Venezuela Watch 1/24/06

From VCrisis: ExxonMobil's Exemplary Exit

Investors.com

The pullout of ExxonMobil Corp. from a project in Venezuela may have marked a turning point — not for the oil giant, but as a warning about the deteriorating situation in that country.
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Exxon sold its stake in its only operating agreement in the country to its partner, Repsol-YPF, rather than be forced into a joint venture with the state on vague terms or — even worse — face expropriation.
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For an oil company to dump its stake in scarce acreage is rare. Oil producers rank themselves by acreage and compete fiercely amid dwindling supply. Given the frontiers in which Exxon is used to operating — Russia, Angola, Chad, Yemen — its decision to leave is a warning that Venezuela is an even higher investment risk.
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Foreign investment, in fact, is down in Venezuela (see chart) and, more ominously, domestic investment is down even more, particularly since 1998. As bankers at BBO Securities in Caracas put it: "Venezuela has simply become a place where businessmen are looking for deals, but are avoiding investments."
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In the wake of those broken contracts, there's been a mudslide of property rights violations, as well as new price and capital controls. It's not hard to understand why. Property rights violations don't stop at breaking contracts. They repeat into further breaches of contact, and spread to violations of all kinds.
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Meanwhile, Chavez himself announced that he'll expropriate 1.5 million more hectares of land from Venezuela's battered farmers in addition to the 1.34 million already taken from working farms in the states of Cojedes and Yaracuy.
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It hasn't stopped there. Like a madman, Chavez vowed to confiscate the entire coffee, and now corn, industries if they don't continue to sell processed products below production costs.

(Hat tip to CaribPundit.)