these panoramas "explain the elements of uncertainty and great expectation for legal security needed for private activity to develop," Roberto Smith, a telecommunications entrepreneur, told IPS.

"Foreign companies already in Venezuela will continue functioning here, provided with the peace of mind knowing the government-elect will not be 'acting crazily.' But new investors could wait a little longer, until the outlook becomes more clear," said Smith. Chavez's foreign minister designate, Jose Vicente Rangel, appointed the "political spokesman" of the cabinet, told the business community "the political activity of the Constituent Assembly will not upset economic activity."

"What will happen in Venezuela is a political debate which does not imply abandoning economic tasks," stressed Rangel in a meeting called with executives from investor companies in Caracas to clear up any doubts on the Chavez administration.

And in order to prove his point, Rangel referred to the tours made by Chavez after his conclusive triumph on December 6, and his meetings with entrepreneurs in 10 countries throughout America and Europe. This round of international meetings will be completed on January 27, the week before his assumption, when Chavez will visit US President Bill Clinton in Washington.

Furthermore "here there will be no coup by, nor against, Chavez, because the Constituent Assembly will confirm the legal security so necessary for business activity," stated Rangel - a leading opposition politician and journalist for around 50 years, now entering government
for the first time.

Carlos Sequera, former chairman of the Fedecamaras business organisation, which prepared the meeting, told IPS that "in keeping with this effort, the private sector has wanted to speed this contact so that its concerns and initiatives be rapidly known by the new government."

"We want to transmit the idea that Venezuela is safe for private
activity," said Sequera, and despite the fact 1999 looks like being a
difficult year "the view of the country is different for foreign
investors who look above all at the medium and long-term."

Sequera has no qualms about the Constituent Assembly "as it can give development a boost if it rejects a bureaucratic State and makes this cheaper and more efficient, as well as this being an opportunity to reduce the tiresome chain of permits which block the path of private activity."

Minister-designate of Infrastructure (Transport, Communications and Urban Development), Luis Reyes, stressed the new government will provide incentives for competition and private investment in transport, railways, ports, airports, telecommunications and tourism infrastructure.

The entrepreneurs' apprehensions about Chavez date from his insurgence against the established order through the bloody coup he led as lieutenant colonel in 1992, which were maintained throughout his conversion into presidential candidate, and finally, winner of the December elections.

Chavez's support-base came above all from the left, former military coup members, groups of protectionist entrepreneurs and economists critical of the macroeconomic adjustment programmes, oil sector liberalisation and the privatisation of core companies, without offering any defined economic plan in return.

In any case, the president-elect rejects the labels of leftist and populist which have been slapped on him, assuring his project follows the "third way" of British Prime Minister Tony Blair and Clinton
himself, favouring social as well as economic balance.

The Venezuelan-American Chamber of Industry and Trade Tuesday released results of a survey amongst 562 executives, mostly associates of US companies, stating the faith they have in the new government, most of whom had an adverse reaction to the coming leader.

For 70% of those surveyed, Chavez offers little security, a further nine claim he offers no security, while 20% ticked the much category and just one went for total security.

According to Sequera "to a large extent this situation responds to uncertainties raised by the announcement of the Constituent Assembly and its legal basis, but were diluted with the clarity provided by the Supreme Court ruling." The Court ruled unanimously that the convocation of a Constituent Assembly is constitutional and legal, following a plebiscite proposed by the President, Congress or 10 percent of the electorate.

This verdict satisfied representatives of the US and other countries that political change would be carried out within the legal framework, helping the domestic climate to avoid tension arising from conflict between the institutional powers. Colombia: Bringing an outdated road network into shape