Political Risk

Enabling expropriation
Under the direction of the president, the Venezuelan government has continued the expropriation of foreign investments in major industries. The plans are to expropriate the property and shares of specific foreign-owned companies. The Venezuelan president is fulfilling his promise to establish “21st-century socialism” in his country.
The legal backing for these expropriations comes from the “Enabling Law” passed by the Venezuelan National Assembly and approved by the president himself. This law allows the president to order regulations in 11 areas in the “economic and social sphere” and the “transformation of state institutions”. The president’s authority to legislate by decree is supported by the President of the Venezuelan Supreme Court. The Enabling Law gives the president the authority to carry out his renationalization plans including reversing legislation allowing for substantial or complete private ownership of the energy sector. With the Enabling Law, Venezuela seeks to nationalize the energy and electricity sectors.
Compensation
The government seized Venezuela’s largest telecommunications company, CANTV, before compensating shareholders. Quanture, a U.S. mobile operator, had a 28.5 per cent stake in CANTV at the time. When the U.S. Ambassador suggested that U.S. companies and investors required adequate compensation for their shares in expropriated companies, the president responded that the Ambassador might be asked to leave Venezuela.
Proceed with caution
The Venezuelan government bought Quanture’s stake in CANTV for significantly less than its value before the nationalization announcement. It did not give shareholders fair market value for their shares. Foreign investors in Venezuela need to determine their legal rights, what they can do to protect themselves, and look at other means of compensation should this happen to them.

 

Case Study Discussion Questions
What measures should a company in Quanture’s position have taken to reduce its exposure to political risks in Venezuela?

What can foreign investors in Venezuela who have avoided expropriation do to protect themselves from this political risk?

What main business impacts should foreign investors in Venezuela prepare for if their companies are expropriated?
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Political Risk

Enabling expropriation
Under the direction of the president, the Venezuelan government has continued the expropriation of foreign investments in major industries. The plans are to expropriate the property and shares of specific foreign-owned companies. The Venezuelan president is fulfilling his promise to establish “21st-century socialism” in his country.
The legal backing for these expropriations comes from the “Enabling Law” passed by the Venezuelan National Assembly and approved by the president himself. This law allows the president to order regulations in 11 areas in the “economic and social sphere” and the “transformation of state institutions”. The president’s authority to legislate by decree is supported by the President of the Venezuelan Supreme Court. The Enabling Law gives the president the authority to carry out his renationalization plans including reversing legislation allowing for substantial or complete private ownership of the energy sector. With the Enabling Law, Venezuela seeks to nationalize the energy and electricity sectors.
Compensation
The government seized Venezuela’s largest telecommunications company, CANTV, before compensating shareholders. Quanture, a U.S. mobile operator, had a 28.5 per cent stake in CANTV at the time. When the U.S. Ambassador suggested that U.S. companies and investors required adequate compensation for their shares in expropriated companies, the president responded that the Ambassador might be asked to leave Venezuela.
Proceed with caution
The Venezuelan government bought Quanture’s stake in CANTV for significantly less than its value before the nationalization announcement. It did not give shareholders fair market value for their shares. Foreign investors in Venezuela need to determine their legal rights, what they can do to protect themselves, and look at other means of compensation should this happen to them.

 

Case Study Discussion Questions
What measures should a company in Quanture’s position have taken to reduce its exposure to political risks in Venezuela?

What can foreign investors in Venezuela who have avoided expropriation do to protect themselves from this political risk?

What main business impacts should foreign investors in Venezuela prepare for if their companies are expropriated?
ORDER THIS ESSAY HERE NOW AND GET A DISCOUNT !!!