Ice cream manufacturer Efe falls down the cliff
After having survived social and political troubles, 85-year-old Helados Efe is in the red for the first time, due to worker absenteeism and internal conflicts
This subject matter has been brought to the Dossier section because the company has overcome all sort of political and economic storms in 85 years. However, it seems that it will not survive the storm of the 21st Century Socialism. Following 24 years of non-stop growth in the domestic market, for three consecutive years, internal conflicts have pushed the company to the brink of closure.
A new way of relating or a new way of living amidst violence has taken hold among the 450 workers that help bring this cherished dessert to Venezuelan homes. The desire to manufacture the best possible product has been replaced by divide, political polarization, and conflict. "The work environment of the company has become tense, very much similar to the situation facing the rest of the country," said Félix Gastón, the general manager of Helados EFE.
Over the past 10 years, in Venezuela, 170,000 companies have closed their doors out of the 617,000 firms that were in place when President Hugo Chávez first took office, according to the Federation of Trade and Industry Chambers (Fedecámaras).
There is a variety of factors behind this trend, including expropriations, and labor laws and rules that are suffocating the private sector, while labor unions seek nationalization of industries.
Another factor triggering the closure of companies is the stringent foreign exchange controls, which have been in place since 2003, with a forex rate of VEB 4.30 per US dollar. This virtually prevents the purchase of inputs necessary for production.
Recently, a new labor law was enforced. This instrument, among other things, provides for firing freeze, which is translating into worker absenteeism and undermining production.
Overall, this results in a lethal equation: increasingly expensive labor and significant production drop.
A rapid growth
Helados Efe was an ever-growing company until 2008. It went through critical episodes, including the 2002 general strike and the consequent political crisis, foreign exchange controls, expropriations and new restrictive labor laws. In the 90s, the company yearly production averaged 16.43 million ice cream liters. In 2005-2006, the firm made 21.7 million liters; in 2006-2007, production jumped to 24.77 million and in 2007-2008, production hit the highest level of all times at 28 million tons of ice cream.
Production growth came after the company made important investments. A majority stake of Helados Efe was bought by giant food company Alimentos Polar in 1987. Then, Alimentos Polar diversified products and entered new markets, with a significant increase in quality standards.
The successful production model derailed due to new negative factors. In 2009, production started to plummet. In 2008-2009, production fell to 24.74 million liters. In 2009-2010, production tumbled to 20.08 million liters. In 2010-2011, the company's output declines to same level recorded in the 90s, namely 16.63 million liters.
This was somehow a paradox, as demand was high and production capacity was high, but production could not meet demand. Consequently, for the first time in 24 years, the company was in the red. Thus, losses recorded a six-fold increase in three years. The question was: why production plummeted after a significant investment and the introduction of topnotch technology?
An unprecedented fact sheds some light on the nature of these changes. The company's productivity has fallen 57% in the last five years. What does this mean? It means that every single worker has been producing less than half of what they used to produce five years ago.
According to the plant's manager, Juan Alberto Seijas, all this happens in spite of significant investments in state-of-the-art equipments that expanded the production capacity. Currently, Seijas said, "We have installed capacity to produce 32.5 million liters, but we are producing 16 million liters only."
What is going on?
The company's labor union believes that the main factor behind the production decline is the lack of staff. This is one the claims of workers in their conflicts with the firm.
Gastón highlights four factors pushing Helados Efe to the brink of closure. First, worker absenteeism increases on a monthly basis, thus undermining production. Currently, the plant operates with an absenteeism rate of 10%, Gastón explained.
In November 2011, worker absenteeism stood at 3.8% and by August 2012, it increased to 14%. In Venezuela, the worker absenteeism average rate is 2.5%.
According to Gastón, production disruptions are caused by union leaders, even though their claims could be solved without shutting down production.
Currently, production lines are halted for any reason, even to take workers to political rallies downtown Caracas. Workers' meetings take place at the very workplace during working hours. Besides, unscheduled meetings are held at the production plant. Such disruptions have resulted in losses in the past two years amounting to 1.93 million ice cream liters that are not being produced.
It is worth noting that Helados Efe has one of the best collective bargaining agreements of the market. Currently, the agreement corresponding to 2012-2014 is under negotiations. That is to say, the future of hundreds of workers depends on the outcome of such talks.
Translated by Adrián Valera Villani
President Nicolás Maduro is not only the heir to the throne, but also to an economic crisis which demanded urgent measures to rectify the course. The crisis showed up in two aspects: a 50% inflation estimate, and shortage of staples ranging between 70% and 98%. These issues might hit the President's poor popularity; considering his feeble electoral victory of 1% over his challenger.