petroleumworld

VenEconomy: Overstepping
the bounds of the Constitution

Monday, August 18, was a black day for private property in Venezuela. It was a long day in which the government revealed the reach of the talons of its criminal decree-laws enacted on July 31 during the last moments of the Special Powers Law.

This Monday, Vice-president Ramón Carrizález and Energy and Oil Minister Rafael Ramírez, following the instructions issued by Hugo Chávez on Sunday, went ahead and took control of the domestic cement industry under the false pretext of “shoring up development in housing and infrastructure.”

On the one hand, they announced that the French group Lafarge and the Swiss company Holcim had “accepted” the terms of sale imposed on them by the Venezuelan government and that they had signed memorandums of understanding with the two companies that will mean a disbursement by the Republic of $829 million. In this forced sale, Lafarge will transfer 89% of its shares to the State and the Holcim group 85%, and both will retain a minority shareholding. On the other, they stated that the government had not reached any agreement with the Mexican company Cemex and that, therefore, the company would be “expropriated” pursuant to the decree-law for the planning of the cement industry enacted in June 2008.

Up until that point, it could be said that the government was acting within the bounds of Constitution. However, the Executive totally overstepped them when, during the night, it went ahead and carried out the prior occupation of Cemex's facilities, enforcing the new Decree-law for the Defense of Persons regarding Access to Goods and Services, which gives the Executive the (unconstitutional) right to confiscate as it sees fit all or any part of the production chain of goods and services deemed essential.

This Monday, in carrying out the prior occupation of Cemex, the government ignored the constitutional guarantees that stipulate that a declaration of expropriation is the start of such a procedure, not its culmination, and that demand that a legal procedure be followed in which the parties reach an agreement on, among other things, the payment of a fair price.

In another equally arbitrary incident, in the morning, the new Institute for the Defense of Persons regarding Access to Goods and Services (Indepabis) took part in another assault on the Constitution by suddenly enforcing not only the Law for the Defense of Persons regarding Access to Goods and Services but also the Agricultural and Food Security Law at the Excelsior Gama supermarket in Santa Eduvigis. Indepabis seized 1,670 kg of premium rice (99.5%-100% whole grains) alleging that it was being sold at above the regulated price, and immediately sold it outside a Caracas Metro station at the regulated price of Bs.F.2.30, which applies to rice with 1% broken grains. The money obtained from the sale of this product does not go to the Treasury but to the National Community Councils Fund, as provided for in the law.

The message is more than clear: with the enforcement of the communist laws enacted via special powers, no company or private business will be safe from the omnipresent authority of Hugo Chávez .

VenEconomy is a Venezuela's leading specialized publisher in the economic and financial area. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.

Editor's Note:This commentary was originally published by VenEconomy, on 08/19/2008. Petroleumworld reprint this article in the interest of our readers.

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Petroleumworld News 08/20/08

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