Venezuela's economic crisis catches up with malls
Apr. 23, 2014
CARACAS, Venezuela (AP) — Staring through a glass storefront at the Sambil shopping mall, Aleimar Sanchez sees more than a struggling business in the near-empty shelves of a Casio electronics store. She sees a country in sad decline.
Since its inauguration in 1999, Caracas' biggest mall has been a hive of frenzied shopping, a glitzy counterpoint to the anti-capitalist tirades of the late Hugo Chavez. Today, a few die-hard shoppers stroll through dimly lit corridors, past stained walls in need of a paint job, and shuttered boutiques. In those stores that are open, employees spread out their dwindling supply of garments, cellphones and designer bags on shelves and window displays.
Fifteen years of socialist rule and an acute economic crisis is catching up with Venezuela's shopping malls, once impenetrable oases of consumerism where rich and poor alike sought refuge from crime-ridden streets.
"It makes you bitter to think that a country so rich is sinking deeper into ruin every day," said Sanchez, a 39-year-old sales clerk visiting from Puerto Ordaz in southern Venezuela, where she said shelves are even more barren.
While a decade of rigid price controls long ago forced Venezuelans to scavenge for basic goods like toilet paper and corn flour, an oil-fueled spending boom and hands-off approach to less-essential parts of the economy had always left stores filled with North Face jackets and Louis Vuitton handbags, catering to the well-off looking display their social status with designer brands.
Things started to change with the election a year ago of President Nicolas Maduro and the onset of an economic crisis that has been the main driver of deadly protests shaking the country over the past three months.
With the supply of dollars drying up as oil production wanes, imports have fallen and shortages have hit record levels. Meanwhile, galloping 57 percent inflation is eroding families' purchasing power.
Maduro says the problems are a result of price gouging and hoarding by opposition-aligned merchants waging an "economic war" to destabilize his government.
His response has sent shockwaves through the retail industry. In November, he seized a nationwide chain of appliance stores and slashed prices on fridges, plasma TVs and computers. The fire sale, which emptied the shelves, was followed by an even more devastating blow to business: a freeze on commercial rents at rates more than 50 percent lower than they had been at some malls.
The retail landscape has never looked more forlorn.
Incomes for shopping malls plummeted by as much as 75 percent as a result of the rent freeze, according to Claudia Itriago, director of the Venezuelan Chamber of Shopping Centers.
Malls that were a rare magnet for investment under Chavez are now at risk of shutting down. To reduce costs, many are cutting back on frills such as holiday displays, and even essential services like cleaning and air conditioning. At Sambil, many of its escalators sit idle for lack of maintenance.
At Tolon Mall, one of the capital's most chic shopping spots, dozens of stores are closed on any given day. Strict labor laws make it nearly impossible to fire workers. So to get around the juggernaut and reduce payroll costs, many stores don't bother to open every day. When they do, bored clerks fiddle with their cell phones and flip through magazines.
Until recently, Venezuela's shopping centers thrived as consumer spending surged. Between the late 1990s and 2007, the number of malls in the country nearly doubled to 400. Owners invested lavishly in security systems and hired armies of guards, making malls one of the few safe places in a country with one of the world's highest murder rates.
This year, shopping centers have slashed security and maintenance personnel, something they can do because such work is outsourced. Many shops at Sambil now close before dark out of safety concerns.
How quickly shelves are restocked may be a key indicator of events to come. More than the protests, which are concentrated in middle-class neighborhoods and are unlikely to force Maduro's resignation, it's the the health of the economy could decide the president's fate.
The International Monetary Fund is forecasting the economy will contract 0.5 percent this year.
Merchants suffering the most are those selling clothes, toys and electronics — anything that's imported.
"There is nothing to buy," said Dariana Henriquez, a 20-year-old student looking into a barren Tolon clothing shop. "We come to the malls to have fun, but imagine if there is nothing to see, nothing to buy?"
Associated Press writer Joshua Goodman contributed to this report.