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Jul
16
2010
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Expropriated Companies in Venezuela Get Little to No Compensation

July 15

“… I will expropriate all the rice processing plants, I will expropriate them, I don’t have a problem doing it and moreover, I will pay them in paper not with real money.”

-          Hugo Chavez, May 1, 2009

The latest expropriation of an American company in Venezuela, that of Oklahoma-based contract drilling company Helmerich & Payne, yielded a familiar reaction from the U.S. government. The U.S. State Department said that “We would just call on them, if they did make such a move, to compensate the owners of those wells. This is the latest in such an instance where international investors, their investments are being nationalized by the government of Venezuela. It doesn’t speak or bode well for the investment climate there.”

The statement from the U.S. government was echoed a few months earlier by Assistant Secretary of Commerce, Walter Bastian, who when asked about the increased expropriations in Venezuela, said that “We have no problem with expropriation as long as those affected are paid.”

Therein lies the problem: expropriated companies in Venezuela are NOT being compensated. Moreover, because the Chavez regime has eradicated judicial independence in Venezuela, foreign companies have in practice no legal recourse to challenge the expropriations.

The numbers tell the story. According to a report issued in May 2010 by prominent Caracas based economic consulting firm,  Ecoanalítica, the costs of the nationalizations executed by President Chavez (since 2006) add up to $23.3 billion. These costs include that of the major nationalizations but do not include that of the “rescued land or farms, expropriated sugar mills or the expropriations of industrial zones in Barquisimeto and Maracaibo, so the figure could be higher.” It does include the expropriations of U.S. companies such as Hilton, Exxon, Conoco, and Cargill.  Ecoanalítica estimates that of this $23.3 billion, $14.65 billion of compensation have yet to be paid by the government. In fact, the Venezuelan government has only paid 37.2% of what it owes to the expropriated companies. According to the Ecoanalítica report, of the $14.65 yet to be paid, nearly half, “$ 7.25 billion are payable to companies in the oil sector, such as ConocoPhillips and ExxonMobil.”

Not only are expropriated companies not being compensated as legally required, but companies impacted by the nationalization policies have little legal recourse to challenge the taking of their property. This is so because Venezuela’s judicial system has been politicized by President Chavez and lack independence, thus in practice denying domestic and foreign companies the right to due process to challenge the government’s taking.  The 2009 U.S. State Department Human Rights Report described Venezuela’s “corrupt, inefficient, and politicized judicial system characterized by trial delays and violations of due process.” In its 2009 report on Venezuela, the OAS’ Inter-American Commission on Human Rights noted “the Executive Branch’s alleged interference in decisions of the judiciary.” To put it lightly, those counting on Venezuelan’s judicial system to overrule an action taken by the government, much less a decree issued by the President himself, are indeed tempting fate.

One need only look at the case of the coffee company, Fama de América. Fama de America, the best known coffee brand in Venezuela, was expropriated last year by the government. As part of negotiations to determine compensation, company representatives and the government agreed to name a three member panel of experts to determine the value of the company. Two of the members of the panel where named by the government. The panel conducted a study and determined a fair price, yet the government offered to pay only 10% of the value agreed upon by the experts. It was a take it or leave it offer: take the 10% and then we take the company, or refuse the offer and we’ll take the company anyway. That sounds more like extortion than a fair negotiation.

The bottom line for American and other foreign expropriated companies in Venezuela is that compensation for the taking of their property is likely never to come. It may not be surprising then that following the taking of their property, Helmerich & Payne issued a warning to fellow companies in their industry about investing in Venezuela: “Reflecting on last week’s forced exit from Venezuela, it is clear now that PDVSA was not interested in both sides achieving commercial terms to return our rigs to work… That approach only heightens concerns for our oil-field-service peers contemplating their future there, as it should.”

 
Jul
16
2010
Posted by
admin
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Expropriated Companies in Venezuela Get Little to No Compensation

The latest expropriation of an American company in Venezuela, that of Oklahoma-based contract drilling company Helmerich & Payne, yielded a familiar reaction from the U.S. government. The U.S. State Department said that “We would just call on them, if they did make such a move, to compensate the owners of those wells. This is the latest in such an instance where international investors, their investments are being nationalized by the government of Venezuela. It doesn’t speak or bode well for the investment climate there.”

The statement from the U.S. government was echoed a few months earlier by Assistant Secretary of Commerce, Walter Bastian, who when asked about the increased expropriations in Venezuela, said that “We have no problem with expropriation as long as those affected are paid.”

Therein lies the problem: expropriated companies in Venezuela are NOT being compensated. Moreover, because the Chavez regime has eradicated judicial independence in Venezuela, foreign companies have in practice no legal recourse to challenge the expropriations.

The numbers tell the story. According to a report issued in May 2010 by prominent Caracas based economic consulting firm, Ecoanalítica, the costs of the nationalizations executed by President Chavez (since 2006) add up to $23.3 billion. These costs include that of the major nationalizations but do not include that of the “rescued land or farms, expropriated sugar mills or the expropriations of industrial zones in Barquisimeto and Maracaibo, so the figure could be higher.” It does include the expropriations of U.S. companies such as Hilton, Exxon, Conoco, and Cargill. Ecoanalítica estimates that of this $23.3 billion, $14.65 billion of compensation have yet to be paid by the government. In fact, the Venezuelan government has only paid 37.2% of what it owes to the expropriated companies. According to the Ecoanalítica report, of the $14.65 yet to be paid, nearly half, “$ 7.25 billion are payable to companies in the oil sector, such as ConocoPhillips and ExxonMobil.”

