Monday, May 17, 2010

Expropriation risk...

...a continuing series.

The last sentence in this announcement from Mr. Chavez is a classic of its kind. They could not "settle with the owners", so they simply relieved the owners from the burden of ownership. So now what? We see the familiar refrain of capital, both financial and physical, fleeing to adjacent jurisdictions or perceived safe havens until some semblance of certainty with property rights can be achieved. The security and surveillance costs alone will be enough to bring Venezuela down.

CARACAS, Venezuela (AP) -- President Hugo Chavez announced Saturday the expropriation of a group of iron, aluminum and transportation companies in Venezuela's mining region.

Among the expropriated companies is Materiales Siderurgicos, or Matesi, which is the Venezuelan subsidiary of Luxembourg-based steel maker Tenaris SA.

Venezuela's socialist president said in a televised that his government was going to take over Matesi because "we couldn't reach an amicable and reasonable settlement with the owners."

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