Venezuela moves to seize US-owned telecom
Dow Jones Marketwatch, http://www.marketwatch.com/news/story/venezuela-moves-seize-us-owned-telecom/story.aspx?guid=%7B622436F5%2D1A6C%2D4FAF%2D9F77%2DB755FF793437%7D
Chavez's move may hint at growing economic problems in Venezuela caused by declining global crude-oil prices, The Wall Street Journal reported in its online edition.
On Friday, the price of the Venezuelan mix of crudes was down to about $46.87, about $15 below highs of around $60 last yea, according to the Journal.
Venezuela, an OPEC member, is a major world oil producer and its government is heavily dependent on revenue from oil sales and production royalties. It is the fourth-largest supplier of crude to the U.S., according to the most recent figures from the U.S. Department of Energy's Energy Information Administration.
Chavez's announcement Sunday threw further doubt on whether Verizon (VZ) would receive fair compensation for its stake in CANTV (VNT) , The Journal said.
Earlier in January, Chavez announced that Venezuela would nationalize CANTV as well as the country's private power companies by the end of the years, and government officials said the companies would receive fair compensation, according to The Journal. The companies are worth an estimated $4 billion, and Venezuela has sufficient money in its reserves to buy them, The Journal said.
But delaying the payment to CANTV shareholders would produce a cash gain for the Chavez government from the start, and probably drive down the ultimate price it would pay, according to the report.
Chavez was quoted in media reports Sunday as saying, CANTV "was given away" in 1991, when state-owned company was privatized.
"So I don't want to hear stories about how I have to pay at such and such price, at the international price, no, no, no, CANTV was given away," Chavez was quoted as saying.
Chavez said after his government decides what it's willing to pay for CANTV, it will subtract the value of pensions owed to about 4,000 former employees, according to media reports
CANTV's stock has fallen more than 30 percent in the U.S. and 19% in Venezuela since the nationalization plan was revealed on Jan.8.
CANTV's U.S.-traded shares closed Friday at $123.49, up 0.07%. Verizon shares closed at $37.25, down 0.85%
[Editor: As long as property was acquired legally and ethically by an individual or a corporation, I'm not in favor of seizing it. Chavez' actions are unilateral, autocratic, and smack of blind hatred of the US.
However, we have to admit that our past actions in Latin America invite such hatred. Additionally, we should ask ourselves under what conditions Verizon acquired its stake in CANTV. I call your attention to the previous article posted about Grameen Phone, Telnor's stake in the company, and the manner in which it was acquired.
Muhammad Yunus accuses Telnor's current CEO of reneging on a promise made by the previous CEO. The previous CEO was said to have started Grameen Phone with Yunus as a nonprofit venture, to later be turned over in its entirety to Grameen Bank. Now, Telnor's CEO claims that such a promise was never made.
Let's assume, though, that Telnor's stake was acquired ethically. The operation is profitable, and Telnor will not relinquish it without compensation. It has a responsibility to its shareholders, after all. Grameen Bank isn't in a position to buy Telnor out; they organized for social good, not profit. As the majority partner, Telnor may be able to take actions that will short-change Grameen Bank, the minority partner, and by extension the citizens of Bangladesh.
We have an imbalance of power between corporations and developing nations. Even if the contracts that these parties negotiate are legally sound, they may be ethically problematic. I am not excusing Chavez' actions. He is a danger, and he is becoming the evil that he sees in us. And it is not ethical to appropriate a corporation's property without compensation. But we should seek to know the complete circumstances surrounding Verizon's investment in CANTV. If they caused major social or environmental damage in Venezuela and were trying to escape responsibility, then they deserve what they get - although I think this is unlikely.
Chavez is better off nationalizing the Venezuelan assets of Exxon Mobil.]