Venezuelan shoe industry decimated by corruption
A frightening example of what can happen to an industry when it is denied effective government protection against the black market and corruption is provided by the Venezuelan shoe production sector.
As recently as a decade ago, the Venezuelan footwear industry was thriving, providing work for over 200,000 people. Today, it employs less than half that number, having been decimated by illegal imports and ‘underground’ factories that produce footwear without paying government duties. In the last three years alone, over half of the country’s legitimate footwear businesses have disappeared with the loss of over 50,000 jobs, while a high proportion of the remainder have become import agents or gone underground themselves.
At the root of the problem lies Venezuela’s overvalued currency, which has drastically reduced consumer spending power. Combined with lax customs procedures, corruption within the customs service and official indifference at the highest level, this has lead to a flourishing market for contraband goods of all kinds. According to CAVENIC (Venezuelan Chamber of the Footwear Producers) the domestic market consumed 55 million pairs in 2000, with legitimate domestic producers and importers accounting for 18 million and 15 million pairs respectively. It can only be assumed that the remaining 22 million was sourced illegally.
The seriousness of the crisis was underlined last week by Hector Velazquez, president of the shoe workers' union, who pointed out that: "Today, thousands of specialised workers roam the streets selling cheap goods."
In May, the Venezuelan government announced a series of measures it said would protect the textile, garment and shoe sectors, but they appear to have had little effect. The official view, as expounded by Production Minister Luisa Romero, is that the footwear sector has been in decline for over 20 years and its problems cannot be solved overnight. Earlier this month, customs department chief, Jose Vielma, quit his job claiming he was not getting enough help to stamp out corruption.
In an attempt to find a breathing space, the footwear sector has called upon the government to limit imports for at least six months, with an option to renew for another six months. It also wants shoes manufactured in the footwear-producing region of Nova Esparta to be afforded the same VAT (Value Added Tax)-exempt status as imports, and a school uniform programme that previously boosted legitimate footwear sales to be restarted.
Velasquez says both the workers and their bosses are prepared to take ‘strong action’ if the government does not come up with a meaningful solution soon "as it is not just a factory we are talking about here, but the future of the national shoe industry".
While the sector waits for the government to get its act together, CAVENIC has begun working in collaboration with BANCOEX - the Foreign Trade Bank - in an attempt to stimulate exports to the USA, the Caribbean and Mexico among other countries.
