As President Hugo Chavez seizes ever more private property in his push to build a socialist system, foreign companies are squeezing Venezuela's resources by filing claims for billions of dollars in compensation.
Heavyweights such as U.S. oil giant Exxon Mobil Corp. as well as smaller companies from around the world are demanding at least a third of the government's congressionally approved budget, which could hinder Chavez's ability to boost spending ahead of next year's presidential elections.
The potential payout could also send a warning throughout Latin America, where governments in Argentina, Bolivia and elsewhere have nationalized portions of their economies.
Chavez can't ignore the claims if he wants to attract international investment and achieve his stated goal of boosting oil production. Venezuela's government is counting on ramped-up production to fund the government's many social, housing and other programs.
Paying the claims, however, could drain precious cash his government will need for those very same programs.
Chavez acknowledged last month that the pending disputes are a concern.
"It's an issue of permanent debate and discussion between us," Chavez told reporters.
Alejandro Grisanti, an economist with the investment bank Barclays Capital, said Venezuela will definitely have to pay to make the cases go away, and the question is how much. Many of the cases are pending before the World Bank-affiliated International Centre for Settlement of Investment Disputes, or ICSID.
"In all the cases, the government is expecting it's going to have to pay something," Grisanti said.
The ICSID's website lists 18 pending cases against Venezuela, while top government lawyer Carlos Escarra said recently that Venezuela faces a total of 28 arbitration cases, many of them before the ICSID.
The Venezuelan industry business group Conindustria said Chavez's government made 1,045 "interventions" involving companies and other private property owners from 2002 until this September, with 44 percent of the interventions construction related. The government seized property or in some cases outright expropriated companies.
The pace of interventions accelerated in the first nine months of this year, the data show, as the government stepped in 459 times, in many cases by taking over land, buildings and other property to shelter people displaced by last year's torrential rains.
The government last month nationalized its latest target, a family-owned Venezuelan ferry line, Consolidada de Ferrys, or Conferry, which transports passengers to and from Margarita Island.
Chavez maintains that government-run companies can provide services more cheaply than privately held firms and are linchpins to the new socialist system he's building. He has seized crucial businesses such as cement plants and farms, as well as oil projects that pump out billions of dollars in revenue. To some of Chavez's followers, the expropriations are seen as patriotic moves to protect the country's resources from exploitation.
If anything, the seizures have frozen foreign investment in Venezuela, except from energy companies still lured by high oil prices and the country's vast petroleum reserves, said Chris Sabatini, senior policy director for the business group the Americas Society-Council of the Americas.
"It's called the intoxicating effect of high oil prices," Sabatini said. "Venezuela thinks it protects them from the normal laws of economics and investment."
The laws of most countries, including Venezuela's, allow governments to take over private property, provided they provide fair compensation. The failure to agree on compensation, however, often move disputes to the countries' courts, in the case of domestic companies, or to international arbitration bodies for foreign corporations.
Chavez has said his government offers fair compensation to companies, but, in fact, reaching settlements can drag on for years.
Escarra suggested Venezuela consider abandoning the arbitration body, following the leftist governments of Ecuador and Bolivia, which pulled out in the past several years.
Asked about that possibility, Chavez called the arbitration center one of multiple organizations "created to assure the domination of world capitalism."
"If we were to arrive at the definitive conclusion that we have to pull out of that, we'd pull out," Chavez said.
At least in the short term, though, experts say that's unlikely because such a move would hurt the country's ability to obtain credit internationally and attract oil investment. Arbitration requirements are regular parts of oil service contracts.
"They need to play the game with transnational companies because they need these companies to invest," said Diego Moya-Ocampos, an analyst with consulting firm IHS Global Insight in London.
Cases now in arbitration range from a dispute over coffee production facilities, filed by Longreef Investments AVV, to a $3.8 billion compensation claim by Toronto-based Crystallex International Corp. over the government's rescinding of a contract to develop a gold mine.
Some of the biggest disputes erupted in 2007 when Venezuela seized majority control of the last privately run oil projects in the country. Many oil companies reached agreements with the government and stayed on as minority partners of the state company Petroleos de Venezuela SA, or PDVSA.
But Irving, Texas-based Exxon Mobil and Houston-based ConocoPhillips Co. sued for compensation. They declined to comment on their arbitration claims.
The Caracas-based consulting firm Ecoanalitica has estimated the bulk of the government's nationalizations involve more than $33.7 billion in assets, including about $23 billion in outstanding obligations.
Such an amount, if paid all at once, would be a significant financial hit for Venezuela, totaling about half of the country's $47.5 billion budget approved by lawmakers for this year.
When asked about the Exxon Mobil case, Venezuelan Energy Minister Rafael Ramirez responded: "It's a difficult battle."
But he has also said that Venezuela isn't negotiating with Exxon Mobil and isn't willing to "pay any penalization they may want to impose."
"What's at stake with the arbitration is the country's sovereignty," Ramirez said.
Venezuela will seek a significant change in new agreements, he said: "No new contract permits arbitration."
Ian James on Twitter: http://twitter.com/ianjamesap
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