Nationalization May Have Different Look

A person using his cell phone walks by a street telephone owned by C.A. Nacional Telefonos de Venezuela, CANTV, flanked by an image of Venezuela's President Hugo Chavez and the words "Vote for Socialists" in Caracas, Friday, Jan. 10, 2007. Chavez announced plans to nationalize power and telecommunications companies, like CANTV, and make other bold changes in a more radical push toward socialism. (AP Photo/Leslie Mazoch) (Leslie Mazoch - AP)

BOGOTA, Colombia -- Hugo Chavez loves incendiary rhetoric and risk-averse investors understandably rushed to sell shares in Venezuela's biggest telecommunications and power companies after he announced this week that he would nationalize them.

But it later emerged that the Venezuelan president _ whose "21st-century socialism" has managed to co-exist with a vibrant private sector _ is disposed to pay fair market prices for the two utilities.

That would make these "nationalizations" much less radical than initially feared and not all that unusual for Latin America.

"Nationalization," White House press secretary Tony Snow said after Chavez's latest move, "has a long and inglorious history of failure around the world."

The directors of the Chilean copper-mining company Codelco might take issue. Theirs is a proud and extremely profitable ward of a state so committed to free markets that even its toll roads are privately run.

A decade after the region rushed to privatize state-run industries, even countries outside Chavez's populist camp have realized that private companies haven't always served the public's best interests, particularly when it comes utilities like water distribution that require major investment but don't reap much profit.

Several key privatizations have recently been reversed, and even in countries that bought into the "Washington consensus," some strategic industries were never sold off.

"Some nationalizations in Latin America are long-standing and exist for mainly national security and even symbolic reasons. They are also a measure of national pride," said Michael Shifter of the Inter-American Dialogue think tank.

Mexico's 1938 nationalization of its petroleum industry set the standard. Its state-run oil company Pemex has long served as both the government's cash cow and a model of inefficiency and patronage.

State-run oil is the norm in countries including Brazil, Colombia and Chile, despite the latter two being near orthodox free-marketeers. (Colombia is, however, poised to sell 20 percent of state-run Ecopetrol this year to help fund exploration).

State-owned enterprises continue to account for more than 10 percent of the region's gross domestic product and about 5 percent of formal employment, according to the World Bank.

Of course, the success of any nationalization depends on details specific to the industry and country.