Nationalization is defined as the concept of a government seizing the private property of foreign nationals. In other words, nationalization is the alteration or assumption of control or ownership of private property by the state. It is historically a more recent development and differs in motive and degree from “expropriation” or “eminent domain,” which is the right of government to take property for particular public purposes (such as the construction of roads, reservoirs, or hospitals), normally accompanied by the payment of compensation. Nationalization may occur through the transfer of a company’s assets to the state or through the transfer of the share capital, leaving the company in existence to carry on its business under state control. Nationalization has often accompanied the implementation of communist or socialist theories of government, history tells us, as was the case in the transfer of industrial, banking, and insurance enterprises to the state in Russia after 1918. More recently, a further impetus has been resentment of foreign control over industries upon which the state may be largely dependent, as in the nationalization of the oil industries in Mexico in 1938 and Iran in 1951, and in the nationalization of foreign businesses in Cuba in 1960. In my view, another motivating factor for recent nationalizations may be the belief in some developing countries that state control of various industrial operations is at least temporarily necessary because of the lack of a developed capital market or supply of entrepreneurs in the domestic private sector.
Venezuela and Bolivia’s political uncertainty and a recent history of actual and threatened nationalizations, and increasing state intervention in the private sector has created a debate in the international scene. There a many talks about whether or not these actions by these governments are in conformity with recognized international standards. Hugo Chavez of Venezuela and Evo Morales of Bolivia both hold a socialist view of having the state or government run or take back privately run companies and industrial properties. President Hugo Chavez in 2007, announced plans to nationalize Venezuela’s electrical and telecommunications companies, pledging to create a socialist state in a bold move with echoes of Fidel Castro’s Cuban revolution. The nationalization appeared likely to affect Electricidad de Caracas, owned by Arlington, Virginia-based AES Corp., and C.A. Nacional Telefonos de Venezuela, known as CANTV, the country’s largest publicly traded company. According to James of the Associate Press,
“Investors with sizable holdings in CANTV’s ADRs include some well-known names on Wall Street, including Deutsche Bank Securities Inc., UBS Securities LLC and Morgan Stanley & Co. But the biggest shareholder, according to Thomson Financial, appears to be Brandes Investment Partners LP, an investment advisory company in California.”
According to Wilpert; “a financial analyst with local brokerage InterAcciones Casa de Bolsa CA, “the deal turns out very well for the American investors. Even though AES purchased the company for $1.6 billion and is selling it now for $739 million, it made a handsome profit of $1 billion in the six years it owned the company, said Richard. AES shares rose 0.63% on the New York Stock Exchange today”.
On the other hand, Bolivian President Evo Morales, in 2007 also announced the concretization of his planned nationalization of the country’s oil and natural gas industries. These enterprises had been privatized at the end of the 1990s during the “neo-liberal turn” throughout Latin America. According to Morales, the Bolivian people are now resuming their role as the true owners of the natural wealth that exists in the subsoil of their county. In my opinion, one could conclude that what president Morales is really promoting in Bolivia is not nationalization (as it has been historically) of the foreign companies that have been operating in the country. Rather, what he is doing is in effect buying back enterprises that were state-owned before but had been privatized in the previous decade. As far as am concerned, there could be fraud in this process, whereby these companies that are being bought back are being cheated of their real compensation, or are not even compensated at all in many circumstances. According to an article by Antunes:
“Just months after his inauguration as president, on May Day, Evo Morales ordered the invasion of the Petrobras Bolivian refineries by the country’s army as a symbolic means of announcing to the world that Bolivia was, from that point on, resuming control of the country’s economy, breaking with more than a decade of submission to “savage capitalism…to make this “nationalist” announcement effective, the Bolivian government has been negotiating for a number of months with the Brazilian state-owned firm on the value of its Bolivian assets to be paid as compensation for the de-privatization of the two refineries controlled by Petrobras in Bolivia. In 1999, Petrobras had paid US$104 million for the two refineries and since then invested some US$30 million in improvements. Initially, Petrobras had sought US$200 million for the two enterprises, but on May 10 the Brazilian government ceded to Bolivia’s offer and accepted a final price for the repurchase of the two installations of US$112 million (close to 224 million reais)”.
This is a prime example of a nationalization process that was under-compensated for the real worth of the company. The actions of these two governments under the so called “nationalization” in my opinion are in conformity with recognized international standards even though the foreign companies involved did not receive a fair amount of compensation. These companies involved in this deal practically did not receive the right compensation due them. Both governments, in their own interest took back these foreign companies through some form of force and/or in a dictatorial manner. Even though I disagree with the compensation amounts agreed on in these respective deals, at least these foreign companies did receive some kind of compensation.
On the contrary, when one compare these acts with the expropriation of foreign assets by Cuba after Fidel Castro took power there in 1958, one can deduce that the actions of the Cuban government was strongly not in conformity of international laws. Castro's nationalization of private property without compensation to property owners was one of his more visible attacks on human rights. Through a series of expropriations, the communist regime confiscated private residences, businesses, and lands belonging to both Cuban citizens and foreign citizens and entities primarily those from the United States.
Most economists around the world frown upon the idea of nationalization and expropriation; they argue that these actions are not in the best interest of a nation because it does not promote economic growth. There are many pros and cons behind this debate. But in my view, any government that sees nationalization and /or expropriation as the only means to control its economy should conduct this process or actions in a fair manner that will benefit both parties involved and should also be done within the internationally recognized concepts of the law.
WORKS CITED
Antunes, Jair. “Evo Morales and the fraud of nationalization in Bolivia.” Wsws.org. Wsws.org, 22nd may, 2007. Web.15th oct.2010. <www.wsws.org/articles/2007>

James, Ian. “Hugo Chavez to nationalize telecoms and electronic companies.” Associate Press. Havanajournal.com, 8th Jan, 2007. Web. 17thoct. 2010. < http://havanajournal.com/cuban_americans/entry/hugo-chavez>

Wilpert, Gregory. “Venezuela and Electric Company Sign Memorandum for Nationalization” venezuelanalysis.com. venezuelanalysis.com, 7th Feb.2007. Web. 15th oct.2010 <www. venezuelanalysis.com/news/2219>