With no end to crisis in sight, Caracas businesses shut down in droves

Grey façades with shuttered windows and doors have become part of the scenery in Caracas, where every day another business closes for good. One day it’s a bookstore, the next a hairdresser’s, and then it’s a restaurant. The experience of going to a shopping mall in the capital of Venezuela involves seeing a display of undressed mannequins, “closed” signs and stores with threadbare shelves.

Even on the city’s most commercial streets, stores are going out of business in a slow but clearly noticeable process as a result of the economic crisis gripping Venezuela. National GDP contracted a further 14% in 2017 after shrinking 16.5% in 2016, according to the International Monetary Fund (IMF). And inflation soared more than 2,400%.

Small businesses have managed to survive because they can fire their employees and do the work themselves

Victor Maldonado, Caracas Chamber of Commerce

Even culinary icons of Caracas have had to shut up shop: most recently it was the arepas establishments Doña Caraotica and La Casa del Llano, once mandatory stops for any local resident out for a night of partying.

Also gone are the restaurants Punta Grill and La fonda de Las Mercedes, both located within the residential estate that President Nicolás Maduro recommended visiting to those who claim there is an emergency situation in the country. “Send a camera to the restaurants of Altamira, La Castellana and Las Mercedes so they can see the humanitarian crisis and the jugs of whiskey that get passed around. That’s Venezuela,” said the national leader last week.

“A city with no commerce is a dead city,” says Víctor Maldonado, general manager of the Caracas Chamber of Commerce. “And areperas, those typical businesses that are open nearly 24 hours, are starting to be an endangered species in this country.”

The chamber brings together around 40,000 businesses, and nine out of 10 are small mom-and-pop operations. “Fifteen years ago there were 80,000 businesses in Caracas, but the mortality rate has halved that,” says Maldonado. “Small businesses have managed to survive because they can fire their employees and do the work themselves, and because they never lived off the government’s preferential dollars, which only reached 20,000 out of the 200,000 businesses left in the country.”

Caracas’s nightlife has been petering out as well, especially in Las Mercedes, which used to be the “in” place to be in the 1990s and early 2000s. Where once people went home at midnight, these days the streets start to look deserted by 7pm.

The Chinese restaurant Aiqun, located in Colinas de Bello Monte, in southeast Caracas, shut down in January. And other Asian eateries popular with students looking for cheap beer have also gone under. Discovery Bar, a popular venue for rock bands, threw in the towel in September of last year.

The Finance Committee of the National Assembly, which is controlled by the opposition, this week released figures showing the variation in economic activity in 2017. This indicator shows a 13.2% drop in activity, and an accumulated slump of 25.1% since 2012.

National GDP contracted a further 14% in 2017 after shrinking 16.5% in 2016

Shortages, legal insecurity, safety concerns, government control over commercial activities and a labor law introduced by the late Hugo Chávez, who created job benefits difficult for employers to honor, all help explain the dramatic drop in business activity. And now, hyper-inflation is accelerating the effects of the crisis. Last week, President Maduro decreed a new wage raise of 58% – the second one this year and the 20th in his four years in government. This is certain to trigger a new wave of business closures, according to economists and industry groups such as Conindustria.

Other typical establishments such as the bakeries La Ensaimada and Mar Bel, in the city center, turned off their ovens months ago. Both businesses had offered traditional sweets from Spain that had been adopted by Caraqueños, such as ensaimadas, turrón, polvorones, marzipan and almond cakes. On José Antonio Páez Avenue, in the district of El Paraíso, a stretch of barely one kilometer yielded a count of 27 closed businesses on a recent Friday afternoon.

A drop in agribusiness

Víctor Maldonado, of the Chamber of Commerce, adds another element that complicates matter even further. So far, Caracas has done a better job of resisting the services crisis than inner parts of the country. But this year there has been a recurrence of power cuts – like the one that plunged Simón Bolívar International Airport into chaos for several hours on Monday – coupled with problems with the water supply and telecommunications.

“The restaurant sector is also very much affected by the brutal drop in agribusiness, which means they can’t guarantee the products on their menus,” he explains.

The drop in commercial activity is even being felt in transit patterns: traffic bottlenecks, a regular torture for Caracas residents just a few years ago, are less frequent.

In October of last year, two-thirds of businesses in the capital were thinking about shutting down completely due to the country’s situation, according to a quarterly survey conducted by the Chamber of Commerce of Caracas.

“We are now preparing the first survey of this year, and we expect that this figure will be even higher, because entrepreneurs have no expectations of seeing a political way out of this economic crisis on the horizon,” says Maldonado.

English version by Susana Urra.