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The Strange Case of General Motors In Venezuela

The Strange Case of General Motors In Venezuela

Venezuela has made headlines in recent months due to the ongoing economic crisis in that country. Most recently the country made news by nationalizing an American corporation: General Motors. In April 2017, the government seized control of the GM plant in Valencia, Venezuela, nationalizing the factory and sending GM officials and American workers back to the United States. The move reportedly cost GM in excess of $100 million. Many industries in Venezuela have been nationalized since 1999, including oil and telecommunications. If you have business operations in other countries, how can you protect your business? What is Nationalization? Nationalization is the process whereby a national government seizes the assets of a private company and takes them over for government use. This seizure most often occurs without compensation to the private company, resulting in financial losses to that company. What Is The Risk? Nationalization of businesses happens all over the world, though the risk is higher in some countries than others. Even in the United States, nationalization of certain industries has occurred. Typically nationalization of private industries occurs during wartime or times of economic depression. The more economically unstable a country is, the more likely it is to want to nationalize industry to increase government profit. Some companies may choose to sue for lost assets and revenues. Usually, these lawsuits end in an award that is a mere fraction of the loss, and in most cases, no lost assets are ever recovered. GM has said that they plan to fight the government seizure. However, it is unlikely that the company will regain control of the plant anytime soon, if ever....