Venezuela Nationalizes Lubricant and Fertilizer Companies

[naaman fletcher]

As long as personal lubricant is cheaper and more available, i'm all for it.

http://venezuelanalysis.com/news/5706

[Peace Patriot]

1. Just thought this item from the article should be highlighted...

Mérida, October 11th 2010 (Venezuelanalysis.com) – Venezuelan President Hugo Chavez announced the nationalization of the lubricant and chemical company Venoco and the fertilizer company Fertinitro on Sunday, after accusing the two firms of price speculation.

The measures are the latest in a series of recent nationalizations that the government says are aimed at guaranteeing food access, decreasing dependence on food imports, and lowering price inflation in the oil-exporting nation.

Chavez made the announcement on his weekly Sunday talk show, “Hello, President.” In the coming months, the government and the companies will negotiate indemnity, which is required by the constitution. Government officials announced that all workers at both companies have their job security guaranteed, and the companies will now be managed by the Ministry for Energy and Petroleum.

(MORE)

http://venezuelanalysis.com/news/5706

[bherrera]

2. Venezuela Risk to Investors is very high

The companies and government may negotiate indemnity, but the government does not have a good track record making the payments.

"Venezuela is becoming an increasingly more challenging place to do business. Tough operating conditions include weak contract rights and government interventionism, shortages of foreign exchange and a growing bureaucratic burden—not least because of the introduction this year of a dual exchange-rate system. Added to this is a poor macroeconomic outlook, including high inflation and a profound recession, which the radical policies of the Chávez administration will only prolong rather than alleviate. Given these conditions, Venezuela now has the worst investment climate in Latin America, according the Economist Intelligence Unit’s latest Business Environment Rankings."

http://www.intelligencequarterly.com/2010/04/venezuela-business-at-the-bottom-of-the-heap/

The government policy is quite radical, and it leads to the poor economy - negative GDP growth and high inflation. This policy is not sustainable. The poor economy is the the cause of the reversal which allowed the opposition to gain the majority of the popular vote in the last election. Heinz Dieterich already pointed out current policies should be corrected, or the economy will be worse.

I don't know if these two nationalizations are good or not, but if the government continues to nationalize industries, businesses, and agricultural land, it will continue to have a high investment risk rating. And this will cause the economy to hurt. When the inflation is high, and the economy does not create jobs, the working class is the one which hurts.