A year ago, the opposition to Venezuela's
government coined a term: the enchufados.
It translates roughly as "plugged-in elites" (enchufe is the Spanish word for electrical socket), and
it refers to the various cronies and other groups aligned with the government that
are profiting from Venezuela's massive economic distortions.
The enchufados are a large,
heterogeneous bunch, and they arguably hold the key to Venezuela's political
Last year, after the death of Hugo Chávez, the opposition
candidate Henrique Capriles went negative against his acolytes. He tried to
paint Chávez's heirs as simply looking to profit from the government. Now, many
in Venezuela talk about the enchufados -- everyone either knows
one, is one, wants to be one, or hates one.
Who are the enchufados, and what do they do?
Enchufados profit from the system of price
controls and heavy government regulation that characterizes the Venezuelan
revolution. They do so by smuggling, importing at subsidized rates, winning
government contracts thanks to friends in high places, or being in charge of
Some are in the military, some are business
people, and others are public employees. But foreign investors, large multi-nationals,
and even foreign countries qualify.
Key among the enchufados is the military. Their
main line of business is smuggling -- and the product that accounts for most of
the action is gasoline.
Gasoline in Venezuela is the cheapest in the world. A liter of gasoline
costs less than a penny, but in neighboring Colombia it goes for about $1.09.
The profits from sneaking gasoline across the border are irresistible for the
members of the military in charge of safeguarding it. Recent estimates suggest
million liters are smuggled per month over the border with Colombia alone.
Aside from that, there is significant smuggling of gasoline to neighboring
Caribbean islands, such as Trinidad and Tobago.
The military is in charge of many other
"businesses" in Venezuela. Many have been called out for alleged links to the drug trade. Last year an Air
France jet landing at Charles de Gaulle Airport in Paris from Venezuela was discovered to be carrying the
largest drug haul ever intercepted on French soil. That could not have happened
without the consent of the military officials in charge of the international
airport in Caracas. (In the photo above, members of Venezuela's National Guard seize a 2.6-ton shipment of cocaine that was on its way to Honduras.)
The military also controls the ports, and frequently
takes bribes in order to speed up
imports. It is also in charge of weapons purchases, and holds key
positions in the oil industry. Essentially, being in the military means no
oversight to shady dealings. In that regard, the country's chief enchufado is Diosdado Cabello, the president of the
National Assembly and, in effect, leader of the Venezuelan Armed Forces.
As important as they are, members of the
military do not work on their own. They have found allies in business people looking for
preferential access to cheap dollars that they can then resell in the black
market for a hefty profit.
Some of these people come from Venezuela's
traditional elites. Others are foreigners connected to governments that are on
good terms with Caracas: Many Chinese or Arab businessmen are doing very well
in today's Venezuela. Foreign firms whose governments have proven to be allies
of the country have also benefitted handsomely. For example, Brazil's Odebrecht,
a giant construction company, has billions of dollars in projects with the
The enchufados also include Venezuela's veritable
"army" of 2.6 million public employees. Many of these hold positions of
great power, with Venezuela's hyper-regulated economic environment giving much
leeway to bureaucrats' ability to make life miserable for citizens. It is not
infrequent to hear of stores being shut down by overzealous inspectors from
everything from the tax agency to the agency in charge of
Enchufados play an important role in Venezuela's
power dynamics. Many of the government's nonsensical economic policies are made
to ensure they continue reaping the rents from their positions of power -- and
stay out of the government's hair. All of Venezuela's distortions benefit
someone, and with the government's plummeting popularity weakening its grip, it
needs to keep these power players happy.
Distortions keep bureaucrats busy collecting
bribes and reaping the benefits of their power. The rents public employees
collect "on the side" keep them off the streets, where they would normally
be protesting against their low wages. Likewise, the benefits from the black
market keep the military happy. And business people making money off of the
government are less likely to conspire against it. Add all this up and it becomes
unlikely the government will eliminate currency or price controls: They may be
causing scarcity, but they are needed in order to keep the enchufados happy.
Some investment banks have seen signs that the Venezuelan
government is opening up to more rational economic policymaking. Their hope is
that the government has finally understood that price controls, currency
controls, and the hypertrophied socialist model at the root of Venezuela's
current troubles will all be dismantled.
This is unlikely. While there will be some
tinkering, distortions are not going to go away altogether. They are an
important tool in keeping the chavista coalition together. Current distortions
are wrecking the Venezuelan economy, but they are a useful political tool for
In that regard, the enchufados will remain
plugged in for some time to come.
is the Venezuela blogger for Transitions, editor of Caracas Chronicles, and author
of Blogging the
Revolution. Read the rest of his posts here.
JIMMY PIRELA/AFP/Getty Images