The Chávez government continues to move aggressively to nationalize key economic sectors in Venezuela. Oil, telecommunications, and power sectors have fallen prey to nationalization. The Chavez government has begun taking initial steps to do the same with television. Likewise Venezuelan banks have been forewarned about the potential for nationalization. Food, cement, steel, and healthcare industries could well experience a similar fate. To the dismay of private investors and the political opposition, no industry appears immune from forced nationalization.
The Sweep of Nationalizations
On May 10, 2007, the state oil company, Petróleos de Venezuela SA announced that it had acquired more than 90 percent of the largest power company in the country, Electricidad de Caracas. The preceding day, telecommunications Minister Jesse Chacón announced that the government had purchased just over 86 percent of the telecommunications giant Compañia Anónima Nacional Teléfonos de Venezuela (CANTV). These announcements came one week after the Venezuelan government expropriated the Orinoco belt oil fields on May 1, 2007. US-based companies Exxon Mobil, ConocoPhillips, Chevron, British-based British Petroleum, Norway-based Statoil, and French-based Total all experienced government expropriation as Chávez systematically took production rights away from foreign oil companies.
On May 4, 2007, Chávez warned Venezuela’s private banking industry could experience nationalization should they continue to favor foreign investment over domestic industrial development. Nationalizing the banking industry would be a large step in Chavez’s pursuit of a “Bolivarian revolution” due to its overarching influence on the economy.
Finally, cement and steel manufacturers that export the majority of their goods were warned of possible expropriation if they do not start selling more to Venezuelans at discounted rates.
Additionally, Chávez has overseen Venezuela’s withdrawal from both the International Monetary Fund (IMF) and the World Bank. This move, which Chavez hopes will symbolize economic independence from foreign corporations and Western governments, constitutes a major blow to investors both inside and outside Venezuela.
The Forecast
Chavez’s Bolivarian revolution maintains the support of Venezuela’s lower classes that experience the greatest economic rewards from nationalization of private enterprise. Urban lower classes continue to be Chavez’s largest support base.
Chavez’s “revolution” may not go completely unchecked, however, as demonstrated by the May 21, 2007, protests condemning the closing of a Venezuelan TV station, Radio Caracas Television (RCTV). Accusing the station of violating broadcast laws by producing “grotesque shows” that promote consumerism and violence, as well as supporting a failed 2002 coup against him, Chávez has decided to shut down the station.
In response, thousands of protestors filled the streets of Caracas calling the move a threat to freedom of expression that will affect all citizens equally, despite political affiliation. The station, despite an attempt to appeal the decision to the Supreme Court, will still be forced to end its broadcast, but the outcry of Venezuelans against Chávez’s decision does indicate that Venezuelans may speak out against the formation of a completely authoritarian state.
Chavez’s determination to forcefully close RCTV despite both pro-government and anti-government outcry demonstrates his political tenacity. In addition, the closure of RCTV received Supreme Court backing, giving Chavez legal cover in the matter. Chavez’s ability to expropriate industrial and media sectors, and possibly the finance and food service sectors at a future date, accurately reflects his growing political power and dwindling opposition base, which remains highly disorganized.
We anticipate continued nationalization of foreign companies deemed essential to the security and well being of the Venezuelan people, including foreign companies operating within Venezuela’s banking, manufacturing, and food service sectors.
