Telephones for the Classes – Socialism for the Masses
Need to phone Venezuela? Forget about it if Hugo Gets His Way
(A magazine article based on this post, "Chavez's New Statism" may be found at FrontPage Magazine. Click here -- DP.)
By David Paulin
President Hugo Chavez has announced his intention to pursue an authoritarian socialist model for Venezuela, and to nationalize key companies. Predictably, the nation’s stock market and currency has gone into a nasty tail spin.
"We're heading toward socialism, and nothing and no one can prevent it,” Chavez declared on Monday, in a national television address. Today he will be sworn into a third term that runs until 2013.
Chavez's embrace of socialism should surprise nobody who has been paying attention to what he's been saying. He was announcing his radical intentions, loud and clear, as early as 1999 when he took office. Specifically, Chavez vowed on Monday to nationalize Venezuela’s telecommunications company, unspecified electrical firms, and to reduce the Central Bank’s autonomy. Among other things, he also called for additional powers for himself so that he could rule by decree.
In respect to the nationalizations, the biggest prize would be Venezuela’s publicly traded telecommunications company, Compania Anonima Nacional Telefones De Venezuela (known by the Spanish acronym CANTV, pronounced "Can-Tee-V”). “Let it be nationalized," he said. "The nation should recover its property of strategic sectors.”
Before 1991, to be sure, CANTV was a state-owned and managed phone company. It also was an international basket case: People calling across town had trouble getting a dial tone – much less a connection. Calling other cities was virtually impossible.
I lived in Caracas during these years, working as a Caracas-based foreign correspondent for several American daily newspapers. The story of what CANTV was – and what it became in the hands of can-do American managers – is a remarkable one. It’s also testimony to the power of markets to transform an economy – in terms of providing investment, transparency, and accountability.
Poorly managed as a state-owned company, CANTV was rife with do-nothing political patronage jobs and corrupt unions that got what they wanted. In short, it was what you’d expect in a nation with a statist economy that, according to corruption-watchdog Transparency International, was among the world’s most corrupt.
Venezuela had a population of about 20 million people at the time – yet only 1.6 million of them had telephones. It wasn’t for lack of money. Rather, the money-losing state phone company took years to hook up phone lines – unless you had political connections, bribed the right officials or purchased a stolen line. The state phone company, according to some accounts, took out advertisements asking its customers not to use the phones too much.
Like many Third World countries, Venezuela realized it needed a modern telecommunications system to develop its oil-producing economy. After a highly politicized congressional debate, it privatized CANTV. A GTE Corp.-led consortium won a bidding process and acquired 40 percent of CANTV for $1.9 billion. The government retained 49 percent, and workers kept the remaining 11 percent. (Dallas-based GTE Corp. merged in March 2000 with Bell Atlantic to form Verizon Communications.)
Consider some of what the privatized CANTV accomplished: From 1992 to 1994, it invested more than $1.1 billion to upgrade and expand Venezuela's phone system – more than was spent during the 20 years preceding privatization.
Led by American managers, CANTV's 22,000 employees installed more than 863,000 phone lines by 1994 – 4 1/2 times as many as were installed during the two years preceding privatization.
More than 460,000 customers were added, three times more than CANTV connected during the two years before privatization.
Bottom line: By 1994, callers almost always got a dial tone. And they usually got a connection.
“The telecommunications system here was very poorly designed and maintained, with 40-to 50-year-old technology,” CANTV's 40-year-old president Bruce Haddad, a 19-year GTE veteran, told me during an interview in July, 1994.
Haddad had his share of problems. He was spoofed on a Venezuela comedy program, had annual reports tossed at him during an annual meeting, and was called a “gringo” and “foreigner.”
At one point, an arrest warrant that seemed politically motivated was issued against him. He was charged with complicity in a natural gas pipeline explosion, caused by a CANTV sub-contractor, which incinerated more than 50 motorists on a major highway. After lying low for a while, Haddad eventually turned himself in and was exonerated.
He and fellow GTE Corp. managers kept the company moving ahead through two bloody coup attempts (one led by Lt. Col. Hugo Chavez); draconian currency exchange controls, a 100 percent currency devaluation, 70 percent interest rates, and annual inflation of up to 100 percent.
Haddad and fellow GTE Corp. senior executive Douglas Mullen shocked Venezuelan workers by mingling freely with them at functions designed to build esprit de corps – something most status-conscious Venezuelan managers would never do.
It will be interesting to see how CANTV fares once it’s controlled again by Venezuelan managers: state employees of a government that, by all accounts, is involved in record levels of corruption.
Haddad, incidentally, never made it back to the states to settle down with his wife, Dorothy. They died when their corporate jet smashed into the side of a volcano near Guatemala City, Guatemala at 3:30 a.m. on Feb. 19, 1997. They were racing the clock to get to Dallas, where the couple was supposed to catch an airliner to China. Haddad was going there as part of his new position, senior vice president of international operations. Both were 43 years old. They had been high school sweethearts.
Author’s note: This was derived in part from articles I wrote for The Dallas Morning News while based in Caracas. For additional analysis, visit The American Thinker and The Devil's Excrement.
Also see these earlier posts: