Political Risk Latin America Blog @PolRiskLatam

Expropriations Hurt Venezuela

Posted in News and Articles, Political Risk by politicalrisklatam on November 18, 2010

by Inter-American Dialogue for Latin Business Chronicle, November 18th, 2010.

Hugo Chávez’s nationalizations are hurting Venezuela’s chances of economic recovery, experts warn.

Venezuelan President Hugo Chávez on Oct. 31 announced the nationalization of Sidetur, which was among the latest in a series of nationalizations by the socialist president. In recent weeks, Chávez has also announced nationalizations of the local operations of six Venezuelan construction companies, a U.S. bottle manufacturer, a fertilizer plant, a farm supplies company and a motor lubricants maker. How will the latest nationalizations affect Venezuela’s economy and Chávez’s grip on power? To what extent are foreign companies shying away from investing in Venezuela and how big a threat does that pose to the country’s economy?

Juan Pablo Fuentes, economist at Moody’s Analytics: Since suffering a setback in September’s congressional election, President Chávez has radicalized his socialist agenda with a new wave of nationalizations. The government’s objective is clear: to take control of the country’s key productive sectors. The government has targeted building materials and construction, food (including distribution), retail and financial sectors. The government already controls energy, media, and telecommunications. No group or industry seems safe from government expropriation. As a result, foreign investors will continue to shy away despite excellent opportunities in Venezuela’s energy sector. Private investment will continue to decline, hurting job creation and growth potential. Private investment made up only about 35 percent of total investment in the first half of 2010, sharply down from 70 percent in the early 2000s. (continue reading… )

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