Jun
24
2011
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Chávez Moves Forward with Expropriation of Argentina’s Matesi

Venezuelan President Hugo Chávez issued this week an Executive Decree authorizing the expropriation of Matesi, an Argentine steel company. As it is the case with other government expropriations in Venezuela, Matesi’s takeover has been a long and convoluted process which started in May of 2009, when the Chávez Administration first expressed an interest in nationalizing the company. In August 2009, the Ministry of Primary Industries and Mining took over the facility, seizing its equipment.

The Matesi plant is a subsidiary of Tenaris, a leading global supplier of steel tubes and related energy services, which is part of Argentina’s Techint conglomerate. While negotiating the terms of the transfer of assets, the company did not rule out taking legal action against Venezuela to seek prompt compensation for its entire interest in Matesi.

“While we reserve all our rights under international treaties and current laws in Venezuela, Tenaris is prepared to begin negotiations with the Venezuelan authorities to achieve the fair and adequate term and conditions for the transfer of Matesi to the Venezuelan government,” said the company.

The expropriation of Matesi coincided with the release of a new study that shows that companies expropriated by Chávez are unproductive, inefficient, and a bad deal for Venezuelan workers, especially as compared to their counterparts in the private sector.

 
Jun
20
2011
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Chávez’s New Sports Law is an Air Ball

José R. Cárdenas DSC 0754 150x150 Chávez’s New Sports Law is an Air Ballserved in several foreign policy positions during the George W. Bush administration (2004-2009), including on the National Security Council staff.  He is a consultant with Vision Americas in Washington, DC.


How ironic that just as the U.S. State Department announced a basketball “sports diplomacy” visit to Venezuela, that country’s National Assembly is debating yet another grandiose Hugo Chávez project to virtually expropriate and nationalize Venezuela’s entire sporting sector.

Included in the U.S. delegation is NBA player Greivis Vásquez, a Venezuelan native, who will spend five days conducting clinics, visiting schools, and interacting with underprivileged youth.  Such exchanges are meant to present a “softer” side of the United States and can have value, provided that governments like that of Mr. Chávez don’t try to hijack them for their own narrow political purposes.

On the other hand, there is nothing redeeming about the Venezuelan government‘s latest harebrained scheme to exert government control over an increasingly large part of Venezuelan society.  If the Venezuelan government has its way, Venezuelan athletes chasing their sports dreams will soon encounter a vastly different environment – one most assuredly not for the better.

Mr. Chávez wants to designate the entire sporting sector – including sporting leagues and purveyors of goods and services – as “public services,” meaning that they must be made available to all sectors of Venezuelan society.  If a particular entity is deemed by a government bureaucrat not to be fulfilling that mission, it runs the risk of confiscation by the state. We have seen this movie before. This is usually the first step the government takes before it expropriates an entire sector of the Venezuelan economy. Declaring anything a “public service” it’s a sure sign that the government will exercise its power over that sector.

The new Ley Orgánica del Deporte (“Organic Sports Law”) is yet another Chávez promise that, while cloaked in noble rhetoric, will accomplish none of its goals and lead to declining sports opportunities, more inefficiency, and more corruption.

For example, the Venezuelan private sector has traditionally been able to claim tax deductions for their support of sporting activities – everything from buying uniforms for professional teams to building local facilities for underserved communities.  Under Mr. Chávez’s law, Venezuelan businesses will now be levied a new tax that would go directly to a National Fund for Sports Development, which will have sole authority to decide where and how the funding is spent.

It constitutes one more circumscription of the rights of individuals and the private sector to make choices and exercise freedoms. Moreover, with the government hovering over every sports enterprise and examining their decisions under threat of confiscation it will simply drive investment capital elsewhere.

There is even a more ominous dynamic at play here. An authoritarian system is usually defined as one in which the government exercises control of the political system, but usually allows relative freedoms in the economic and social sectors as long as no one challenges the prevailing political order. On the other hand, a government that invades the peoples’ social space is a dangerous slide into totalitarianism.

