Venezuela gets desperate, seizes a GM plant and vehicles

April 20, 2017

The political climate in America may be tense at the moment, but it's nothing compared to what's happening in Venezuela. The South American nation is in such a state of chaos that authorities in the city of Valencia have seized a General Motors plant, forcing the automaker to suspend operations there for the foreseeable future.

A complicated situation

The troubles in Venezuela are complex, but they're largely rooted in the country's heavy dependence on oil exports.

When crude prices were high, the situation in Venezuela was better, but since oil began its sharp plunge in the summer of 2014, the economy has been in a tailspin. Inflation has surged, reaching 800 percent last December.

The financial troubles have had a direct effect on everyday Venezuelans. The country has become an outrageously dangerous place--the most murderous on Planet Earth--and the U.S. State Department has warned travelers about visiting Venezuela "due to violent crime, social unrest, and pervasive food and medicine shortages."

The current president, Nicolas Maduro, isn't exactly endearing himself to the people during this time of turmoil. In the face of rising criticism, he's led a power grab, including the declaration of a state of emergency which can force Venezuelans to work on farms for up to 60 days. Last month, he was briefly aided in his political machinations by the country's high court, which shut down the opposition-led legislature for 24 hours, before massive protests forced the court to overturn its own ruling. 

It's complicated, is what we're saying.

GM plant grab

In the midst of all that chaos, it's been difficult for GM to figure out exactly why its factory in Valencia was seized or why the company's vehicles were taken from the property. Venezuela's Information Ministry hasn't provided any useful details about the incident as of yet--but then, given the political climate, the ministry may be just as confused as GM.

And so, for now, GM has suspended its activities across the entire country. It has laid off some 2,678 factory workers, though it has promised to pay separation benefits, if the Venezuelan government will allow it. The suspension has left GM's 79 dealers to wonder when deliveries of vehicles might resume. 

Future prospects

Other automakers in Venezuela might not have had their property seized in the way that GM has, but they've all been suffering for some time. The political turmoil, sky-high inflation, and difficulty in getting parts and raw materials has put a crimp in both manufacturing and sales. 

Will the situation in Venezuela improve? No one knows for sure. Since December 2016, OPEC has been scaling back oil production, which could eventually boost prices and stabilize the economy. However, the change won't happen overnight, and oil production gains in other countries--including the U.S.--could offset those reductions to some degree, minimizing their impact. 

For now, most observers expect things in Venezuela to be very shaky. And if the price of oil doesn't recover, the problems that Venezuela could spread to other countries like Russia, which depend on petroleum for revenue. 

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