Venezuelan President Hugo Chavez has taken control of a rice mill owned by a U-S food company. That and other takeovers are part of an effort by Chavez to control food costs in Venezuela. Anchor Lisa Mullins speaks to Latin American expert Michael Shifter about the economic and political implications of Chavez's strategy.
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LISA MULLINS: A different country, a different response to the economic downturn. In Venezuela, the government of President Hugo Chavez has imposed new food regulations. The move is supposedly aimed at lowering food prices and slowing down inflation in Venezuela. But Chavez is doing more than regulating food prices in the country. He's also taking over foreign-owned business involved in food production. Among them? A rice mill owned by the US food company Cargill, based in Minnesota. Michael Shifter is Vice-President for Policy at the Inter-American Dialogue. What actually happens when an American company such as Cargill is taken over, expropriated or nationalized in a place like Venezuela?
MICHAEL SHIFTER: Well, what happens is that the takeover operates pretty much like a sale or a merger. The top employees leave, are dismissed, but most of the employees are allowed to stay on if they wish. And then there is -- the state takes over and controls it, and then there is a compensation that is given to the company. And that has to be reached through negotiation between the Venezuelan government and the private company. In the past, this has taken place and there have been compensation packages that have been given to the company.
MULLINS: If they can agree on a final price.
SHIFTER: Yeah, just – the difference between now and a couple of years ago is that Venezuela had a lot more resources and oil was at a higher level. Some of these negotiations may be a little bit more difficult with Cargill than with others, because Venezuelan government simply doesn't have the money that it used to have.
MULLINS: Because oil --
SHIFTER: Because of the decline in oil prices.
MULLINS: And because it based its budget on $60 dollars a barrel of oil, when right now the going price is what, $40?
SHIFTER: Right. $40.
MULLINS: And speaking of money, when we think of nationalization, which is what he's doing with this American company, we think about AIG or Ford, perhaps, or GM, which is what has been talked about in certain cases here in the United States. But in this case, Cargill was not leaching money. Cargill is still a strong operation?
SHIFTER: There's no evidence that Cargill was having any difficulty, was an ailing company at all. This is very different situation than what we're facing in the United States where there's really very little option. In this case, in Venezuela, the company was operating well and its very little economic rationale for Chavez's move, and it really seems to be motivated fundamentally by politics.
MULLINS: Okay. We're talking specifically about Cargill, but we should say that it's not just American company that is being nationalized in Venezuela. There are other companies as well?
SHIFTER: Yeah. Absolutely. He's gone after other companies – Mexican companies and other foreign companies as well.
MULLINS: Does this give you any more of an idea of what the Obama administration is going to be facing with Hugo Chavez, who was a thorn in the side of George Bush?
SHIFTER: I think this does suggest that Chavez is going to continue to be a problem and a challenge for the Obama administration. Clearly, there's not going to be the level of confrontation, I don't think the Obama administration is going to go for Chavez's bait. But I do think Chavez is somebody who is intent on consolidating power at home and being a regional and a global player and challenging the United States. This nationalization, I think, suggests that the kind of the confrontational politics that Chavez has thrived on over the last decade is going to pose a real problem for the Obama administration.
MULLINS: All right. Michael Shifter, Vice President for Policy at the Inter-American Dialogue, speaking to us from Washington, D.C. Nice to have you on.
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