The average Venezuelan must now wait in long lines for bread and medicine, and many are going hungry and unpaid, as the government struggles to avert default. But the situation is rough for businesses, foreign and domestic, as well.
Political tensions, corruption, high crime rates, a restrictive investment law and interruptions of electric service have made doing business in Venezuela akin to running an obstacle course en route to bankruptcy. Especially burdensome have been harsh currency restrictions and repeated devaluations of the bolívar, the local currency, which have limited imports of vital machine parts and goods, while shrinking the value in dollars of company revenues.
Much if not most business is done with the government and state-owned companies, and invoices can go unpaid for months on end. The government has expropriated more than 1,400 private businesses since 1998, according to the State Department.
“Nowadays, there is no country in Latin America more difficult for a company to operate in,” said Luis Giusti, a former chief executive of Petróleos de Venezuela, or PDVSA, the national oil company, who also worked for Shell Corp. of Venezuela. “There is uncertainty for the future of the economy, and companies have long periods to wait for cash.”
Coca-Cola, long one of the most successful companies in Latin America, suspended production in Venezuela last summer because of a scarcity of sugar in a country that once was one of the prime producers in the region. Bridgestone, Clorox, Ford Motor, General Mills, Kimberly Clark and Procter & Gamble have all left Venezuela or scaled back production sharply in the country amid political hostility and a general shortage of necessary raw materials in recent years.
In the economy’s most vital sector, oil production, the international companies that remain are barely hanging on. Scores of international and domestic oil service companies have been expropriated since President Hugo Chávez, who was elected in 1998, came to power. Under Mr. Chávez, the government took a majority stake in four giant oil projects in 2007, prompting Exxon Mobil and ConocoPhillips to leave the country. Chevron has chosen to stay as a minority partner to PDVSA.
Mr. Chávez, who died in 2013, also seized a major gas injection project run by Williams Companies of Tulsa, Oklahoma, and seized 11 rigs from Helmerich & Payne, another major service company based in Oklahoma.
Life under Mr. Chávez’s successor, Mr. Maduro, has been no better, especially since oil prices plunged in late 2014.
Several international service companies are keeping staff members, offices and equipment, including rigs, in the country despite a lack of payments from PDVSA in hopes that Venezuela will return to its traditional place as South America’s leading oil producer.
But Baker Hughes, Halliburton, Schlumberger and Weatherford have all reduced their…