Baseball Crank
Covering the Front and Back Pages of the Newspaper
March 20, 2007
WAR: A Corporate Lawyer's View of Venezuela

Authorized corporate blogs are rarely interesting, but the blog by Mike Dillon, General Counsel of Sun Microsystems, is occasionally candid enough to be worth reading; his description from last month of the challenges of trying to actually do business in Hugo Chavez's Venezuela is illuminating:

The current congress in Venezuela has given their president broad powers to unilaterally enact laws for a period of 18 months in a wide range of areas. The result is that new laws and changes to existing laws are issued almost weekly. Last month, Venezuela's president announced plans to nationalize the country's oil, telecommunication and electricity companies. There are concerns that he may go further.

I spent over an hour meeting with a group of eight local attorneys in Caracas to discuss this fluid political situation and how it impacts their work. They represented a cross-section of the local legal profession - lawyers from firms and in-house with IT, energy and telecommunications companies. They very openly described the challenges of trying to advise their clients about laws that appear first in the morning newspaper with no prior legislative debate or announcement. Many of these new enactments were described as inconsistent or ambiguously drafted. This forces citizens to seek prior approval from the government before taking any action. And, there is no stare decisis to be relied upon for guidance.

It's a very anxious environment in which uncertainty pervades most aspects of life.

Posted by Baseball Crank at 12:16 PM | Business • | Law 2006-08 • | War 2007-14 | Comments (7) | TrackBack (0)

Simple answer: don't do business with Venezuala. It'll be unfortunate to the people of Venezuala, but their economy is going to have to collapse for them to turn against Chavez.

Posted by: rbj at March 20, 2007 1:24 PM

That is exactly the answer, unfortunately there will always be someone, such as Russia or China, that will do business with him. The only other option would be to make it difficult to do business, such as a blockade. However, that is probably not a good solution either.

Posted by: maddirishman at March 20, 2007 2:14 PM

We can't "not do business" with Venezuela. They are in our hemisphere; they have a product we unfortunately are addicted to, and they have a direct influence on our other neighbors.

Venezuela was allowed to slip into chaos, in ways that Mexico did not. Clinton knew the importance of our Southern neighbor. Bush paid what little attention he does to Iraq, and not to South America.

Posted by: Daryl Rosenblatt at March 20, 2007 2:39 PM

Yeah, Russia or China or...Halliburton. Hell, they just moved to Dubai, they can do whatever they want since any US rules would not impinge upon their mercenary ways. They were doing business with Iraq when there was an embargo, why not Chavez?

Posted by: jim at March 20, 2007 2:46 PM

Oil, being a desired commodity, is hard to "not do business" with. No matter where it comes from, oil is pretty much oil. If the USA stops buying Venezuelan oil, that is not going to affect them at all as long as there are enough other buyers out there. And there are.

Now, if you could get the rest of the world to embargo, that would have an effect. Perhaps if almost all the countries in the world embargoed and the remainder decide to bargain for a lower price, that could work too. Good luck on that, especially with China and India.

Of course, we could stop buying oil altogether. That will drop demand, lowering the price of oil, and I'm sure Chavez will not be happy about that at all. But with China and India guzzling more and more, how much effect this would have is hard to predict. They might just make up the shortfall. Plus we get the added bonus of higher energy bills and trying to figure out what to replace petroleum with. Expensive "green" power? Nuke plants? Coal? And to think people complain about gas prices now.

More to the topic, a company that would invest in a country where the laws can change by the day and their property could be siezed with no warning better expect huge returns. Otherwise they are insane.

Posted by: Paul at March 20, 2007 6:34 PM

I think this article is useful in that instead of condemning Chavez on idealogical grounds, it attacks him on business grounds. Even if you happen to ascribe to him the best of motives, the way in which the government operates is harmful to business. The most obvious way is that companies don't want to invest in industries that may be nationalized, but the "laws can change drastically without debate or warning" thing is substantial as well.

The US really can't stop buying Venezuelan oil. Or, more specifically, it won't matter if we do. But the Venezuelan oil industry is liable to collapse in the long run under the weight of it's own bad business practices.

Posted by: Jerry at March 20, 2007 11:25 PM

The U.S. can and must stop buying Venezuelan oil and Russian oil and Middle East oil. We must do it for security reasons. I don't care what it takes, biofuels, wind power, cells and yes, even nuclear power and coal. That and eliminating our debt to China should be our paramount concerns. We have one of the mightiest weapons in the world, namely our affluent and insatiable consumer culture. But we can't use it to influence anyone, because they own us through oil and debt. It might not make a big difference to the fate of Venezuelans, but it will impact ours greatly.

Posted by: Rene at March 22, 2007 12:50 PM
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