Thursday, November 12, 2015

Venezuela Takeover Order Riles Companies

David Jara

“Venezuela Takeover Order Riles Companies”

July 30, 2015
The Venezuelan government delivered news on July 30th via the National Guard that major food companies including Cargill Inc., PepsiCo, and Neste Inc. had 60 days to vacate warehouses in an industrial area where the state plans to expropriate the land to build low income housing.  While the move will provide much needed housing for the country’s poor, it will also displace 1,500 workers not to mention upset an already fragile supply chain for vital goods including food and toilet paper.  Venezuela has experience staggering inflation in recent years as the country has become strapped for cash.  Social programs and low crude oil prices are pushing the country towards bankruptcy and as a result the nation’s currency has become greatly devalued.  While the government argues it’s the retailers and producers of such goods that are causing the issues, the retailers and producers point to the countries poor policies.   Either way you slice it the government’s answer has been to nationalize and/or expropriate assets to manage them as they see fit.  This of course has strained relations between private investors and is a perfect example of a foreign uncontrollable. 

Venezuela may very well be one of the least friendly companies for private investment given their track record.  The country has nationalized just about everything it can and even seized assets from foreign companies such as Cargill, Exxon, and Conoco Phillips (just to name a few).  The country of Venezuela and its socialist government are cash strapped and constantly looking for way to raise capital while continuing to pour money into social programs that provide for the country’s poor.  Some would argue this is more about getting votes than it is about compassion for the less fortunate.  But the one thing that is easy to see is that Venezuela has proven that it will exercise its right to expropriate whatever land or assets it sees fit regardless of what effect it has on private investors.    

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