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Chavez’s Big Grab

hugo chavez

Is this why people love this guy? I just don’t get the love affair that people of free nations have with socialism. Chavez has already seized control over American companies when we built up their oil infrastructure and their telecommunications for their country. Now they are doing the same, not just to our European allies, but our friends to the south as well. How can we put up with someone like this? We should take action against him, with a coalition of the countries that Chavez has disgraced. Not necessarily military action but the first steps toward it. We could blockade his shipping ports, stop trades, and help the people in Venezuela that protest this dictator. We are too wrapped up in not wanting to look bad to the rest of the world, and most of the rest of the world is sympathetic to growing socialist countries like Venezuela. Even with that, we must not let him continue to use his military to force private companies, from other countries that put their time and money into Venezuela, out of the country.

Chavez’s Big Grab

By INVESTOR’S BUSINESS DAILY | Posted Wednesday, August 20, 2008 4:20 PM PT

http://www.ibdeditorials.com/IBDArticles.aspx?id=304125139898165

Socialism: Venezuela’s seizure of Cemex assets Monday is more than a typical nationalization of resources. Its vindictive manner has much to do with the firm’s Mexican headquarters. It’s a message to others in the region.

Like a quasi-military conquest, Venezuelan strongman Hugo Chavez marched in troops to “take back” four Cemex cement plants in the dead of night as part of his nationalization of cement announced in April. “It was time,” he said Tuesday, calling it one of his “steps toward socialism.”

Chavez then popped out fireworks as red T-shirted mobs, judges and politicians headed to the plants and cheered their “victory.”

Why was Cemex “defeated”? Because last April, Mexico’s Cemex told Chavez its plants were worth $1.3 billion, based on standard norms of value. Chavistas said no dice, and after driving their stock price down in Caracas trade, offered $800 million tops.

The Venezuelans, of course, had the last word, and moved into their clownish conquest even before Chavez’s 90-day negotiation period expired.

For Latin Americans, this is something of a wake-up call. No longer will Latin American companies be exempt from Chavez’s power plays. In fact, a Latin American company might now expect even worse treatment than the western ones Chavez has grabbed.

Mexican President Felipe Calderon, no stranger to public quarrels with Chavez over free markets, complained that Chavez’s takeover amounted to discrimination against the Mexican company. He noted that Venezuela had paid two other cement firms — Holcie of Switzerland and Lafarge of France — fair prices for their assets. So the Mexican company was ripped off, which “we cannot understand,” Calderon said, calling for more talks.

The sooner Mexico recognizes the obvious, the better.

Chavez’s vindictive treatment of a Mexican company has more to do with his loathing of Mexico, and the capitalist development path it has pursued, than it does with price. Successful Latin American companies ought to expect particularly harsh treatment from Chavez if they succeed. There already are many signs of this.

For one, the last time Chavez made a show of troops and flags was when he seized Exxon Mobil’s assets in 2007. Like Exxon, Cemex is a foreign company, and the amounts expropriated — about $1 billion in Exxon’s case and $1.3 billion in Cemex’s — are comparable.

Second, like Exxon, Cemex is a big company that has resisted being kicked around by a petty dictator. Cemex reportedly has told Chavez that it would see him in international court.

As global companies, both Exxon and Cemex know their responses to Chavez are being watched closely by other dictators. They must defend their shareholders, an alien notion to Chavez.

Still, it goes even beyond that. Mexico’s Cemex, like U.S.-based Exxon, is known for its advanced technology, state of the art operations, fiscal transparency and high profitability. For any company this is remarkable. But for a Mexican company it is especially so.

Chavez not only cannot stand Mexico, he also cannot stand the idea of a successful, world-class Latin American company like Cemex providing an example to the region. Rather than leave them alone, he’s not only trying to rub their presence out with nationalization, he’s also tricked up bogus charges of tax evasion and environmental damage — something no nationalized firm has avoided.

Chavez has nationalized telecommunications, electricity, farms, iron, steel, oil and banks over two years in a bid to end private property and turn Venezuela into Cuba. All of the nationalized firms have since gone from profitability to losses.

The prosperity and better life Cemex’s jobs represent for its 67,000 workers as well as the superior product it delivers to its customers directly challenges Chavez’s claim to ideological dominance in the region.

As we said, Cemex likely will defend itself in court. But Mexico’s government will have to toughen up and prepare to confront a predator challenging the success of its private sector on more than just this front. Chavez’s wrath against Mexico is particularly strong.