Some supporters of this position, refer to a “post-industrial society”, based upon expansion of services, in which goods producing activities lose relevance.

This approach would make sense in highly developed economies, in which a good part of the services develop at a greater pace and have a high intellectual aggregated value, thus producing an increase in the demand. In those economies all sectors grow; being the services sector the one with the fastest growth rate.

This is not the case of the economies with a low degree of integration, like ours. The growing trend towards the service sector of the Venezuelan economy is due to its limitations and deindustrialization process.

Except for the case of the financial system, the capital generated and the productivity of the service sector, are very low. Meanwhile, all of the indicators in the manufacturing industry have been decreasing for more than a decade. The Gross National Product (GNP) in the sector between 1995 and 1999 decreased by 13% in real terms, while the number of establishments dropped to less than half in the 1990-2002 period. (Atlas of the Small and Medium Industry -PYMI- by the Ministry of Planning and Development).

These circumstances render the policies aimed at reactivating industrialization (such as the preservation of the country’s existing industrial capacity) valuable. Only by recuperating the interrupted industrial growth will unemployment and substandard self-employment decrease.
In this endeavor, public policies, as well as the measures that the private sector -in association with the public sector- may take are important. The most important actions should be focused towards the most dynamic industrial sector: the Small and Medium Industries (PYMI’s).

An important consequence of deindustrialization in the last decade -originated by an abrupt change in policies- was the disarticulation of the industrial network and the increasing dependence on imports of industrial supplies.

The most affected sector among all industries was the PYMI, due to its greater exposure to competition.
For the surviving industries, the current circumstances are a very good opportunity. Foreign currency exchange control has mitigated external competition, a good chance for the industries to recuperate their participation in the markets.

These circumstances, nevertheless, have come up after more than ten years of loss of capital, and structural weaknesses in the sector.

Both problems must be addressed in order to strengthen and reactivate the sector. The protection that foreign currency exchange control renders is necessarily temporary.

This makes the strengthening of the sector more necessary in order to avoid a new crisis when the situation reverts.

Most frequently, the PYMY’s are a result of individual efforts by their owners, who put their personal resources at risk, to perform an activity for which they have previously attained either a know-how or a good knowledge of the market. These characteristics makes of the PYMY’s enterprises with a strong potential for development, that nonetheless require initial support to stabilize and start to grow.

Traditional support policies have focused on indiscriminate funding and protection that enabled them to grow in an artificial environment.
As soon as macroeconomic restrictions (and above all, prejudices or ideological trends) forced the decrease in the flow of funds and the withdrawal of protection, these enterprises were left to their own fate; and many of them had not achieved the necessary maturity and developed the necessary self reliance to survive in a competitive environment.

Today, industry is characterized by two factors: a high technological component and globalism (understood as perfect insertion of the national, local and regional markets into global markets, which forces these markets into global competition).

This last phenomenon is a result of the evolution of communications, transportation, and computer technology, which have permanently been reducing the size of the planet by shortening distances and therefore their associated costs.

As for the technological component, competition is no longer based upon low cost of labor or of raw material (static competitive advantages), but upon the massive incorporation of new capital, technology, and design.

Industry has become not only an intense capital investor, but also an intense user of intellectual components such as technology and design.

The objective of becoming part of this new industrial economy is not achieved by blocking its access to our market, but by adapting to it. This implies paying special attention to the evolution of those trends and supporting them.

Published in Quantum No 27

Rodolfo Cibank