Hugo and the Venezuelan Chocolate Factory
Hugo Chavez may have lost the referendum that would have granted him absolute power in Venezuela. But that hasn't stopped him from nationalizing much of the country's economy.
May 21, 2008 - 12:43 am
A big story last week was that INTERPOL’s forensic report on FARC computers and hardware seized by Colombia verified the validity of the laptop, files and information found by Colombian forces in a FARC camp in Ecuador that belonged to the communist guerrillas’ mouthpiece Raul Reyes.
The information confirmed that Venezuelan President Hugo Chavez is working with the FARC.
In addition to hundreds of millions of dollars in financial support, Chavez and the FARC were discussing “the possibility of taking advantage of Venezuela’s purchase of arms from Russia to include some containers destined for the FARC.” Venezuela so far has purchased 100,000 Russian-made assault rifles, 5,000 Dragunov sniper rifles and surface-to-air missiles, fighter jets, and is planning to build Kalashnikov rifle factory. “Some containers” of these weapons will worsen the guerrilla warfare in Colombia and the region.
This has President Bush concerned that the failure to ratify the Free Trade Agreement with Colombia will only play into the hands of Chavez and his FARC associates. The more difficult it is for Colombia to implement free market reforms, the more likely it is for the FARC’s guerrilla warfare to continue and for Chavez’s brand of revolution to continue expanding.
A large part of this expansion has Chavez, in spite of being defeated in his December 2007 referendum which would have granted him unlimited power, relentlessly seizing total control of the Venezuelan economy as a means of expanding his influence in the region.
Last month The Economist Intelligence Unit’s six-monthly business-environment index rated Venezuela as the second-worst place in the world to do business, sandwiched between Cuba and Angola at the very bottom of the list.
When you look at the list of businesses and enterprises that Hugo Chavez is in the process of nationalizing or has already expropriated, the rock-bottom rating comes as no surprise. Private industry is under attack.
Venezuela used to have one of the most diverse private sector economies in South America. Even with what is estimated as the largest oil reserves in South America, private enterprise thrived in Venezuela, including banking, manufacturing, and farming. The Venezuelan economy was not entirely dependent on oil revenues.
Chavez’s “Bolivarian Alternative for the Americas,” – his plan to counter US-sponsored free trade with “Socialism for the 21st Century,” – is his way of installing Communism in the hemisphere, and he’s starting at home. In a January 8, 2007 speech Chavez declared himself a Communist and pledged to create a socialist state modeled after Fidel Castro’s Cuban revolution.
He is well on his way towards that goal. Chavez controls the National Assembly, the Supreme Court, the federal government and most state governments. Now he’s after a much more ambitious goal; controlling the economic heartbeat of the nation.
During the past year Hugo Chavez has nationalized major electricity, telephone and oil companies, but that’s only the tip of the iceberg: Everything from cold storage to five-star hotels is ripe for nationalization.
The telephone company, CANTV, was certain to be a target. The Venezuelan Constitution had already granted Chavez control of the Internet. Having the state own the company ensures that Venezuelans’ communications with the world at large are fully under the watchful eye of the government.
Chavez’s approach is directed towards attaining total control in all sectors of the economy. Here is a sample of companies Chavez has seized:
* In 2005 the Vestey Group’s cattle ranch, Hato el Charcote was seized by the government.
* Last year Chavez took majority stake in all six oil companies operating heavy oil projects in the Orinoco River Basin. In February this year Exxon-Mobil obtained a freeze on $12billion of Venezuelan assets in courts in the Netherlands, the US and the UK, and the cases will be in courts for a long time. Conoco-Phillips pulled out of the country, taking a $4.5 billion write-off.
* Food production and distribution are on the Chavez agenda: As The Economist points out, the country’s largest cold storage and distribution company, The Centro de Almacenes Congelados (Cealco), and Lácteos Los Andes, a dairy producer responsible for around 30% of Venezuela milk production, are being incorporated into Productora y Distribuidora de Alimentos (PDVAL), a food distributor and subsidiary of state oil company Petróleos de Venezuela (PDVSA).
* Ternium Sidor, Venezuela’s largest steelmaker, owned by Argentina’s Techint, will be taken over by June 20 next month. The company had asked for $4billion in compensation but will receive only $800million.
* The cement companies owned by Mexican, French and Swiss investors are next along with 30 sugar plantations.
* Banks, of course, won’t be left untouched. Just this month Chavez was proposing an oil-for-food fund where private banks in South America would divert 10% of their total lending to farmers in the region while oil companies divert some of their profits “to the poor.” Banks are under constant pressure to meet Chavez’s demands for fear of being nationalized.
* The private healthcare industry and private schools are also under pressure. Many private physicians have left the country. The school curriculum is being revised to avoid any criticism of the Chavez government.
But it’s not only the big fish who are in the crosshairs: The chocolate factory in Devon, England which produces “Venezuelan Black” chocolate owns a cacao plantation named El Tesoro (The Treasure) in the Venezuelan mountains. Now the plantation and the business are under investigation by the Chavez regime because, in Chavez’s own words, “The production and distribution is done from his factory in Devon, England, and this gentleman is getting rich.”
That is enough reason for Chavez to want to seize it.
Fausta Wertz writes on New Jersey, taxation, current events, and the French and Spanish-language media at Fausta’s Blog.