Special Economic Zones: Venezuela’s Strategy for Breaking the US Encirclement

The Venezuelan government is fine-tuning the legal framework to strengthen the special economic zones (SEZs) already existing in its territory and to open space for foreign direct investment in a production scheme favorable to the Bolivarian nation.

Although the experiences of foreign investment have left little to Venezuela, the national Executive observes the recent changes in the global financial order in which the BRICS are gaining space and considers this an opportunity for the industrial development of the country.

There are eight SEZs in Venezuela that will be redefined with the new legal framework. The purpose is to generate a model of efficiency in services and available resources, as well as in the exercise of public management, to attract investors and be part of the successful experiences of the SEZs in the world.

Juan Arias Palacio, economist and deputy minister for the development of SEZs, spoke with Sputnik to get an in-depth look at this new initiative that leverages the development of the South American country.

He reiterated the need to generate processes that can bring down economic sanctions and thus boost the economy.

What is the current legislation governing the creation of special economic zones? In that sense, how is a SEZ defined?
In Venezuela, the SEZs are regulated by the Law of Integral Regionalization for the Socio-Productive Development of the Homeland; in it, the SEZs are defined as geographic units with economic potentialities and to develop them it is proposed to provide them with tax and customs incentives to attract investments that make possible their development and the achievement of the general and specific objectives that the country has set to increase its productive and exporting capacities.

Let’s talk about the project of special economic zones presented to the Commission of Economy, Finance and Socio-Productive Development of the National Assembly. What does this project propose?
With a law of special economic zones we seek to correct problems detected in the operation of the current SEZs. In fact, it is worth mentioning that the bill we are presenting arises from the diagnosis that we promoted from the Vice-Ministry that I direct and from which we called for the active participation of the Management Councils of six existing SEZs in Venezuela, as well as businessmen, exporters, government agencies with competence in labor, environmental, tax and republican rights, planning, security, ports, chemical management, foreign trade and expert academies in the areas of finance and customs, among others.

What is the relationship, similarities or differences with the special sustainable development zones (ZEDES) of the decree and law of the same name approved in 2001?
Very good question, since they are not the same type of zones. It is worth clarifying that the SEZs are territories whose development privileges national and international private investments, while the ZEDES provide for investments by the Venezuelan State, mainly. Therefore, in the ZEDES law – enacted by means of an enabling law by our beloved President Hugo Chávez, in 2002, 19 years ago – the National Fund for the Financing of Special Zones for Sustainable Development (FONZEDES) was established. Now, I confess that many of us like the ZEDES approach very much. That is why, in fact, we borrowed some elements from that law.

What other international references are taken into account in the conception of the SEZs in Venezuela? What similarities or differences?
We are continuously studying the many experiences of SEZs in the world, where there are already more than 5,400, in 147 economies according to the 2019 Report of the United Nations Conference on Trade and Development (UNCTAD). Well, we evaluate their potential, problems, successes and, above all, failures. There is much to learn, fundamentally, to avoid the temptation to make irresponsible copies without understanding the differences in contexts, cultures, potentials and laws, among other aspects.

In particular, we are paying attention to the economies of allied countries, and particularly to the experiences derived from the well-known and numerous SEZs of China, some of which we have visited; the interesting 21 SEZs of the extensive Russian Federation, with its surprising technological and industrial capabilities and its future that stands out in the decisive Eurasia; those of the member countries of the Association of Southeast Asian Nations (ASEAN); those of the thriving and rich African continent and those of the Arab world with such a long tradition of trade and exchange. Of course, we also study with great interest the dynamics of the SEZs of the nations of our Andean, Amazonian and Caribbean region, and, mainly, the development of the SEZs of the 33 nations belonging to the Community of Latin American and Caribbean States (CELAC).

What is the labor policy used or to be used in the SEZs?
There is a fantasy that our EEZs are a lawless territory where the working class is unprotected and environmental laws and the fight against money laundering, terrorism and drug trafficking are relaxed. In Venezuela, this would be unconstitutional. On the contrary, in the SEZs, perhaps all laws will be applied more efficiently and effectively, especially labor and environmental laws, since in the SEZ bill we are asking for the activation of ad hoc tribunals in order to quickly deal with conflicts, which often escalate due to avoidable procedural delays. In fact, we are determined to turn the speed and transparency of the SEZ processes in Venezuela into one of the main differentiating elements compared to the SEZs in the region, to the point of becoming one of the greatest competitive and comparative advantages in the value chain of Venezuelan production and exports.