The days when millions of Venezuelans turn to baseball, basketball, soccer, or any other sports as a quiet respite from the country’s problems and political polarization could become a thing of the past. As history tells us, whatever sector of society the Venezuelan government touches is immediately politicized. Will all sports teams now be forced to wear red uniforms? Will pictures of Ché Guevara now replace the Maltín Polar logo or that of other popular Venezuelan brands common in stadiums?

The Venezuelan caudillo has always tried to hide his true colors behind an aura of democracy.  But as the government seeks to control more and more of Venezuela’s society, he fools no one. It would seem he is trying to emulate his idol, Fidel Castro, who has survived 50 years in power by maintaining a stranglehold on all facets of Cuban society. After all, when populations have to rely on the state for the delivery of all goods and services, dissent is inevitably suffocated. Cuba stands as the tragic example.

Mr. Chávez, of course, is not there yet, but think of the imagery of a frog in a frying pan. Turn up the heat too fast and it jumps off; turn up the heat slowly and it is cooked before it knows it. The Venezuelan people should oppose Chávez’s latest power grab before his dream becomes their nightmare.

 
Jun
14
2010
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Venezuela’s state takeovers under Chavez

According to an article published on Friday by Reuters, Venezuela said on Friday a World Bank court had favored the OPEC member over Exxon Mobil Corp in a preliminary ruling for a case brought after President Hugo Chavez nationalized oil projects in 2007.

Following are key events in the president’s push to build a socialist state in South America’s biggest oil exporter, along with some of the cases brought against the OPEC member:

OIL:

* In 2007 the government took a majority stake in four heavy crude projects worth tens of billions of dollars in the vast Orinoco oil belt. U.S. majors Exxon Mobil Corp and ConocoPhillips (COP.N) quit the country over the move and filed arbitration claims against Venezuela with the World Bank’s International Center for Settlements of Investment Disputes, ICSID.

* France’s Total SA (TOTF.PA) and Norway’s StatoilHydro (STL.OL) received around $1 billion in compensation after reducing their holdings. BP Plc (BP.L) (BP.N) and Chevron Corp (CVX.N) remained as minority partners.

* Last year, Chavez seized a major gas injection project belonging to Williams Cos Inc (WMB.N) and a range of assets from local service companies.

FINANCE:

* Also in 2009, Chavez paid $1 billion for Banco de Venezuela, a division of Spanish bank Grupo Santander (SAN.MC), to help him channel state resources.

* His government has closed 11 small banks since November 2009 for operational irregularities. Some were reopened as state-run firms. Chavez has said he will nationalize any bank that fails to meet government lending guidelines or is in trouble.

HEAVY INDUSTRY:

* The government paid $2 billion in 2009 for Argentine-led Ternium SA’s (TX.N) stake in Venezuela’s largest steel mill.

* Chavez ordered the nationalization of the cement industry in 2008, affecting Mexico’s Cemex (CX.N), Switzerland’s Holcim (HOLN.VX) and France’s Lafarge SA (LAFP.PA). Holcim and Cemex both filed for arbitration with ICSID.

* Chavez has also considered bringing mining more firmly into state hands, and last November the mining ministry seized Gold Reserve Inc’s (GRZ.TO) (GRZ.A) Brisas project, which sits on one of Latin America’s largest gold veins. Gold Reserve immediately filed for arbitration with ICSID.

TELECOMMUNICATIONS:

* In 2007, Chavez nationalized the country’s largest telecommunications company, CANTV, buying out U.S.-based Verizon Communications Inc’s (VZ.N) 28.5 percent stake for $572 million. Analysts said Verizon’s compensation was fair.

POWER:

* In the same year, Venezuela expropriated U.S.-based AES Corp’s (AES.N) stake in Electricidad de Caracas, the country’s largest private power producer. It paid AES $740 million for its 82 percent stake. Analysts said the deal was fair for AES.

FARMING:

* In 2005, Chavez began implementing a 2001 law letting the state expropriate unproductive farms or seize land without proper titles. He has redistributed millions of acres deemed idle in a bid to boost food production and ease rural poverty — taking over some large farms, including ranch owned by Britain’s Vestey Group, who also filed for arbitration. The government agreed to pay more than $3 million to a group of Spanish farmers for their land.

Note from the Editor: The article was originally published by Reuters.