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Chavez’s Venezuela seizes record number of firms

GIL MONTANO/Reuters

It is the nightmare reality for Venezuela's business community where President Hugo Chavez's government has taken over more enterprises than ever in 2011, says Carlos Larrazabal, head of the country's largest industry association.

Authorities have nationalized 459 businesses so far in 2011, a whopping 62-per-cent increase over last year, according to the association, Conindustria.

In the course of 13 years of socialist rule by Chavez, the Conindustria body estimates 1,045 businesses have been taken over, the recent majority being small industries, Mr. Larrazabal said in a recent interview

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This process is strangling the economy, he said, adding that most companies are not being adequately compensated.

The oil-rich OPEC member state, never a manufacturing powerhouse, has seen its share of manufacturing drop four points to 14 per cent of the economy under Chavez, according to Conindustria.

"There is less and less national production and more and more dependence on imported products ... if you can get hold of [U.S.]dollars," Mr. Larrazabal said.

His organization, traditionally critical of Mr. Chavez, represents about 90 per cent of Venezuela's private industries. Mr. Chavez maintains nationalizations are reversing inequality and putting the country's wealth at the service of the people.

Though the biggest nationalizations – in the oil , telecommunications and power sectors – came years ago, the government is now constantly targeting smaller companies in sectors such as agriculture, tourism, transport and retail.

"Each month, they expropriate one, two, three companies in the industrial sector," Mr. Larrazabal said. "When there is a takeover of assets or installations, theoretically there should be a payment, but in most cases it has not happened."

Though Mr. Chavez frequently announces or threatens takeovers, his officials give few figures on the number of seizures or amounts of compensation paid. They insist that fair prices are offered, and that the policy is intended to combat inefficiency by taking over companies with poor output or idle land.

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Venezuela is battling about 20 international arbitration cases triggered by nationalizations, the biggest by far being those brought by oil companies Exxon Mobil and ConocoPhillips .

With Mr. Chavez demanding an "acceleration" of socialism ahead of a presidential election in October, 2012, analysts expect many more nationalizations before then.

A ferry company and private properties on the Los Roques archipelago were among the latest targets.

Business leaders such as Mr. Larrazabal say almost all the businesses that go into state hands deteriorate quickly. "I think it is well-known among the population that as soon as a business is taken over, shortages of that product begin, there's a fall in production," he said.

According to Conindustria data, imports have soared in the last five years to $40-billion (U.S.) from $15-billion. Import dependency has long been a problem in Venezuela, however, from well before Mr. Chavez, with economists often chiding the lack of diversification away from oil.

Conindustria said a recent survey of its members showed more than 80 per cent identifying "political uncertainty" and "the attack on private property" as main obstacles to growth.

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"You can't plan production with so much uncertainty" in Venezuela, Mr. Larrazabal said.

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