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  HOME | Opinion (Click here for more)

VenEconomy: A Destructive Firing Freeze Extended in Venezuela

From the Editors of VenEconomy

On December 24, as a Christmas “present,” President Hugo Chávez announced to the country that the firing freeze would be extended until December 2012. This means that this policy, which freezes dismissals in the private sector, will now complete its first ten years.

The decree making the measure official, published in Gaceta Oficial of December 26, reveals that, unlike the previous decrees, it radicalizes the firing freeze still further by extending its scope to apply to all personnel, regardless of salary, excluding only persons who occupy positions of trust or top management positions.

There are at least two observations that need to be made regarding this disastrous policy being implemented by the Hugo Chávez administration:

The first has to do with the policy’s totally mistaken approach. In theory, and only in theory, this measure is based on the assumption that it will benefit workers. However, in real life, it has been proved, wherever this measure has been implemented, that it does precisely the opposite: far from benefiting the workers, it proves detrimental to them and, not only that, it discourages investment and the creation of new jobs.

Given the risk that hiring a new employee for life represents, many companies put off taking that decision, which is very bad news in a country where the private sector’s productive apparatus is being systematically destroyed.

The second refers to the timing of the measure. In an election year and just when an amendment to the Organic Labor Law is about to be passed, there are those who think that the purpose of this radicalization of the firing freeze is to pave the way for including the concept of a permanent firing freeze in the amended Labor Law, promised for May 1.

If that happens, Venezuela will continue down the path of destruction of the private productive sector and, along with it, the destruction of sources of productive jobs.

VenEconomy has been a leading provider of consultancy on financial, political and economic data in Venezuela since 1982.

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