Not only are expropriated companies not being compensated as legally required, but companies impacted by the nationalization policies have little legal recourse to challenge the taking of their property. This is so because Venezuela’s judicial system has been politicized by President Chavez and lack independence, thus in practice denying domestic and foreign companies the right to due process to challenge the government’s taking. The 2009 U.S. State Department Human Rights Report described Venezuela’s “corrupt, inefficient, and politicized judicial system characterized by trial delays and violations of due process.”

In its 2009 report on Venezuela, the OAS’ Inter-American Commission on Human Rights noted “the Executive Branch’s alleged interference in decisions of the judiciary.” To put it lightly, those counting on Venezuelan’s judicial system to overrule an action taken by the government, much less a decree issued by the President himself, are indeed tempting fate.

One need only look at the case of the coffee company, Fama de América. Fama de America, the best known coffee brand in Venezuela, was expropriated last year by the government. As part of negotiations to determine compensation, company representatives and the government agreed to name a three member panel of experts to determine the value of the company. Two of the members of the panel where named by the government.

The panel conducted a study and determined a fair price, yet the government offered to pay only 10% of the value agreed upon by the experts. It was a take it or leave it offer: take the 10% and then we take the company, or refuse the offer and we’ll take the company anyway. That sounds more like extortion than a fair negotiation.

The bottom line for American and other foreign expropriated companies in Venezuela is that compensation for the taking of their property is likely never to come. It may not be surprising then that following the taking of their property, Helmerich & Payne issued a warning to fellow companies in their industry about investing in Venezuela: “Reflecting on last week’s forced exit from Venezuela, it is clear now that PDVSA was not interested in both sides achieving commercial terms to return our rigs to work… That approach only heightens concerns for our oil-field-service peers contemplating their future there, as it should.”

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Jul
9
2010
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Chávez Launches Attack Against Cardinal Urosa

Chávez is playing with fire, says the semi-official Vatican newspaper L’Osservatore Romano.  The newspaper reported this in reference to the insults the Venezuelan president leveled Monday against Cardinal Jorge Liberato Urosa Savino, the archbishop of Caracas, calling him a “troglodyte” for trying to “scare people about communism.”

“We don’t deserve a cardinal like,” Chávez said during a national assembly on the day his nation celebrates its independence. “This gentleman is unworthy of calling himself cardinal.”

He asked the papal nuncio to Argentina, Archbishop Pietro Parolin, to tell Benedict XVI to replace the current cardinal with Bishop Mario del Valle Moronta of San Cristobal.

L’Osservatore Romano says the president took “advantage of the celebrations of the bicentenary of national independence,” to pour “gasoline on the fire of Church-state relations.”

“Addressing the National Assembly in a solemn commemorative session, Chávez directed very harsh insults to the cardinal, who recently criticized the closing of many of the opposition media and invited the government to respect the democratic rights recognized by the Constitution, insults also repeated in a television broadcast,” reports the Vatican newspaper.

“The Catholic Church in Venezuela firmly rejects the indescribable verbal aggression of which the cardinal archbishop of Caracas has been the object,” states the article, which will appear Thursday in the Italian edition.

In an interview with Globovision network, the secretary-general of the Venezuelan episcopal conference, Auxiliary Bishop Jesús González de Zárate Salas of Caracas, rejected the accusations. He has become the spokesman of the manifestations of solidarity that the cardinal has received from the whole country.

In the same line, the council of priests of the archdiocese of Caracas issued a communiqué, in which it states that, “as a Venezuelan citizen, Cardinal Jorge Urosa Savino has the full right and duty to opine and contribute to the common good, in keeping with his ample cultural preparation and his personal convictions.”

The note continued: “As archbishop of Caracas he has the full right, more than that, he has the sacred duty to guide Catholics on religious and moral principles and values that are at stake in the present social and political situation of our country. This is a part of his office that he cannot give up as principal pastor of our Caracas Church and eminent member of the Venezuelan episcopate.

“In this connection it should be pointed out that all the public statements on topics that affect the collectivity and, hence, the common good, have been very pointed and specific and have been made from the plane of the great principles of the Gospel, and from the systematic application of the latter in the field of social topics, that is, from the Social Doctrine of the Church.”

The council also stated that it rejected Chavez’s attempt to interfer with the internal decision s of the Church by telling the Pope who he should name as archbishop of Venezuela. “The Holy Father, as Universal Pastor of the Catholic Church, enjoys total autonomy and liberty to appoint the bishops for the different diocesan sees in the whole world and to institute the members of the College of Cardinals.

“The clergy of the archdiocese, together with their faithful, reiterate their unbreakable communion with the archbishop of Caracas, Cardinal Jorge Urosa Savino, our legitimate pastor.”