Venezuelan small businesses and the economic crisis: reflections from Europe

Abstract

Examines the Venezuelan economic crisis and the role and current situation of small businesses in its economy and looks at national policy towards this sector. By way of contrast, describes small-and medium-size enterprises (SMEs) in the European Union and reflects on how European SME policy can be of interest to a developing country such as Venezuela. The Venezuelan economic crisisThe source of Venezuela's growth since the 1970s has been its immense oil wealth. The economy has been built on this. However, it is also the source of its problems and the long gestation of the economic crisis lies in the strategies built on this easy influx of foreign exchange. With the fall in oil prices in the 1980s the shaky superstructure of state intervention, populism and corruption began to show its cracks, and awareness has grown in the country that the real problems lie in the foundations of this edifice. It seems increasingly difficult to patch up the economy.The growth in the early 1990s was facilitated by the rise in oil prices resulting from the invasion of Kuwait. The income from privatization also stimulated the economy. However, the economic crisis sharpened in 1994 with increased contraction in output. Table I [1] shows severe fluctuations in GDP -1994 saw the biggest decline in GDP since 1989.

Employment and SMEs during crises

“…On the one hand, SMEs may suffer disproportionately from economic downturns due to their limited financial resources and dependence on banks' lending, paying for such high interest rates (e.g. Mulhern 1996 for the crisis of 1989-1994 in Venezuela; Domaç and Ferri 1999 for the 1997 Asian financial crisis; and Özar et al 2008 for the 2001 Turkish financial crisis). Adding to the financial aspect, their relative shortcomings in terms of technological, managerial and human capabilities may reduce their capacity to overcome the economic crisis (Gertler and Gilchrist 1994;Forbes 2002;Beck et al 2005;Butler and Sullivan 2005;Régnier 2005;Marino et al 2008;Das and Pradhan 2009).…”

Micro and Small Enterprise Growth in Turkey: Under the Shadow of Financial Crisis

“…These policies, for the most part, do not include discretionary programs and policies to support MSE. However, in emerging countries, where weaknesses exist in the economic environment and MSE are relatively less institutionalized, there is room for specific programs and policies encouraging the creation and development of MSE (see Mulhern (1996) for the Venezuelan case). Additionally, emerging economies, after liberalizing their financial sectors, become increasingly more vulnerable with respect to the adverse effects of financial crises, independent of the origins of the crisis, be it within their own country or elsewhere.…”

“…First, as in the case of Venezuela, the impact of a financial crisis on small business is almost immediate. Within a one‐year period following the crisis it is estimated that 50% of the SME in Venezuela were either closed or became inactive (Mulhern 1996). However, as was the case in Indonesia during the 1998 financial crisis, many SME were quick and flexible in responding to the rapid changes caused by the crisis.…”

The Strategic Management of Market Information to SMEs during Economic Crisis

“…SMEs may suffer disproportionately from economic downturns, because of their limited financial resources and dependence on banks' lending, paying such high interest rates (Mulhern [13] for the crisis of 1989-1994 in Venezuela, Domac¸ and Ferri [14] for the 1997 Asian financial crisis and Ozar et al [15] for the 2001 Turkish financial crisis). Adding to the financial aspect, their relative shortcomings in terms of technological, managerial and human capabilities may reduce their capacity to overcome the economic crisis [16,17,18,19,20,21,22].…”