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40% of Venezuelan Businesses Close After 3000% Minimum Wage Increase

Venezuelan workers who got a pittance are now getting a slightly higher pay, thanks to a 3000% increase in their minimum wage. What they may not have, though, are jobs.

Seven million employees are now guaranteed 1,800 bolivars per month, which is worth about $20 at the black-market rate, after a minimum wage hike. Venezuelan President Nicolas Maduro proposed the change to increase his popularity, but it’s having the opposite effect. Businesses, already hit by Venezuela’s financial collapse, tell employees they can’t afford to pay them.

“The government sector has the monopoly on imports, the currency market is dysfunctional and there’s hyperinflation,” said Economist Orlando Ochoa. “So, if salaries are increased by decree, and the commercial and industrial sectors cannot sell their products because of these problems, and on top of that because of electricity blackouts, infrastructure problems and the loss of qualified personnel, which is leaving the country, then it’s easy to understand that many may prefer to close.”

Even though there have been multiple comparable moves in the past, none has ever been so disruptive, arriving amid a depression, hyperinflation, and devaluation.

Some companies are restructuring expenses and arranging settlements with employees. Other businesses are just firing workers. Much of the development occurs secretively as employers attempt to evade backlash by the government, which has been detaining those it considers are breaking the rules.

“We have inspections, and they force us to sell at last month’s prices,” said María Carolina Uzcátegui, president the National Council of Commerce and Services of Venezuela. “That takes money away from the business because of the hyperinflation when you can’t even sell at yesterday’s prices because you lose money.”

She adds: “And anyone who protests against these measures runs the risk of going to jail, without the right to appeal, without the right to anything, simply because the official whose turn it was to inspect the store just felt like arresting you. He did it, and that’s all.”

Marcos Vizcaino, 56, a garage owner in Caracas, stated that the wage rise was the definitive setback for his family business of two generations. Vizcaino said the lack of spare parts and hyperinflation had already complicated matters and ended up bringing in less than one customer each day.

“I already told my four employees to go find other jobs,” he said. “I’ve decided to close. There’s no need for me to keep losing money for a third year in a row.”

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