Hugo Chavez, Carmaker

♠ Posted by Emmanuel in at 12/25/2009 07:54:00 AM
Like so many other things, Latin American populismo sounds great over the airwaves but is rather horrible in practice. Once more, Hugo Chavez offers today's case in point. A few weeks ago, we had Chavez railing against corruption in Venezuela's banking system stemming, him giving cronies carte blanche authority over some banking institutions. Today, we receive news that Hugo is back on the expropriation warpath. Apparently, he's targeting automakers in Venezuela for nationalization based on their supposed refusal to sell rugged 4x4s necessary to traverse the often rough terrain of Caracas. (As an aside, wouldn't nice roads be a nice demonstration of him paving the the way for Bolivarian revolution? Silly me.)

Comrade Hugo is now singling out Toyota, the world's largest automaker that's inching its way back to profitability, for not offering more Venezuelan people's cars. Fun stuff. From Reuters:
Venezuela's President Hugo Chavez has threatened to expel Japanese carmaker Toyota unless it produces an all-terrain model of 4x4 vehicles used for public transport in poor and rural areas.

The fiery socialist, in a speech late on Wednesday, also said he would not hesitate to expel and expropriate plants from other Asian and U.S. automobile companies operating in Venezuela if they failed to share technology with locals. "What's this that Toyota doesn't want to make the 'rustic' model here?" Chavez said, during a ceremony in Caracas to hand owners the keys to economically produced cars that Venezuela's government has imported from Argentina. "We must force them. And if they don't, then they should leave and we'll bring another company in ... The Chinese want to come and they make 'rustic' models."

During a decade in power, Chavez has nationalized large swathes of the Venezuela economy -- including the oil and power sectors -- as part of his "21st century revolution" but has so far left car manufacturing relatively untouched.

He turned on Toyota, the world's biggest automaker, when a transporter said there was a scarcity of all-terrain models to serve people in under-privileged areas. Caracas' poor mainly live in hillside slums, while many rural areas lack decent roads, meaning tough 4x4s are the main means of transport.

Chavez ordered his Trade Minister Eduardo Saman to carry out a "severe inspection" of Toyota, and warned other companies they must start sharing technology with Venezuelans. "You tell the people at Toyota that they have to produce this model and we are going to impose a quota, and if they don't meet it, we will punish them," he told Saman, adding that the state would not hesitate to expropriate Toyota's facilities and pay appropriate compensation...
Somehow, I am inclined to believe Toyota Motors' version of events. According to them, the government knew two years ago that Toyota's Venezuelan subsidiary would stop assembling the cars locally and would import them instead. However, the Venezuelan government has not issued a license yet for the importation of these 4x4s:
But a source at the company said Toyota had stopped assembling the model in question -- which he identified as Land Cruiser 70 -- in 2007, with the government's full knowledge. It planned to import instead, but had not received the necessary license, he added...
Absorb them or kick them out if they don't sell 4x4s, says Hugo. What's more, he adds that the likes of China, Russia, and Iran are eager to sell the required models the Japanese and Americans aren't willing to sell in the Venezuelan market:
"Companies who come here to set up must be ready to transfer technology to us," Chavez said. "If they don't want to, they should go away. I invite them to pick up their things and go," he added, saying companies from allies like China, Russia, Belorussia and Iran were ready to take their place.

Lack of access to dollars at the official exchange rate, and labor disputes, have combined with a recession to hit the automobile industry hard in Venezuela this year. According to latest figures from the Venezuela Automobile Chamber, car sales in November were down 40 percent at 10,075 units, compared with the same month last year.
What is worse run, Venezuela or the United States? Given their shared love for nationalization, I can hardly tell the difference. Venezuelan officials indulge auto fetishes bordering on the senseless (via fuel subsidies and the like) while American ones do the same for homes via unnaturally easy credit conditions as well as unquestioned guarantees on limitless loan growth. You'd think they'd have learned their lessons by now but I guess some people have near-infinite faith in unreason.