US corporations warned of risks in Venezuela

news.ft.com By Andy Webb-Vidal in Caracas Published: January 19 2003 21:01 | Last Updated: January 19 2003 21:01

US corporations with interests in Venezuela are facing increasing risk of government intervention or even expropriation, as President Hugo Chávez moves to confront a general strike and consolidate his position, business leaders warned on Sunday.

The warning comes after the military raided a Coca-Cola subsidiary bottling plant on Friday and distributed the soft drink to the poor to help ease shortages of staple goods arising from a six-week-old protest stoppage by opponents of Mr Chávez.

Mr Chávez said orders had been issued to military units to carry out similar "legal" actions against companies deemed to be hoarding essential foodstuffs. "Those who attempt to deprive the people of food and then complain that Chávez is arbitrary are traitors to the nation," he said.

US companies with operations in Venezuela include food group Kraft, Procter & Gamble, and Cargill, the agribusiness. Business leaders are watching to see whether the raid was intended as a gesture aimed at persuading other companies to lift the economically crippling strike, or whether the move marks a Cuban-inspired leftward shift in Mr Chávez's policies.

Either way, the difficult relationship between the government and private businesses look set to deteriorate. "Tremendous damage is being done to Venezuela's reputation, countries in Latin America have long had to wrestle with the banana republic, tin-horn dictatorship image from the 19th century," said Antonio Herrera, vice-president of the Venezuelan-American Chamber of Commerce.

"Venezuela had to a great degree overcome this image, but through a single event on the part of a small group of people world opinion will now start thinking of Venezuela in terms of countries that aren't quite civilised," Mr Herrera said.

The move against the Coca-Cola distributor is likely to add urgency to a nascent diplomatic initiative by a six-nation group aimed at finding a negotiated resolution to the political deadlock between the government and opposition groups.

Brazil, Chile, Mexico, Portugal, Spain and the US last week agreed to form a "group of friendly nations" to bolster an existing mission by the Organisation of American States.

Colin Powell, US secretary of state, and some of the foreign ministers from the five other "friendly nations" are expected to hold talks in Washington this week. Irked over the inclusion of the US in the group, Mr Chávez said his government could walk away from the OAS talks.

Mr Chávez met Luiz Inácio Lula da Silva, Brazil's president, at the weekend to seek support to widen the group to include Russia and France. Celso Amorim, Brazil's foreign minister, said membership of the group would not be broadened for the time being.