Global

Venezuela’s Health and Economic Crisis: What Employers Should Consider

The country’s current crisis has forced many companies to reassess their business strategy for operations, which have major implications extending to human resources, health benefits and employee well-being.

November 15, 2018

Venezuela was once a vibrant, upper-middle class country that served as a hub for many multinational companies in Latin America. Depending on the industry, the employee footprint may have been significant or small. Regardless of the volume of employees, events in recent years have made Venezuela a focal point for employers. The country’s current crisis has forced many companies to reassess their business strategy for operations, which have major implications extending to human resources, health benefits and employee well-being.

The Global Institute recently attended a webcast, “Complex Emergency: The Health Crisis in Venezuela,” hosted by Johns Hopkins University’s Center for Public Health and Human Rights and the Center for Humanitarian Health to discuss Venezuela’s evolving economic and public health crisis. Panelists included Gerver Torres, Senior Associate at the Center for Strategic and International Studies; Dietdrick Lohman, Director of Health and Human Rights at Human Rights Watch; Kathleen Page, Associate Professor at Johns Hopkins’ Center for Clinical Global Health Education; and Shannon Doocy, Associate Professor at Johns Hopkins’ Center for Public Health and Human Rights. Participants included researchers, clinicians and advocates.

In order to keep Business Group members updated on the (declining) trend in the country, this publication summarizes key themes from that discussion on how Venezuela arrived to where it is today and the public health implications of the current crisis. It also identifies current challenges faced by local employees and considerations for employers.

How Did We Get Here?

Venezuela is currently undergoing a meltdown of its economy and its public health system. In the last few years, there has been a resurgence of endemic diseases, medicine shortages, a mass exodus of medical professionals and the collapse of hundreds of clinics and hospitals that are now unable to help patients due to their poor conditions.¹

Venezuela’s breakdown is the result of several factors, including: government corruption, hyperinflation, plummeting oil prices and inadequate production of local goods.² Because it has so much oil, Venezuela never produced other goods or products. It sells oil to other countries and imports goods with the revenue, which accounts for about 95% of its export earnings.³ However, much of this changed when oil prices plummeted in 2014.² Venezuela was faced with a shortfall of foreign currency, making it difficult for the country to import goods at the same level. All imported goods became scarce.² As a result, businesses increased prices and inflation rose.² Today, Venezuela’s inflation rate increases by 4% every day.² The International Monetary Fund expects it to reach 1,000,000% by the end of 2018.^2,3

Hyperinflation and the shortage of basic products have had a drastic effect on Venezuelans daily lives. More than three million people have left the country to find refuge in neighboring Argentina, Brazil, Chile, Colombia, Ecuador and Peru.^4,5 Those who remain are faced with disease, violence, hunger, malnutrition and hyperinflation.^5,6

Public Health Challenges

Hospitals in Venezuela currently lack medicine and clean water. About half of the country’s hospitals are closed and running at low capacity due to a lack of medical staff. ⁵ There is also a shortage of medication to treat patients.⁵Patients and their families are expected to obtain medical supplies or medicines on their own.⁵ For example, someone undergoing surgery would be expected to purchase their own surgical gloves and antibiotics.⁵ Some Venezuelans rely on relatives abroad to send needed items.⁵ Others rely on the black market or street vendor, where medication efficacy and authenticity are uncertain.⁵

The breakdown in Venezuela’s health system has also sparked a resurgence in vaccine-preventable diseases like measles.⁷ Currently, many hospitals and clinics do not have vaccines to treat patients. A number of Venezuelans travel across the border to Colombia for free vaccinations. Those who cannot cross to neighboring countries to seek care are left at the mercy of the collapsing health system.⁵

How Has the Current Crisis Affected Multinational Companies?

Since Venezuela’s economic collapse, companies with operations in-country have struggled to find raw materials to produce goods. Product shortages and currency controls have drastically reduced imports.⁸The government has banned companies from raising their prices to keep up with the rapid rate of inflation, sometimes forcing them to sell their products below the cost of production. As a result, many multinational companies left Venezuela, abandoning their assets or selling them cheap.⁸ Other companies have reduced their employee footprint to the bare minimum. Even if the employee headcount is significantly smaller than it once was, for companies who remain in Venezuela, the challenges employees face continues to increase.

What Does This Mean for Employees in Venezuela?

Although most multinational companies have decided to cease operations in Venezuela, some remain.⁹ For example, one company suspended operations due to the lack of resources, but continues to pay plant workers and remains committed to its employees. ¹⁰ Another company furloughed employees due to halted operations but still allows them to eat lunch at plant cafeterias.¹⁰ A similar arrangement exits at Colgate-Palmolive and Johnson& Johnson facilities in Venezuela.¹⁰

While some multinational companies have made accommodations to meet the needs of their employees, many employees are still struggling. About 70% of the workforce make an average monthly salary of only $7.92, putting more than 90% of the population in poverty.² While companies cannot afford to raise wages at the pace of inflation, some are providing compensation adjustments to account for the significant fluctuation in currency exchange. Some are also providing a few important necessities. Many workers bring their cafeteria lunches home to share with their families.¹¹

Additionally, many employees quit their jobs over low wages, often skipping work to find groceries because of widespread food shortages.¹² Commuting to work has also become extremely difficult. A shortage of tires and spare parts has significantly reduced the country’s fleet of functioning buses and subway cars, while public transportation fares have skyrocketed.¹² Some employees spend a quarter of their day's wages just to get to work. Many have decided that it's no longer worth it to go and instead do odd jobs or sell food on the black market.¹²

What Can Employers Do?

Companies still operating in Venezuela have an opportunity to assist employees with their basic needs. When thinking about ways that you can assist employees, it will be important to identify current needs. The standard “go to” programs are not necessarily applicable. For example, looking at health benefit plan design in an environment with depleting and in some cases unavailable medical facilities and supplies does not address the issue. Some things to consider:

Employee Assistance Program (EAP) resources – If you have a local or global EAP vendor, identify what crisis support resources can be deployed. The challenges are beyond that of resilience techniques, but there may be local resources that can provide support and assistance to help in times of crisis. Contact your current vendor to identify how they can assist.
Free or subsidized transportation – Consider providing transportation assistance so employees can to get to work. Buses are hard to find, and many Venezuelans obtain rides from passing dump trucks and pickup trucks. Bus fares rise on a continuous basis, making the average employee’s journey to work unaffordable. ¹²
Offer basic health services at existing on-site clinics – Approximately half of Venezuela’s hospitals are closed, which means there is a significant need for basic medical care. Existing on-site clinics or assistance deployed from a regional clinic, can help fill this gap by providing first aid, vaccinations (if supplies can be obtained) and primary care for employees and their families.
Ensure that employees get at least one meal while at work – Food shortages and malnourishment are commonplace throughout Venezuela. Despite employees’ challenges getting to work, many go just to have a meal. Providing food to employees with the most need is critical.
Employee/Community Service/Support Campaigns – Many companies have internal departments focused on charitable outreach to communities where they have operations. This often takes the form of assistance to employees in the aftermath of a natural disaster. The situation in Venezuela could be an opportunity for employee outreach to assist in the shipment of basic goods.

In such a challenging political, economic and labor climate, we encourage anyone considering implementing any actions to seek the consultation of their labor counsel.

The current crisis in Venezuela serves as a reminder that some markets are extremely fragile and can have a significant effect on the day-to-day operations for multinational companies and their employees. Although many companies are reducing their footprint, some will stay because of business needs. The employees of these companies will face numerous challenges until the current situation improves.