Venezuela moves to nationalize fuel distribution

Taken from international herald tribune.

The Associated Press
Published: August 28, 2008

CARACAS: President Hugo Chávez said that wholesale gasoline sales by private companies in Venezuela will soon disappear after his congressional allies pass a bill nationalizing the business.

Under the measure, which received initial approval in the National Assembly on Wednesday, the state-run oil company Petróleos de Venezuela will control Venezuela’s fuel distribution network but will not nationalize privately owned gas stations.

Dominated by Chávez allies, the National Assembly is expected to give its final approval to the legislation later this week.

Distributors, including subsidiaries of British Petroleum, Exxon Mobil and Chevron, had hoped to persuade the government not to seize total control of their businesses.

But Chávez ruled out allowing private minority stakes, accusing operators on Wednesday of making money at the country’s expense.

“This was an old scheme through which some private sectors seized the nation’s wealth without a drop of sweat,” Chávez said. “That’s what they defend.”

The law gives distributors 60 days to negotiate the sale of their businesses to the government or face expropriation. It also forces distributors to sell storage tanks and gasoline pumps to Petróleos de Venezuela and to relinquish their brand names.

Congressman Luis Tascón, a former Chávez ally, said the pending legislation could cause shortages at gas stations because the government is not prepared to take full control over distribution.

The Chávez government has never raised gasoline prices and Chávez has ruled out any increase in the fixed pump price of around 12 U.S. cents per gallon, the cheapest in the world. Wholesale fuel distribution in Venezuela generally offers limited profitability because of the combination of fixed prices and high inflation.

“I’m warning the population that if this law is approved, we are going to see shortages in the short term,” said Tascón, one of a handful of lawmakers who voted against the bill.

A Petróleos de Venezuela subsidiary controls 49 percent of fuel distribution in Venezuela, with the rest controlled by private companies, according to industry representatives.

Under Chávez, the government has nationalized Venezuela’s largest telephone, electricity, steel and cement companies and has assumed majority control over four major oil projects.

Also Wednesday, the president said in talks with the Mexican ambassador, the government has negotiated a deal that will let the Venezuelan authorities take full control of the local plants of the Mexican cement company Cemex.

He gave no details on what his government might pay for a majority stake in Cemex’s three Venezuelan cement plants, 30 smaller concrete plants and shipping terminals.

Venezuela seized the facilities on Aug. 19 after compensation talks failed.

Jorge Pérez, a spokesman at Cemex headquarters in Monterrey, Mexico, confirmed the agreement with Venezuela but said compensation must still be determined in talks with the government.

Chávez also said that “time has run out” for an agreement on compensating the country’s largest steel maker, Sidor, and that Venezuela will determine on its own what shares in Ternium, the parent company, are worth.

Ternium is a subsidiary of the Argentine-Italian conglomerate Techint. It owned 60 percent of Sidor until it was nationalized in May.

Chávez added that the two sides disagree over a Ternium request that the government guarantee immunity from future claims by workers or others in Venezuela.

Associated Press writer Christopher Toothaker contributed to this report.

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