Venezuela: The Challenge of Advocacy in a Collapsing Country

Despite the obstacles created by frequent protests and an unstable political situation, both the President and CEO of the Venezuelan Chamber of Franchises, or Profranquicias, continue to champion the interests of franchise businesses in the South American nation.

By J.P. Carroll

Open just about any newspaper or turn on any news channel, and you’ll see that life for everyday people in Venezuela is tough. The country’s economy is in shambles as it contends with one of the world’s highest inflation rates (the International Monetary Fund’s World Economic Outlook for April 2017 forecast that inflation for the country in 2017 would reach 720 percent), and people are forced to stand in long lines at supermarkets and pharmacies for basic food staples and over-the-counter medicine. On top of all that, while struggling to merely survive, imagine that you are responsible for advocating on behalf of some of the biggest brands in the entire country, and the world. That’s where Luis Vicente Garcia and Abel Calvo come in as the President and CEO, respectively, of the Venezuelan Chamber of Franchises, also known as Profranquicias.

“It’s part of what we live here every single day,” Vicente said with a tone of normalcy, regarding the recent storming of Venezuela’s National Assembly by an angry mob of protesters. Given the day-to-day difficulties in the country from frequent protests against the government, Calvo said that the organization has decided to focus most of its energies on the long-term view.

As a result of the challenging economic climate, Profranquicias increasingly finds itself no longer prioritizing advocacy exclusively on behalf of franchise clients, instead partnering with other major business associations and advocating for continued private business and real estate ownership. The very existence of franchising and non-state-run businesses writ-large is under threat as non-partisan experts in both economics and politics do not see signs of the country’s situation improving anytime soon.

In recent years, businesses operating in Venezuela have had property seized and the government has taken a strong hand with employees. The Venezuelan government expropriated and nationalized an ExxonMobil operation in Cerro Negro in 2007 and only received $918 million in 2012 when seeking $10 billion in compensation. More recently in December 2015, the Venezuelan government arrested and then freed the workers of a Pepsi-Cola plant in the country.

The Venezuelan economy has been on shaky ground with international investors ever since Hugo Chavez, a former military officer who attempted to take power in a coup attempt in 1992 before taking power in 1999 after winning a democratic election as the leader of the Socialist Party.

To ensure Profranquicias could continue to rely on a strategy of showing strength in numbers, the organization met with other business advocacy organizations for a “National Congress” event in March. The joint effort paid off with approximately 500 attendees at the conference. The main speakers were political scientists, economists who focus on public policy, and pollsters who gave some of the country’s major business leaders a crash course in political science and economic forecasting. “We focused on what changes are necessary to promote a healthy environment for business in Venezuela,” Calvo explained.

Profranquicias frequently acts as an honest broker these days between the members of its association as well as with suppliers. Calvo emphasized that the Venezuelan business community is starting to realize that they are all in this together, even with competing businesses. Vicente also raised many of the points brought up by Calvo during a video conversation that included problems getting a functional Internet connection. Basic, high quality Internet access is a major challenge for businesses in Venezuela, an OPEC member state.

Such frequent challenges, whether electricity shortages, poor Internet service, or shortage of food staples, have forced many Venezuelan businesses and their advocates to be “creative,” Calvo noted. As an example of such creativity, Calvo shared the example of IFA member McDonald’s in Venezuela. “Sometimes they don’t have French fries so they substitute with yucca — a staple of the Venezuelan diet comparable to rice and maize — and other products,” he said. “They keep focusing on what they can find, so they have focused strongly on desserts and ice creams. It’s still dire times. It has put to test our creative and managerial capacities not only of our members, but as an association as well.”

There are moments that creativity is not enough and the ongoing dual political and economic crises hit home in the most personal of ways. “I’m sad and very ashamed to say that the average is one person killed per day in the protests, most of them are young students, most of them from lower income backgrounds because they are the people that feel they have no future in these circumstances. It’s very hard to balance our responsibilities as professionals and as citizens at the same time,” Calvo said. “I’m not married and don’t have kids but, suddenly I became the support of my elders, so it imposes a greater strain on your personal autonomy. Things you take for granted like buying milk or soda, sometimes you have to eat differently. Some people are losing weight, considerably. I haven’t lost any weight but I’m not eating as healthy as I should but sometimes [unhealthy options] are the only ones I can find. It may be shameful to say, but it’s a reality.”

Profranquicias increasingly finds itself being drawn into political matters as the country continues to deal with a challenging political and economic environment. “We have to combine our dual responsibilities as professionals and members of the association and as citizens with our own [personal] views on the situation, not just for us but for our employees and our members,” Calvo explained. “Protests are a civil liberty, so you have to balance how much people should work and how much they can join protests. You also have to do it in a manner that the government doesn’t feel that you’re in favor of the protests,” he added.

In spite of the uphill battle for the dignity of franchise business owners and their employees, Calvo and Vicente still hold out some hope, while continuing to find innovative ways to promote franchise businesses. Calvo and Vicente are leading a project between Profranquicias, one of Venezuela’s largest banks, and MasterCard to develop a multi-brand, franchise-affiliated credit card. Once they reach 50,000 units of credit card distribution, Profranquicias will collect a small percentage of the credit card usage fees along with the partner bank and MasterCard. Calvo noted that the project largely owes its success to a cultural shift in Venezuela as people are forced to adapt to harsh economic realities. “People now buy food at the supermarket and medicine at the drug stores with their credit card. Normally in Venezuela, the credit card was only used for emergencies or special occasions, nowadays, it’s of daily use. So, in a sense, it benefits the banking sector and it benefits us with this ongoing project.”

Recently, the U.S. Treasury Department has sanctioned a number of senior-level Venezuelan government officials, including the country’s President, Vice President and its Supreme Court justices. The economy continues to appear to be in freefall in spite of significant investments by Chinese and Russian business interests. Nevertheless, Luis Vicente and Abel Calvo of Profranquicias keep marching forward without complaint, trying to advance entrepreneurship while trying to navigate one of the world’s most challenging legal, economic, and political systems.

J.P. Carroll is the Associate Editor of Franchising World.