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Is It Difficult to Undertake a Project in Venezuela?

Is It Difficult to Undertake a Project in Venezuela?

Posted by Dubraswka Aguilar on February 28, 2015

Venezuela features one of the most hostile environments for entrepreneurs, according to a study carried out by the World Bank. While in other countries of the region the process to legalize a company could take one week or so, Venezuelan entrepreneurs have to wait up to 144 days – if they get lucky – in order to see their first goal fulfilled.

Along with this reality, those who decided to make a living by means of their company in Venezuela have to cope with legal regulations that include price control, embodied by the Fair Prices Law that analyzes “cost structures, establishment of top profit percentage and effective supervision of the economic and commercial activity” so as to determine the fair price of goods and services; and the Work Law, with a stifling regulation for job generating firms.

Although per se enterprising is accompanied by uncertainty in any region of the world, “this characteristic seems to be tripled in Venezuela”, Harry López, general coordinator of Emprered, says. “While entrepreneurs in other countries are focused on obtaining the initial investment for their business, counting on partners that help them develop their project, this Venezuelan segment has to face the country’s instability, and ambiguous exchange system and truly complicated regulations.”

This situation joins the characteristics of local entrepreneurs that “are more interested in opening self-employed businesses rather than creating job-generating companies. For instance, there are people that are producing shampoo to make money because of the crisis, but when the crisis is over and the economy is back on track, such projects won’t prosper as they don’t have a company concept”, Esteban Reyes, leader coach of Emprered, points out.

This remark is in line with the report issued by GEM (Global Entrepreneurship Monitor), which included IESA’s Enterprising Center and details that the rate of startups that become companies in the country was barely 1.55 percent in 2012. “In Emprende, we believe that this trend hasn’t changed to date”, Edwin Ojeda, representative of this distance learning program, underscores.

Reason? Harry López believes that “Venezuelans have an immediacy culture, we say ‘I do it in my way’ and we don’t pay attention to the fact that the 21st century enterprise is based on talent and innovation, not only on the capital”, which is complemented by the lack of access to formal education in terms of entrepreneurship.

“It’s never the right moment for startups, still less when there are no public policies to support this activity, just like in Venezuela. Nevertheless, entrepreneurship is like a spirit that possesses people and encourage them to do things despite of the circumstances”, Reyes points outs.

Good ideas, Big Opportunities 

The current situation of the country, which has entailed closing companies and reducing organizations, has brought about the presence of new professionals in the enterprising area. Paradoxically, the GEM report reveals that, in 2012, only 4.4 percent of the new entrepreneurs said to be following this line because they were jobless or they had no other choice (need enterprise).

“In Emprered, back in 2013, 45 percent of the new entrepreneurs were professionals that weren’t working on their specialization field. 62 percent out that group were women”, López details.

That fact is that the reduction of the business structure has not only brought about unemployment, but empty spaces that become opportunities to be taken by these professionals. “Venezuelan entrepreneurs are characterized by their resilience as a way to adapt to challenging conditions; they are smart to solve things out, they don’t like to be left behind and always find a way out”, Esteban Reyes describes.

In this sense, the Venezuelan people are finding new market niches in activities related to the service sector and solutions of problems. Such cases as Ofictorta, boosted by Emprered, or Pagoflash, that came out of Emprende, are clear examples.

Even when technology-based projects have more visibility, there is a significant trend that targets such segments as gastronomy (restaurants, catering), design (fashion, gold work), trading activities (buying-selling, distribution) and professional services, especially the welfare industry (fitness, alternative health and beauty). That’s the reason why the credit portfolio of small entrepreneurs in bank entities like Banauge went over 50 percent up between 2013 and 2014; or Bangente, which in 2014 had already given some 570 thousand microcredits to startups.

Venezuelan entrepreneurs are also aiming at social initiatives that can be related to the optimization of resources, music-related businesses, environmental care, recycling activities and the improvement of life quality in the communities. As a positive example we have cacao producers at the Birongo community, in Miranda (central region of the country), who were trained for two years by Emprende and the Venezuelan-Italian Commerce Chamber, funded by the European Union.

Emprered and IESA’s Emprende program encourage entrepreneurs to innovate by means of methodologies, business tools and coaching, in an effort to reduce improvisation and, therefore, the anticipated failure of their project.

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