The Chavez-Cemex saga continues

Venezuelan President Hugo Chavez has maintained his anger at Mexican cement giant Cemex this week (I discussed this in Lecture 8 as an example of political risk). He still intends to take over their Venezuelan operations (i.e. to nationalise their assets). Cemex has announced it will seek international arbitration of the dispute, leading Chavez to make accusations about the environmental impact of Cemex’s operations. Threats (and actual incidents) of nationalisation are pretty rare these days, but Venezuela has done it a few times now, including in oil (although some have argued he was merely catching up with other oil-producing nations on that front) and also banking.

Chavez & Naomi Campbell

The impact of such moves can be seen in the perceptions of Venezuela as a place to make investments. Despite being a fast-growing economy (typically GDP has being growing at >4% per annum) with middle-tier income levels (>US$9000 per capita), Venezuela lags a long way behind similar sized nations on rankings of the “Best Countries for Business” (where it is #115 behind Bangaldesh and Ethopia) and of corruption (where it is #162 behind Zimbabwe and Cambodia).

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