CARACAS, Venezuela (AP) — The government allied with Samsung on Wednesday to jointly produce consumer electronics and appliances, a deal coming after a week of raids on Venezuelan retailers and the emptying of store shelves by consumers taking advantage of officially forced discounts.
Rafael Ramirez, Venezuela's longtime oil minister and now vice president for the economy, signed the agreement with the South Korean company's regional president, Hyun Chil Hong, a day after the National Assembly gave President Nicolas Maduro powers to rule by decree for up to 12 months.
Economists consulted by The Associated Press said they expected Maduro to tighten government controls on the economy to the detriment of private enterprise.
Samsung will initially invest $50 million in a factory for the joint production and Venezuela will take a controlling interest, Ramirez said. Its location, output and start date won't be announced for at least a month.
In the meantime, the government will directly import 400,000 Samsung major home appliances and other electronics worth about $100 million to arrive in "the coming days," Ramirez told reporters at the signing ceremony.
He said they would come from Samsung plants in Brazil, Mexico and Argentina.
Rather than a sign of investor trust, the Samsung-government alliance underscores what is fast becoming the prevailing business model in Venezuela's inflation-plagued economy, with the government supplanting private business and directly supplying goods to stores at fixed, discounted prices.
"All countries have their problems," Hong said when asked why Samsung would invest in a country with a distressed economy. "I think we can overcome this type of situation with good collaboration."
Economists say the government directly imports more than 40 percent of the consumer goods sold in Venezuela, compared to 15 percent in the late 1990s when the late Hugo Chavez was first elected president and steered the economy of the major oil producing-nation toward greater state control. He died in March.
Venezuela signed a similar agreement earlier this month with Mexican appliance maker Mabe to produce and sell stoves, refrigerators and other durable goods at "fair prices" well below what Venezuelans have grown accustomed to amid soaring inflation.
In exchange for billions of dollars in loans, the Venezuelan government is also a major buyer of Chinese-made goods that stock the shelves of a government-run retail chain.
Maduro on Nov. 8 ordered the military to take control of several retail chains accused of gouging consumers by charging prices that he says don't reflect the currency exchange rate the government uses to mete out increasingly scarce dollars.
More than a week later, long lines and armed soldiers are still outside Caracas stores that the government intervened in, as well as other retailers that were spooked into marking down their inventory by up to 70 percent.
While the nationwide fire sale is rallying Maduro's supporters ahead of next month's mayoral elections, it hasn't staunched demand for U.S. dollars in the illegal black market, where the bolivar has plunged in recent weeks to a tenth of its official value.
Instead of devaluing the currency, which would add to inflation already at a two-decade high of 54 percent, Maduro is vowing to keep prices low through Christmas and begin setting prices and profit levels across industries. Speaking at a rally Tuesday night to commemorate passage of the law granting him emergency decree powers, he vowed to deepen his offensive against "speculators" who he says are trying to destabilize the country.
"They underestimated me; they said Maduro was an amateur," he told the crowd of 2,000 supporters outside the presidential palace. "What you've seen is little compared to what we're going to do."
Associated Press writers Vivian Sequera and Joshua Goodman in Caracas and Frank Bajak in Lima, Peru, contributed to this report.