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Venezuela is one of a few resource-rich countries attempting to renationalize the property of multinational corporations (AP Images/Fernando Llano).
In early 2007, Venezuela’s president Hugo Chavez gave some of the world’s biggest oil companies a choice (HChron): turn over majority control of their projects to a state-owned company and remain as minority partners, or face a complete nationalization of operations in Venezuela’s Orinoco River basin. The region’s reserves may rival those of Saudi Arabia, so for major oil companies the stakes were huge. Ultimately, Exxon and ConocoPhillips opted to leave, while BP and Norway’s Statoil decided to stay. The move proved especially costly for Conoco, which reported a 94 percent drop in the year’s second quarter earnings—a direct result of losing its Orinoco holdings (FT). Exxon said it was too early to gauge the impact of the seizure.
Venezuela is among a small but growing number of resource-rich countries to put the squeeze on international corporations. Russia early this year pressed both BP and Shell (Guardian) into turning over majority stakes in Russian gas operations to state-owned Gazprom. Bolivia nationalized gas and oil fields (NPR), and Ecuador used troops (Forbes) to take over Occidental Petroleum’s holdings. It is not just the oil and gas sector facing renationalization. Zimbabwe’s government said in June it would nationalize the country’s uranium (Reuters) as well as its coal and methane projects.
To the resource-rich developing states involved in such moves, it is an important signal of sovereignty. In an op-ed, Venezuela’s ambassador to the United States, Bernardo Alvarez, asserts that the benefits from the developing world’s natural resources “can no longer flow (HChron) in only one direction.” And though sometimes clothed in populist rhetoric, this trend seems less like the state seizures of the past because international companies are not entirely left out in the cold. Bolivian Vice President Álvaro García Linera told the Christian Science Monitor that his country practices a “21st century-style nationalization.” Russian President Vladimir Putin stressed that his country remained open to investment (NYT), pointing out that all of the world’s largest companies are represented in Russia.
Still, the reemergence of state-controlled resources has raised concern in some quarters. An internal study prepared by the U.S. military’s Southern Command last year obtained by the Financial Times says resource nationalism in Latin America’s energy sector will likely increase inefficiencies and “hamper” efforts to increase supply and production. According to the UN Commission for Latin America and the Caribbean, though foreign direct investment in the region has increased in terms of dollar amounts, its global share of money flowing into developing countries is shrinking, as transnational corporations lose ground (PDF) to state-owned companies.
Rigoberto Lanz, a senior adviser for Venezuela’s Ministry of Science and Technology, acknowledges that in the “short-term” his country will not be “an attractive market (WashPost)” for foreign investment, as businesses wait to see exactly the kind of economic model the country develops. Yet corporate experts note that with the right approach companies can be competitive and profitable in countries experiencing upswings in nationalized resources.
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