What are ad hoc tribunals?
As I have previously mentioned, it is a mechanism for the expeditious resolution of labor disputes or any other specific type of dispute. It is especially used in the international context when the competent court or tribunal to hear a matter does not include, among its members, any national of the country in question.

Historically, Venezuela has not obtained great benefits from foreign investment. What changes do you observe in international capital that may generate expectations about FDI?

I observe that investments in the world have changed significantly. For example, a decade ago, the United States of America ceased to be the great global investor. China has taken its place, even displacing it in the Americas. Something similar is happening in world trade. The countries of Southeast Asia and the BRICS countries in general are progressively gaining more weight in world trade, while the contribution of the American economy to the world is steadily declining. We must therefore be confident in what we are doing. The world is changing vigorously and rapidly, and many great changes are yet to come in the field of finance and international trade.

What is the contribution to Venezuelan technical, scientific and technological development and national capital in the execution of this program?
I am convinced that the first investments will be made by Venezuelans who have resources abroad and wish to repatriate them. Moreover, many Venezuelan businessmen who have left and want to return, will return hand in hand with international investors in a joint venture scheme. And let’s hope so. There is no one better than them to contribute to generate confidence in international investors. These investments will bring state-of-the-art technologies that will require professionals from different disciplines, as well as training and research centers. We have both of these strengths and their quality is universally proven, which is another key to the success of our SEZs, since it is precisely this aspect that is considered by United Nations experts as one of the causes of the failure of some SEZs in the world.

Finally, the SEZs will require a lot of qualified labor force and in Venezuela this human talent is not scarce. And aware of its value for the construction of our society, every day we strengthen the more than 70 public and private universities we have, as well as technological, technical schools, secondary, primary and preschool education. In short, the national education system in its entirety, because it is about forming, on the basis of education and work, a society and an integral citizen, lover of justice and peace; with high capacities and techno-scientific qualification.

When will the SEZs be activated in Venezuela and how long will it take to expect achievements and/or profits from them in the country?
When will the SEZs be activated in Venezuela and how long will it take to expect achievements and/or profits from them in the country?In Venezuela there are already eight SEZs created by decree, but progress is still weak. Developing SEZs requires much more than a decree of creation. We need a legal framework with robust legal guarantees; a functional and reliable institutional ecosystem, with simple and agile procedures; the abundant economic resources that the productive processes require; the trained human talent, as well as the educational system that satisfies their permanent demand; the road, rail, port and airport networks that facilitate the transportation of capital goods, raw materials, inputs and merchandise; telecommunications; security systems, in addition to all the multiple services that these areas will demand, called to become the productive cities of our future, in line with the 17 Sustainable Development Goals subscribed by Venezuela in the UN Agenda 2030.

Whoever reviews just a little about Venezuela, its strategic geographical location and perpetual spring-like climate, the amount of its resources and the strength of its infrastructure, the jovial idiosyncrasy of its population free of xenophobia as well as its love for education, work and peace, will understand that success has many possibilities. And whoever invests will see and enjoy it, for many, many years to come, because there is enough here for everyone. That is why we are looking for new partners, new markets, for whom we also have new means of payment, new business models and much more. We invite them to invest in this Land of Grace, in the land of the mythical Dorado, cradle of General Francisco de Miranda, pioneer of our independence and of the relations with Russia and other peoples of the world; of the Liberator Simón Bolívar, whose great libertarian enterprise exemplifies that there is no blockade capable of stopping or subjugating the political will of those who are determined to build another possible world; of the giant Hugo Chávez, who opened us to the multipolar and multicentric world; and of President Maduro, with whom we are building, with the tools of cooperation, free and fair trade, and the Bolivarian diplomacy of peace, a Venezuela open to the future.

Featured image: File Photo.

(Internationalist 360°) by Mauricio Montes