Rum Seller Shows How Capitalism Thrives in Socialist Venezuela

Patricia Laya and Nicolle Yapur
·6 min read
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(Bloomberg) -- Venezuela’s socialist government has dogged almost all of Alberto Vollmer’s 25-year career as the head of Ron Santa Teresa, the country’s biggest rum maker.

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Bureaucrats allowed squatters to take over a third of his land with impunity. The Hugo Chávez and Nicolás Maduro administrations oversaw currency declines that left the bolivar all but worthless. The economic disaster they unleashed devastated demand for consumer goods.

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Against this seemingly impossible backdrop, Ron Santa Teresa has grown into a success story by Venezuelan standards, with annual sales of more than $100 million. And now Vollmer is targeting a major expansion — he aims to boost exports 40% this year on the back of his premium 1796 brand, aiming for high-end bars across the globe. He has a distribution agreement with Bacardi Ltd. to aid his ambitions, but for business to take off, what he says he needs most is a government that fosters a safe environment for investment.

That’s where Vollmer’s other job comes into play — he’s the head of a business group that meets privately with senior administration officials to recommend policies that will bolster the economy. It’s a delicate role to play given hostilities between the two sides over decades of expropriations, devaluations and other unpredictable policies, and one that Vollmer mostly does from behind the scenes.

His oversight of the council, known as Conapri, spurs criticism from those who say Vollmer should instead use his platform to denounce the government and work to replace it. The distiller has plenty of complaints, but he’s careful about airing them. While spouting off to reporters or on social media brings attaboys from like-minded entrepreneurs, he thinks he’s more influential keeping a low profile.

Confronting the regime publicly “leads you nowhere because it leads to rejection,” he said. “If I am constructive in my criticism, and do it directly, it’s received very differently.”

That influence is taking on greater importance for Vollmer as he seeks to grow his business, headquartered on a 3,000-hectare (7,500-acre) hacienda that’s been in his family for five generations, since his predecessors emigrated from Germany in the 1800s. Santa Teresa currently gets about 30% of sales from exports.

Vollmer plans to grow that with his 1796 spirit, a smoky rum aged as long as 35 years in bourbon oak casks. It can already be found in a few places overseas, where Venezuelan rum is often viewed as a premium product because it comes from one of just two countries in the world to sport a denomination-of-origin classification that provides extra cachet.

For the brand to take off, Vollmer needs operations in Venezuela to run smoothly. That’s a difficult feat in a country still emerging from one of the deepest economic contractions in modern history and a severe bout of hyperinflation. While there’s been somewhat of a revival in the past two years as Maduro eased controls and allowed greater use of the dollar, the rebound has been limited because the oil industry, the country’s main source of revenue, remains dilapidated amid a lack of investment.

Executives willing to invest are few and far between after decades of state interference in the economy, a history of expropriations and severe sanctions that make doing business difficult in all sorts of ways.

Sharp Pivot

But Vollmer has hope. He and other Venezuelan chief executives in Conapri, which also meets with delegates from other countries and international organizations, are learning to navigate and even help shape President Maduro’s sharp pivot toward capitalism, a necessary concession the administration made as part of efforts to revive the economy.

“Although there is greater openness toward the private sector and toward measures that favor investment and job creation, there is still mistrust and that is not without merit,” Vollmer, 53, said from the porch of his family home on the hacienda. “Existing laws aren’t clear and you have an environment that intimidates investment in a country that is in dire need of it.”

Vollmer, who studied business in the US, took the reins of Santa Teresa from his father in the late 1990s. He’s part of the upper-class that Maduro and his predecessor Chávez spent decades vilifying as oligarchs, thieves and looters.

Like many business owners, Vollmer has been on the receiving end of many of the government’s wide ranging attempts to redistribute wealth. Most dramatically, officials turned a blind eye to squatters that invaded a portion of his hacienda in the early 2000s and have been occupying it ever since.

Issues like this — which make doing business in Venezuela so difficult — is why Vollmer agreed to take over Conapri in 2017. At the time, the organization’s members were discouraged, but Vollmer sought to revive it as a safe space for dialogue between the government and the business community. He steered discussions toward practical issues such as trade financing, tariffs and taxes, seeking to keep politics out of the discussion. And everyone agreed to keep a low profile to avoid scrutiny from committed socialists or avid critics of the regime.

“In six years, he’s managed to double the amount of companies participating, reached agreements of technical support with the Latin American Development Bank, and meet ambassadors and institutions from countries all over the world,” said Horacio Velutini, a real estate entrepreneur and director at Conapri.

The group’s influence has grown since US sanctions imposed in 2019 severely limited Maduro’s access to international financing, forcing him to open up some aspects of the economy to prevent a total collapse. That’s breathed new life into the business community, and Vice President Delcy Rodríguez is now a common attendee at industry events after years of largely ignoring corporate interests.

Conapri members are hesitant to point to specific government measures that Conapri influenced, fearful that drawing attention to the group’s accomplishments would ultimately make it harder to work with the government.

And many of the hoped-for changes are a long way from reality, leaving business owners operating with unclear rules when it comes to setting prices, luring foreign investment, or taxation.

Stock Market

This lack of clarity, as well as scarce financing, are among the biggest obstacles facing business owners in Venezuela today, Vollmer says. The distiller, which has 430 employees, has been one of the few companies to use the Caracas stock market for financing, issuing shares twice in 2020 and later selling the first corporate dollar bonds locally for more than two decades.

“The main function of the private sector should be to create jobs,” Vollmer said. “But to create jobs you need to grow, and for that you need investment.”

When discussing the lack of trust between investors and the government, Vollmer likes to recall a story his father told him about tropical birds that had been nesting for years in a nook atop a pillar inside the hacienda. One day, an electrician installing a lamp accidentally knocked down the nest. Vollmer’s father quickly put it back up, but the damage was already done.

Trust is easily broken and hard to rebuild, Vollmer says.

“It took 25 years for the birds to come back.”

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