Caracas, July 2, 2022 (venezuelanalysis.com) – The Venezuelan National Assembly approved legislation establishing “Special Economic Zones” (SEZ) in the Caribbean country.
The 35-article bill is the latest effort by the Maduro administration to attract foreign investment to drive economic recovery as the country remains targeted by wide-reaching US sanctions.
Following two parliamentary sessions, the new law was endorsed by the pro-government United Socialist Party (PSUV) legislative super majority, as well as right-wing opposition deputies, on Thursday.
Óscar Figuera, the lone deputy from the Venezuelan Communist Party (PCV), was the only lawmaker not to vote in favor of the SEZ Organic Law. Figuera claimed that the project represents a “threat” to Venezuela’s sovereignty by “creating areas under the control of transnational capital.”
The approved text, which Venezuelanalysis has had access to, states that the law aims to regulate the “creation, organization, functioning and management” of SEZs.
Special Economic Zones are defined as geographical areas under exceptional rules and regulations. They can be geared towards a given economic activity, from industry to tourism, while also prioritizing imports, exports or technological development.
The legal instrument stipulates that private investors in these economic enclaves will receive incentives such as legal assurances, a host of tax breaks or exemptions and fast-tracked bureaucratic procedures.
SEZs will be created via presidential decree. The newly approved legislation will likewise lead to the creation of a superintendency that answers to the country’s executive. It will be responsible for monitoring SEZ activity and proposing new ones if certain criteria are deemed to be met. The SEZ superintendency will work alongside the International Center for Productive Investment, which is responsible for scouting investors and drawing up investment plans.
There are eight currently existing SEZs created in 2014 under different legislation that failed to develop. The Maduro government pledged to reevaluate those cases, while a number of governors and mayors have lobbied for SEZs in their jurisdictions.
The project has sparked fierce debate amidst Chavista ranks. Critics have voiced concerns that the plan clashes with the Constitution while pointing to cases where similar experiments amounted to “sweatshops.”
PSUV deputy Oliver Rivas told Venezuelanalysis that the SEZs should not be seen as the “ultimate step” towards socialism but rather as a “resistance strategy” in the face of US-promoted economic aggression.
“Beyond dogmatically rejecting strategies, we should look at examples like China and Vietnam, the challenges, limits and counterweights they had to impose when they partially opened their markets to foreign capital,” he explained, adding that China was able to capitalize on special economic zones to boost public policies.
Rivas, a former student organizer, stressed that “it is the role of the Venezuelan state to control and manage SEZs, and turn the initial advantages for capital in income that can be used to fight inequality.”
Venezuela has been mired in a years-long economic crisis that was triggered by plummeting oil prices and severely worsened by Washington’s sanctions regime. The US Treasury Department has targeted several sectors of the South American nation’s economy, including mining, banking and especially the oil industry.
Venezuela’s GDP has contracted by more than two-thirds since 2014, according to the country’s Central Bank. Crude production, Caracas’ main source of revenue, fell to historic lows following the US’ coercive measures against state oil company PDVSA before modestly recovering last year.
In the past four years, the Maduro government has sought to reverse the country’s economic fortunes by turning to increasingly liberal prescriptions. Measures have included the lifting of price and forex controls, tax breaks, labor deregulation and transferring state assets to private businesses.
Authorities recently announced plans to offer 5 to 10 percent of shares of major public ventures, including the largest state bank and the national telecommunications company, in stock markets.
The economic program succeeded in bringing runaway inflation under control, while higher oil production and market prices were key for the country’s GDP to increase by 4 percent in 2021, the first registered economic growth in seven years. Multiple forecasts predict double-digit growth in 2022. However, a sustained recovery remains hampered by the US’ coercive measures.
Despite the incentives and wide-reaching instruments such as the SEZ Law and the contentious Anti-Blockade Law, foreign corporations have largely avoided coming to Venezuela for fear of being targeted by US sanctions. Washington has threatened and targeted international companies for their Venezuela dealings as part of efforts to strangle the country’s economy and oust the Maduro government.
Simultaneously, the liberal turn has been questioned by leftist voices both inside and outside Chavismo. Despite acknowledging the country’s difficult economic scenario, they contend that powerful businesses are taking advantage of the situation to revert key policies of the Hugo Chávez governments. The former president insisted on overcoming capitalist mechanisms and boosted the state’s role in the economy.