Venezuela Moves Forward with Special Economic Zones to Attract Investment in Development

The SEZ draw their inspiration from the Chinese model of "market socialism" imposed by Deng Xiaoping in the 1980s, which sought to promote state-regulated capitalist development in specific areas of the country.

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Caracas, April 2, 2015 (venezuelanalysis.com) – The Venezuelan government will unveil its comprehensive plan for the creation of Special Economic Zones (SEZ) by the end of the month.

The plan, as presented by Vice-President of Planning Ricardo Menendez on Monday, will outline strategic areas of the country where policy incentives will attract foreign and national investment with the aim of promoting export-oriented production and “integral development”.

The SEZ represent an important dimension of the economic development strategy laid out by late president Hugo Chávez and President Nicolas Maduro, which seeks to fortify Venezuela’s vital infrastructure, particularly in the areas of telecommunications, electricity, and water and land transport.

This past December, President Maduro established the first two SEZ in Paraguaná located in Falcón state and in Ureña in the western border state of Táchira, both of which are about 75% complete.

The SEZ in Paraguaná aims to give further impetus to wind-based electricity production in the region, which since 2012 has supplied the nearby oil refinery with 100 megawatts of power, saving the latter approximately $36.3 million.

Meanwhile, in Ureña, the SEZ will reportedly incentivize textile and shoe production as well as strengthen the metal industry.

In the Orinoco oil belt, a strategic development zone will facilitate the cooperation between private firms and state-owned PDVSA in the exploitation of the most extensive petroleum reserves on the planet.

In addition to th e development of infrastructure and production capacities, the plan also reportedly promotes the transfer of knowledge and technology aided by foreign capital.

“With the investment which we are procuring, new technology will also arrive […] in every SEZ there will be research and technology centers linked with what we are doing there, because there’s no sense in saying we’re going to produce more computers, more cell phones, if we’re not […] learning how to design computers, cell phones, how to make software within each of these components,” Menendez told the rightwing newspaper El Universal.  

So far 47 firms have committed to setting up operations in the SEZ, and a further 100 have requested more information regarding potential projects. Chinese firms constitute the bulk of the foreign partners, with $2 billion in contracts already desisgnated to manufacturing and construction projects,

The Bolivarian government has imposed a series of regulations governing the SEZs which include a minimum 50% Venezuelan share in all projects as well as a mandate obliging all firms to open accounts with the National Public Banking System.

The SEZ draw their inspiration from the Chinese model of “market socialism” imposed by Deng Xiaoping in the 1980s, which sought to promote state-regulated capitalist development in specific areas of the country.

The resulting Special Economic Zones, which now include major cities the size of Shanghai, have been widely praised as the foundation of the Chinese “economic miracle” of the previous decades. However, some have criticized the logic of SEZs, saying the lax investor-friendly regulations facilitate the trampling of labor and environmental rights.

Nevertheless, Vice-President Menendez underscored his government’s commitment to balancing the need for productive investment with defense of the environment and local traditions.

“When each of these zones is decreed, there will be an integral development plan, where we are going to have a component linked to production, seeking foreign  and […] national investment in order to achieve a level of development and procure an export base […], but at the same time, [promote] care for environment, traditions and customs, and an integral development plan.”