Economics of Liberty

10 Signs Your Country is a Banana Republic: A Cautionary Tale

#4. Foreign Companies Avoid Your Country Like the Plague

International commerce and investment are dynamics that are here to stay in our globalized world. Decreased foreign direct investment and companies taking their operations elsewhere are signs of a country whose institutional foundation is built on a house of cards. Economic downturns always follow these developments.

Venezuela is no stranger to this business flight. Many companies, such as Ford and Toyota, have had to shut down operations inside the country due to restrictive price controls that stymie the importation of essential products for the industry. In the same vein, the oil industry in Venezuela faced similar issues, as American, Malaysian, and Russian companies have had to take their projects elsewhere due to the onerous regulations.

When companies can’t produce and consumers can’t voice their preferences in the market, the only option is to exit.

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