State Social Production Enterprises in Basic Sectors

By a series of presidential decrees, the government has constituted a state-owned basic industries’ holding company and nine state-owned social production companies in a like number of basic industrial sectors.  The holding company is the Compañía Nacional de Industrias Básicas, C.A., which is part of the Ministry of Basic Industries and Mining.  The nine subsidiary companies are “empresas de producción social” and are to operate in the following sectors: aluminum laminates, seamless tubing, steel, iron ore concentrates, pulp and paper, cotton thrashing, cement, recovery of raw materials, and mining.  The initial capital of the holding company is just over US$8,000,000, while each of the subsidiaries has been capitalized at just over US$2,000,000.  The essential characteristic of these social production entities is that the profits produced “shall be exclusively reinvested in social and community interest projects … provided that they do not adversely affect their economic and financial equilibrium”.  Aside from the potential economic inefficiencies and costs to the nation of these new state companies, a principal concern is that they could be favored by state policies and practice over competing private sector companies, thereby creating conditions of unfair competition.

        Creation of State Companies in Basic Sectors

        Presidential Decrees Nos. 4.192 through 4.201

        Official Gazette No. 38.345, December 28, 2005

Regulations on Social Production Enterprises in the Basic Industries and Mining Sectors

The Ministry of Basic Industries and Mining (MIBAM) has issued regulations for the promotion, operation and auditing of Social Production Enterprises (EPS’s) operating in the basic industries and mining sectors. The EPS’s are a form of collective, socially active enterprise that, in turn, is to be provided special incentives by the state and state entities. An EPS is “an economic entity dedicated to the production of goods and services in which work has a distinct meaning, unaligned and authentic; there is no social discrimination in any type of work or privileges associated with the hierarchy of positions; there is substantive equality among their members, based on participatory and protagonist planning; and they may function as either state or collective entities, or both.” The incentives that may be provided include the provision of raw materials, technical assistance, government purchases, the donation or loan of assets, and soft credits. EPS’s in turn have to set aside a percentage of their excess revenues for a social fund, run by Social Technical Committees, that are to invest in approved community projects.

        Regulations on Social Production Enterprises

        Ministry of Basic Industries and Mining Resolution No. DM/256-2006

        Official Gazette No. 38.462 of June 20, 2006