U.S. sanctions raise costs for Venezuela firms, business leader says

CARACAS, Feb 11 (Reuters) - U.S. sanctions against the government of President Nicolas Maduro are raising the cost of doing business for firms in Venezuela that are already struggling under decades of misguided socialist policies, the head of the country’s main business federation said in an interview.

Washington in 2019 created a broad sanctions program that has crippled Venezuela’s oil exports as part of efforts to push Maduro from power, but the leftist president has held on thanks to support of the military and backing of allies including Russia and China.

Ricardo Cusanno, head of business group Fedecamaras, said sanctions make it more difficult for business to import goods, lead some suppliers to drop Venezuelan clients, and boost the cost of financial transactions.

“Things get more complex, and that complexity turns into costs,” Cusanno said in an interview on Wednesday. “For example, providers that simply don’t understand the complexity of Venezuela, even though they’ve historically been providers, tell you ‘This is as far as we can go.’”

Cusanno said the country’s economic crisis is the result of ill-fated policies including price controls, arbitrary expropriations and systematic disrespect of the property rights of businesses and individuals.

Venezuela’s economy shrank by 41% in the fourth quarter of 2020 compared with the same period the year before, while manufacturing dropped by 20%, according to calculations by the opposition-linked Venezuelan Observatory of Finances, which also estimates that inflation in the month of January alone was 55.2%. The government has not released economic data for 2020.

Cusanno acknowledged that the sanctions were one of the reasons that Maduro’s government abruptly began an economic liberalization in 2019 that allowed for dollar-based transactions and freed up imports of goods.

U.S. sanctions on Venezuela specifically target government agencies and state-owned enterprises without prohibiting commerce between private enterprise of the two countries.

But business leaders say that in practice, Venezuela-related transactions are often perceived as so risky that commercial partners will at times end supply agreements or decline purchase requests out of fear they could fall foul of sanctions.

Cusanno said that acquiring equipment for the electricity industry, for example, is complicated by the fact that Venezuela’s power sector is controlled by the state - meaning suppliers fear being linked to Maduro’s government.

“The risk is that we end up being a country that is sanctioned for decades and political change never happens,” he said. “We’re not interested in this, among other things, because we have decided to stay here. And there are 25 million other people whose quality of life in one way or another (depends on) the private sector structures that still exist.”

The U.S. State Department, consulted about Cusanno’s comments, said in a statement that Maduro is responsible for the country’s economic collapse and associated humanitarian crisis.

“The United States maintains broad exemptions and authorizations that allow for the provision of humanitarian assistance, including related to COVID-19, and the commercial sale and export of agricultural commodities, food, medicine, and medical devices, to Venezuela,” reads the statement.

President Joe Biden’s advisers said before he took office that his administration would review all existing sanctions programs.

Fedecamaras has had tense relations with the government since 2002 when its leader, Pedro Carmona, briefly was named de facto president during a botched coup against then-president Hugo Chavez.

Many were surprised last month when Fedecamaras received members of the Ruling Socialist party, including National Assembly president Jorge Rodriguez, at its headquarters. Cusanno said the meeting came at the request of the government.

Fedecamaras proposed changes to labor and business regulations and insisted that humanitarian efforts including obtaining vaccinations for the coronavirus should be carried out without political bias, Cusanno said. (Reporting by Brian Ellsworth and Mayela Armas, additional reporting by Matt Spetalnick in Washington Editing by Alistair Bell)