Lorenzo Mendoza, prophet of privatization

Fighting back
Fighting back

Lorenzo Mendoza, CEO of Venezuela’s largest private company (Polar), gave a searing press conference yesterday. In it, Mendoza thoroughly debunked the myth that people can’t find corn flour because Polar is hoarding it. Interestingly enough, in the process of defending his company, he also defended an obvious idea: Venezuela needs to embrace privatization.

The press conference came as we wait for the outcome of a sure-to-be-awkward meeting today between Mendoza, a scion of Venezuela’s dwindling upper class, and Nicolás Maduro. As such, it served as an opening salvo to what is expected to be a brutal confrontation between (what is left of ) economic power … and power itself.

The arguments Mendoza put forward were clever: Polar is working at full capacity, they can’t satisfy demand entirely, CADIVI owes Polar $140 million it needs to buy inputs, and they are actually producing more than last year.

Still, two things stuck out for me.

Mendoza blamed the government for shortages, saying that government-owned corn flour plants were not producing enough.

The solution? Privatize. He claimed that if he were allowed to buy – or even rent – one of the government’s plants, he could get it up and running in a year.

It has been a long while since a public figure came out and said what everyone knows: the State can’t handle companies that should belong to the private sector. Even Henrique Capriles has gone out of his way to reassure people that privatization wasn’t necessary.

The State shouldn’t be in charge of “producing” corn flour because it does a lousy job at it, as it does with pretty much everything else. It shouldn’t have car companies, or hotels, or steel mills, or banks, or electric companies, or phone companies, or pretty much anything else that is not named PDVSA.

Mendoza’s courage in dotting this particular “i” is to be commended. We shouldn’t be afraid to say what everybody already feels, but doesn’t quite know yet: State-owned companies simply don’t work in Venezuela. The moment for embedding this obvious notion into the minds of Venezuelan consumers couldn’t be better. The message is “you’re standing in line waiting to buy over-priced items because the government is in the way.”

The other aspect that Mendoza laid bare is the almost total lack of investment that explains the scarcity of basic staples. I believe it’s true – Polar is probably working at full capacity … because it hasn’t invested as much as it would have under normal circumstances.

Can you blame them?

Everybody in Venezuela is producing at full capacity, but that’s not enough.

This brings us to a likely scenario. So far, the government has decided to control almost everything the private sector does – it decides how many dollars you get, what price you can sell at, what you can pay your employees, which companies banks must lend to, and even how much electricity you are allowed to use.

What the government has so far failed to do is force people to invest.

Can a law forcing people to invest in production capacity be far off? I will even suggest a name for it, something like Ley del Poder Popular para la Inversión Productiva y la Máxima Felicidad Social para la Realización Plena del Hombre Nuevo. In it, companies will be forced to invest in expanding production, and if they don’t do it, they will be expropriated.

Sound too crazy? That’s what makes it likely.

In the end, the meta-story here is the change in attitudes. It strains the mind to think that Mendoza would have been this feisty in defending his company if he were dealing with Hugo Chávez at the peak of his popularity. The fact that he is willing to go to bat for his company – and his ideas – so vehemently is further proof that Maduro is a weak President, that he is no Chávez.