International Herald Tribune Editorial - Bad move by Chávez

International Herald Tribune Editorial - Bad move by Chávez
Copyright by The International Herald Tribune
Published: January 10, 2007


President Hugo Chávez of Venezuela — the very portrait of a modern Latin American strongman — is not content to exercise near-total political and military control of his country. Now he is tightening his grip on the Venezuelan economy. That's bad news for foreign investors, but even more so for the Venezuelan people who will have to pay the price for an economy plagued by increasing inefficiency and corruption.

Chávez announced this week that he would nationalize electricity and telecommunications companies. Venezuela's biggest telecommunications company is partly owned by Verizon Communications. Its largest publicly traded electricity company is controlled by another American company, AES Corp. Chávez also declared his intention to take control of four multibillion-dollar oil projects with significant investments from foreign companies.

State control is rarely an efficient way to run companies. And nationalizations are not a good way to encourage further foreign investment. Chávez is already using the state- controlled oil company to reward his cronies at the expense of getting the best return on Venezuela's most lucrative resource.

Exactly what form these nationalizations will take remains unclear. Whatever Chávez is planning, he needs to fairly compensate shareholders. And while the Bush administration needs to condemn any seizure of American assets, it should choose its words carefully so as not to play into Chávez's Yanqui-baiting game.

The smartest way to counter Chávez's demagoguery would be a more active engagement by the United States with the region's many democracies. It needs to press ahead with trade agreements and other forms of economic assistance and cooperation.

Chávez latest moves also serve another reminder of why America needs to curb its insatiable appetite for oil. The United States is the biggest buyer of Venezuelan petroleum products. If a powerful Chávez is against U.S. interests, we should stop paying for his Russian fighter jets — and his nationalizations — with our gas-guzzling cars and trucks.