Chavez Runs Short of Cash for Takeovers as Oil Prices Slump

Venezuela is holding up payments to contractors, oil services companies and targets of President Hugo Chavez’s nationalization drive, indicating the country is running short of cash after petroleum prices collapsed.

Service providers to the state oil company are idling rigs for nonpayment, and Brazil’s Odebrecht SA said last week it’s slowing work on the Caracas metro because the government is past due on its bills. Chavez also owes $10.2 billion for companies he’s taken over, according to an estimate by Caracas-based economic consulting company Ecoanalitica.
“The economic environment isn’t particularly conducive for any good deals for companies awaiting payment,” said Alvise Marino, an emerging markets economist at IDEAglobal in New York. “If I was one of the companies involved, I wouldn’t keep my hopes up.”

The moves to conserve cash haven’t damped Chavez’s enthusiasm to expand state control of the economy as part of his “Bolivarian Revolution.” This month he seized a rice plant from Cargill Inc., the biggest U.S. agricultural company, a tree farm from Dublin-based Smurfit Kappa Group Plc, and threatened to expropriate the country’s biggest private company, Empresas Polar SA, and pay for it with “paper” instead of cash.

“People have been operating under the misconception that, as much as Chavez has expropriated, he’s always paid,” said Patrick Esteruelas, a risk analyst at Eurasia Group in New York. “That’s not the case.”

Bloomberg