Advertising Faces Uncertain Future Under Chavez's Rule

Agencies See Talent Exodus as Media Censorship Increases

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It's not easy to get an interview with the heads of Venezuelan ad agencies. It's becoming more and more difficult to succeed in the ad business there because the socialist government is in open war with capitalism. And what's more capitalist than advertising?

WORKING UNDER A GAG LAW: In 2004, Hugo Chavez created a law that allows for the censorship of media and the revocation of licenses.
WORKING UNDER A GAG LAW: In 2004, Hugo Chavez created a law that allows for the censorship of media and the revocation of licenses. Credit: Francisco Batista
There are three fundamental phenomena that reflect the influence of Hugo Chavez's decade-long reign on the Venezuelan ad business: the massive talent exodus; the lack of foreign investment; and the progressive disappearance of private media.

Luis Navas, chief creative officer of Venezuelan independent agency Eastwood & Bronson, laments, "Every day, very talented Venezuelans leave this country and graduates come to fill their shoes in the agencies. Fresh blood is great, but what agencies really need is experienced professionals."

Stifled creativity
Venezuela has never been big on international ad festivals. It's never taken a Lion home from Cannes and, in general, the country has never stood out in regional contests either. A likely reason for this might be its lack of creative boldness. But can anyone be bold in a country that's marked by violence, repression, lack of clear rules for fair play and open restriction to freedom of the press? One thing is for sure: It's impossible to create freely if you have to think twice before opening your mouth or saying what you really want to say. It's hard to cultivate ideas in a field of repression.

"Creative development in advertising shouldn't depend on the Chavist regime," said Alberto Hernández, who heads La Cancha, one of the hottest Venezuelan agencies. "However, it has even become questionable if advertising will continue to exist under this socialist modality of the 21st century."

In May 2007, the oldest national open TV channel disappeared from the air after the national government prevented renewal of its license. Now, the president is directly attacking Globovisión, the main opposing channel directed by Alberto Federico Ravell.

The media control imposed by the Chavist government began to alarm the world in 2004 after the Venezuelan president created a specific law to regulate media content that has become known as the gag law. It allows for the censorship of media and the revocation of licenses.

If you are outside, it's hard to imagine the extent to which restrictions influence creative professionals in Venezuela. One who dares to say it plainly is Roberto Coimbra, president-CEO of Ogilvy Andina (Venezuela, Colombia, Peru) and 141 Coimbra. "This gag law castrated the boldness of local advertising, and therefore a lot of what it could have been. It is one of the main motives behind the low creative level we are finding."

Local productions only
Something similar happens in the audiovisual-production sector. All commercials aired in Venezuela must be produced within the country. Then, for a spot filmed in any country in Latin America to be aired in the Venezuela media, it must first be recreated by a local production company. In the Chávist view, this strengthens the national industry. But for many, this represents a huge blow to quality: the level of Venezuelan production is far from competing with other countries of the region, since the freedom of choice of the professionals involved in the development of a commercial (directors, producers, casting) is limited to the selection available within the country's closed doors.

According to Mr. Navas, "This business lives on constant improvisation. Advertisers have to constantly adapt to the political scenario. And they can't focus on building brands, since anything that the president says on his Sunday TV show 'Aló Presidente' ('Hello President') changes every single one of this country's guidelines."

From a financial perspective, the global financial crisis is affecting Venezuela as much as the rest of the world. Budgets drop, creative fees freeze, advertisers wait for the president to set directions and creative men leave the country. The future is unclear. The main subject that rules the Venezuelan economy is the oil barrel. In ten years, petroleum went from representing 64% of the Venezuelan exports to toping 90%. But lately the crisis brought the price of crude oil down after a spectacular growth in the last decade.

"We can't deny that agencies experienced an economical boom because of the high petroleum rents in the country," said Mr. Navas. "A boom that wasn't accompanied by creative improvement, because agencies in this country have always been oriented to great media purchases rather than thinking creatively."

There is no better thermometer to evaluate the investments of Venezuelan advertisers than "presale," or the moment in which ad spaces are purchased for the next year, allowing agencies to be assured of the investment their clients will make during the next period.

Falling budgets likely
Fabián Bonelli, VP of Leo Burnett Venezuela, affirms that "2008's investment was not as good at 2007's, but it was still strong. Perhaps we will have to wait for presale in November of this year to have an idea of what will happen in 2010."

Worse, with the nationalization of companies, the likely outcome is that ad budgets will continue to drop as state companies remain loyal to anti-capitalist principles. But there's something that saves this outlook: a market with exceptional levels of consumption.

In Venezuela, for instance, the concept of saving is nonexistent. Barely after cashing their paychecks, people run to spend it in a way not often seen in other places. This voraciousness on the part of the Venezuelan consumer is why the principal global holdings persist in maintaining operations in a country that is known for its political unpredictability and uncertainty.

"The dynamic here is totally different," said Mr. Bonelli. "When signs of a crisis appear, consumption is not reduced, but on the contrary, it increases. People spend what they have."

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