Firing Up Latin Consumers

An obscure government agency sparks a consumer-rights drive

Consumer protection is a relatively new concept in Latin America. This, after all, is a region where regulatory frameworks are weak and judicial systems are at best inefficient and at worst corrupt. So for decades, companies have gotten away with everything from toxic-waste dumping to bait-and-switch advertising. Thanks to the hard work of an understaffed Venezuelan government agency, that era may now be drawing to an end.

It all started with a team of inspectors operating out of a run-down office in downtown Caracas, where computers are in short supply and the lines for the rickety elevators are long. As part of Venezuela's Institute for the Defense & Education of the Consumer & User (Indecu), they were among the first to spot a structural flaw in the suspension system on the Explorer, the sport-utility vehicle sold by Ford Motor Co., as well as defects in the Firestone-made tires mounted on the vehicles. An agency report released on Aug. 31 charged that these two factors were responsible for 64 fatalities in Venezuela. But what's truly criminal, says Indecu President Samuel Ruh, is that the two companies covered up the problems. "This was a conspiracy," says the 50-year-old lawyer. Ford Motor de Venezuela, in a press release, says it "has never lied to Indecu or its customers."

It will be up to the courts to determine whether Ford and Firestone were negligent. Yet regardless of the outcome of these cases, Indecu's aggressive pursuit of Big Business may wake up Latin America's consumer watchdogs.

These agencies often have maintained a low profile. Established in the early 1990s, Chile's National Consumer Service (Sernac) for years toiled in bureaucratic obscurity. The agency finally made a name for itself in 1998, when thousands of Chileans lost their TV sets, refrigerators, and other appliances as a result of a power surge. Sernac was flooded with complaints and ultimately prevailed on the offending utilities to reimburse customers for the damaged goods. The case helped to build public awareness: Sernac's director, Alberto Undurraga, says the number of complaints has quadrupled over the past five years.

That's progress. Yet in many Latin American countries, consumers remain in the dark about their rights. Brazil enacted a consumer-protection law in 1990, but most people have no knowledge of it. "The result is that Brazilian consumers are timid--they don't complain, they don't stand up for their rights," says Eunice Prudente, president of the consumer-protection commission of the Sao Paulo chapter of the Brazilian bar association.

"LIKE A LOTTERY." In Venezuela, Indecu has organized workshops around the country to educate consumers about their rights. The effort appears to have paid off. Indecu receives about 300 complaints a day. Most grievances involve bad food products and overbilling by phone and electricity companies. But since the agency has just 125 inspectors, many complaints go unanswered. "It's like a lottery," says Carlos Omana, an associate at D'Empaire Reyna Bermudez, a local law firm. "You don't know if they'll do something about it or not."

In most cases, wayward companies get away with a rap on the knuckles. Indecu doled out $1.3 million in penalties in 1999. But individual amounts are paltry, since they are capped by law. In Ford's case, the maximum fine per complaint would amount to $11,600--about half the price of a new Explorer.

Companies also get off lightly in the courts. Venezuela's legal system, unlike that of the U.S., makes no provisions for punitive damages, just material damages. In some cases, plaintiffs can sue for "moral damages" to compensate for emotional distress. But the amount of the award is at the discretion of judges. (Venezuela's legal system, like most in the region, does not incorporate a jury.)

That may explain why three of the Venezuelan cases against Ford and Firestone were filed in Miami this month rather than in Caracas. Indecu is doing a better job of looking after consumers. But clearly, the country's courts have a long way to go.