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Crisis in Venezuela: How Shippers Are Coping

Civil unrest in Venezuela has many shippers worried about the impact on the flow of goods into the country. Nelson R. Cabrera, director of business development with Lilly and Associates, has some advice on how to cope with the crisis.

The Venezuelan trading environment used to be much more open, says Cabrera. Importers had steady access to currency. In the last year, however, the country lost some $9bn in reserves. In response, the government shifted its focus to address the trade imbalance and inflation, which is among the highest in the region.

Companies suddenly found it more difficult to import secondary and non-vital products such as consumer electronics. The result was a shortage of many types of goods.

Cabrera believes the situation is short-term in nature. Venezuela has the largest proven oil reserves in the world, he notes. Many multinationals continue to do business in the country and remain committed to the market. The public, however, is suffering from huge disruptions in the flow of trade, and can’t send cash overseas.

Cargo moving into Venezuela can’t always reach the original destination. Most successful importers and exporters have contingency plans in place, Cabrera says. They might be holding two to six months’ worth of safety stock. About a quarter of that total is being kept in Venezuela, while the rest resides in a third country such as Panama, just a few days away by ship.

Regulations on trade in Venezuela change virtually from day to day – even while goods are on the water. The result is unexpected costs in the supply chain, as companies are forced to obtain new permits or pay additional taxes. Cabrera recommends that they get “good solid advice” from legal experts who are familiar with Venezuelan regulations.

“You need to be prepared before you even think about making your first exportation,” says Cabrera. “And constantly be checking [on regulatory changes].

“You don’t have a problem doing business [in Venezuela] if you can navigate the regulatory environment,” he says.

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