With all his leftist rhetoric and constant harping on the evils of American imperialism in Latin America, it was only a matter of time until Hugo Chavez decided to start nationalizing industries. It was even less surprising that the industries he chose are ones in which American corporations have sizable stakes.
For example, Venezuela's national telecom company, Compa?±ia An??nima Nacional Tel?©fonos de Venezuela (CANTV), in which Verizon has a 28.7 percent stake, is due for government absorption along with oil industry projects currently under the control of companies like Exxon Mobil Corp., Chevron Corp. and ConocoPhillips Co. But it does not end there. Chavez is also going after a power company, Electricidad de Caracas, currently under the control of the Arlington, Va.-based AES Corp.
The repercussions of these series of actions are not limited to corporations who are having the rug pulled from under their feet. Venezuelan people will suffer the most from this most recent round of nationalization. In sectors that have already been nationalized, the government has shown itself to be woefully inept. After CANTV was nationalized in the early 1990s, connections were so bad that many companies had to hire operators whose only job was to call a number repeatedly until a call got through. The same story is found in Venezuela's power sector. In nationalized power grids, blackouts and brownouts are frequent, and this most recent takeover will only add to the problem.
Perhaps the most troubling result of nationalization can be found in the oil industry. Since Chavez came to power, the nationalized oil industry is in danger of becoming obsolete due to poor maintenance and lack of upgrading. Money that was once reinvested into the upkeep and modernization of drilling and production equipment is now spent on massive public works projects and social handouts.
The few projects left that were actually focused on improving Venezuela's aging oil production facilities in the Orinoco basin are the ones that are now scheduled for government takeover. In a nation that is almost completely dependent on oil revenues to finance its economy and governmental operations, this is a troubling sign.
The Venezuelan people have now come to expect massive government aid and handouts, and with an economy that has precious few viable sectors outside the oil industry, any disruption in production and the resulting revenue drop could be catastrophic. Without government aid and with no means of employment, Venezuela's poor, who make up the bulk of the population, will be in serious trouble.
The result of Chavez's actions has been a lack of significant foreign investment. Since Chavez took office in 2000, foreign direct investment has plummeted to an average of $2 billion per year from over $4.7 billion before Chavez took office. With actions like this, it is likely the foreign direct investment will continue to be low in the future. This means that the Venezuelan populace and economy will become more and more isolated from the world economy.
Without capital in the form of foreign investment, Venezuela cannot hope to diversify its petro-centric economy. The people of Venezuela will be forced to live in an increasingly backward and economically desolate state run by an inefficient and bloated public sector providing inferior goods and services. If this is the legacy Chavez wishes his Bolivarian Revolution to leave his nation, then so be it.
