beyondbrics

It didn’t take long for Hugo Chávez to get back into the groove after returning home from his latest world tour. Scarcely a day back in the country and he was gaily nationalising businesses again, this time picking on the local unit of US glass bottle company Owens-Illinois.

Chávez accused the company of all the normal stuff: “environmental damage”, “exploiting workers” and “taking away Venezuelans’ money”. He then added rather ominously that he had a whole “list” of other companies he was planning to take over, to be announced in the coming days. He also warned banks to watch their step.

Companies that may be shifting in their seats particularly uneasily right now include Venezuela’s biggest private company, food and drink giant Polar, and top US grain exporter Cargill. Both were singled out recently as ripe for expropriation by food minister Carlos Osorio, and although this was subsequently denied by the vice-president, the food sector has been explicitly ear-marked as needing greater state control.

After it came to light that the government is studying a draft law that would make it easier to nationalise the assets of oil service companies, the likes of Schlumberger, Halliburton and Baker Hughes may not be terribly comfortable either, having so far managed to fly under the radar of Chávez’s nationalisation drive, unlike most other companies in the oil sector.

But Venezuela’s government seems to be just as keen to amass assets at home as it does to get rid of them abroad. After managing to negotiate the sale of its refinery operations in Germany recently, as well as apparently losing interest in building a major refinery in Brazil, there is now speculation that the government wants to sell its biggest network of refineries, belonging to PDVSA subsidiary in the US, Citgo.

One school of thought has it that precisely because of Chávez’s nationalisation drive, which is affecting US companies in particular, Venezuela is getting rid of overseas assets that might be vulnerable to seizure in the event that things don’t go Venezuela’s way in international arbitration bought at against it by companies like Exxon, which is said to be asking for $7bn in compensation for assets expropriated in 2007 in the Orinoco Belt (Chávez reckons Citgo is worth “much more” than $10bn).

Then again, the sale of its overseas assets may be justified simply by huge investment requirements in Venezuela, particularly in developing massive projects in the Orinoco Belt. Many analysts suspect that
Venezuela may be running out of dollars; and as a $3bn debt issue last week showed, the cost of borrowing on the international markets for Venezuela is incredibly high.