VENEZUELAN SEIZURE AND EXPROPRIATION OF US OIL COMPANY PROPERTY VALIDATES HIGH COUNTRY RISK RATING

Oil Rigs of the type seized by Venezuela last week

Readers who have questioned why I have consistently given extremely high Country Risk evaluations for Venezuela learned this week, the hard way, why I have stated that the nation has an unacceptable level of risk. Armed with a court order, police and National Guard troops seized, and expropriated, two oil rigs that are the property of an American company, Superior Energy Services. The order reportedly recited that the expropriation was essential to Venezuela's national development.

The seizure, which occurred after PDVSA, the national oil agency, defaulted on lease payments owed on the equipment, caused the equipment to be removed from Superior's control, and reportedly shipped to PDVSA. After this telling incident, if you still believe that it is safe to do business with the Government of Venezuela, where the rule of law is what the government tells the judges how to rule, and where foreign companies have no redress for civil wrongs inflicted upon them, then you might want to reconsider your ability to accurately calculate Country Risk.