Compensating for Chavez: Who's Fair and Equitable?

Since the 1930s there has been a debate on how to compensate private companies when their assets they have invested from abroad gets Nationalised by local governments. These debates have always been heavy in Latin America which has been for the most part dependent on foreign investment since the colonial period and have been the most severe victims of economic collapse from abroad since the early 1900s. Carlos Calvo, an Argentine government official in the early part of the 20th Century created a philosophy on how to approach issues of Nationalisation of foreign property at the time. His theory eventually became known as the Calvo Doctrine, where the state would be the ultimate judge on when, what and how much is to be compensated during the Nationalisation of a private company by a state. Compensation to foreign investors has moved much more in balance with the needs of investors and a preference for international arbitration since then, but the old debate has arisen again in Chavez's Venezuela.

This week Hugo Chavez has warned that he will not sell oil to the US if the judgment of a British court to award fair and equitable compensation for Venezuela's nationalisation of assets belonging to Exxon Mobile takes place. The judgment, taken in a British court as accepted by both parties to the agreements, and compensation which was also agreed to upon the setting of capital investment in Venezuela by Exxon was agreed to by both parties through contracts before the investment took place and via treaty obligations accepted by Venezuela. This decision by Chavez is clearly behind the times in the treatment of foreign investment for any country anywhere and has not been an option for any state in the international community in more than 70 years. Severe cases in the past such as Iran's nationalization of US assets in the late 70's even valued the idea of compensation, where in the end compensation was paid to many US companies, albeit less than many of them expected.

The populist trend by Chavez has likely reached its height of cleverness awhile ago in the eyes of all but his most admiring supporters. Success in policies to help Venezuela's poor at first were welcomed by the masses in Venezuela who wish for a way out of poverty. His attacks on Bush has become the trend by not only him, but many liberal policy supporters worldwide. Recently however his interruption of left wing President Zapatero in Spain which lead King Juan Carlos to tell Chavez to bluntly shut up has become an echo for many in the world community who are anti-Bush as well, but are far from being pro-Chavez. Ignoring international norms and laws such as those regarding compensation is another strike again a Chavez who must deal with a post-Bush world where left wing policies as those of Lula of Brazil are taking the place of socialist and capitalist policies which dominated Latin America in the 1970s to 1990s. Lula, a former factory worker turned policy chair of Brazil's Worker's Party and eventual balanced socialist President has been Latin America's true left wing revolutionary, reducing poverty and working amongst all of Brazil's social and economic classes to achieve results. Chavez's non-nonsense approach has recently been seen by many as lacking tact, and perhaps embarrassing Venezuela not in the US where it doesn't count for many, but internationally. In Venezuela's latest referendum Chavez lost, and in the end populism is Chavez's only real currency in the control in Venezuela. Offending the international community can be helped in aiding Colombian kidnap victims and forming partnerships with Iran and Cuba, but in the end populism and oil are very volatile commodities for any leader who wishes to control the fate of Venezuela.