LEFTIST LATIN AMERICA: Nationalizating Private Industry

By Fred Copley

Beyond the anti-America rhetoric, the most potent indication of a leftist turn among Latin American governments is the effort to nationalize private industries, particularly industries dealing with the extraction of natural resources. Especially in Venezuela and Bolivia, foreign-owned extraction industries have been either taken over, or at least forced to agree to new terms of operation that allow more revenue to remain in the host nation.

In Venezuela, the Chavez government has renegotiated upward its share of oil royalties.  It has appropriated land and factories that it claims have been left idle. Venezuela has also recently decided to sell gasoline in the United States only when it can make a significant profit, thereby closing stations in a number of states.  On May Day, 2006, the Morales government of Bolivia effectively nationalized the country’s natural gas and oil industries, to the distress of Brazil and Argentina who have oil interests of their own.

This wave of nationalization is, in part, a response to the prior wave of neoliberal privatization that swept the region in the 1990’s. This trend, in which Latin American nations were compelled to privatize their industries in exchange for foreign aid, did not lead to an improvement in living standards for the people at large. (In cases, it did enrich the lives of the elite class.) At the same time, Latin America surrendered autonomy to international institutions and foreign companies.

Interpreted this way, the current nationalization is a reclaiming of the people’s wealth. However, nationalization can also be read as an ill-conceived usurpation of private rights that will only hinder economic growth for these countries, a regression into policies leading to economic stagnation and corruption that will discourage investment and tarnish the countries’ international reputations. (Yet, don't forget China.) Although it may be tempting to view this nationalization movement as ignorant of the market and the privatization movement as subservient to it, behind these diverging views lies a legitimate question about what is truly best for these nations and how to achieve it.

Proponents of nationalization are hardly ignorant of the ways of the market.  They realize that the privatization of natural resource industries has not helped the majority of people in these countries. They logically seek to change the terms on which these industries operate.  The same thinking is at work on a larger scale in Chavez’s attempts to form a Latin American economic union that would challenge and pose an alternative to the neoliberal Free Trade Agreement of the Americas.

(Citgo is an American subsidiary of PDVSA, the Venezuelan state-owned oil conglomerate.)

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