Good Luck, Gruma

Raúl Peláez, finance and planning director of Mexican food multinational Gruma, says that his company will start to negotiate appropriate compensation for its expropriated Venezuelan subsidiary Molinos Nacionales (Monaca). Gruma owns 72.86% of Monaca, which last year accounted for about 10% of its total global sales of $600 million.

Peláez said that Gruma will seek to enforce the bilateral investment protection treaty between Venezuela and Spain. Gruma believes that its expropriated Venezuelan assets are covered under that bilateral treaty because Monaca was fully incorporated in Spain through Spanish company Valores Mundiales.

Peláez also said that Gruma “surely will reach an agreement” with the Chavez regime in no more than nine months, and likely even less, because “the relationship with Venezuela is very respectful.”

But he added that if no agreement is reached, Gruma will seek arbitration against Venezuela’s government at the World Bank’s ICSID.

Gruma maintains that the Spain-Venezuela bilateral investment stipulates that compensation must be for the real value of the asset immediately prior to expropriation, fully payable in convertible currency.

Gruma thinks that the Spain-Venezuela treaty is its best legal option for obtaining fair and timely compensation from the Chavez regime. But Mexico’s government is more realistic.

Mexican Foreign Minister Patricia Espinosa said that Mexico’s government cannot do anything because Chavez years ago ditched the bilateral free trade pact between Mexico and Venezuela.

Our advice to Gruma: Forget about negotiating anything bilaterally with the Chavez regime. Take your case directly to ICSID immediately; at the same time, file suits in Spanish courts against Venezuela’s government seeking compensation and damages for the unlawful expropriation of Monaca. Where is the downside? Chavez already seized Monaca and will run it into the ground in less than one year. By this time in 2011 Monaca’s plants will be turned upside down. Anyway, the Chavez regime has no money and is unwilling politically to pay the huge debts that it owes many foreign companies for the unlawful expropriation of their Venezuelan assets.

Venezuelan economic consultancy Ecoanalítica estimates that the Chavez regime since 2007 has expropriated foreign-owned assets worth over $23.3 billion, of which only $8.6 billion have been paid off, leaving over $14.6 billion still outstanding. Ecoanalítica calculates that these $23.3 billion in total foreign-owned assets expropriated by Chavez are equivalent to 83.26% of the Central Bank’s current foreign exchange reserves and 7.2% of Venezuela’s GDP.

Chavez claims that his regime’s ongoing expropriations of farms and cattle ranches, intermediate storage and transportation assets, and wholesale/retail assets like the Exito group (Makro, watch out!) will guarantee Bolivarian Venezuela’s “food sovereignty.”

But if that’s so, how to explain the fact that one-third of the food products tracked by Central Bank for its monthly inflation index were missing from retail store shelves in April? Where are the increasingly difficult to find staples like sugar, coffee, chicken, beef, milk, cheese, eggs, etc.?

Perhaps the regime’s interrogation experts at the national intelligence service (Sebin) will extract the identities of the squalid speculators responsible for the growing national food shortages from the hapless butchers jailed recently because they can’t stay in business selling beef at retail prices lower than the corral price at the cattle ranches.


About Caracas Gringo

Representing less than 0.00000000001515152% of the world population as of 31 December 2011.
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2 Responses to Good Luck, Gruma

  1. Tambopaxi says:

    I agree with this posting. I do not understand why any foreign investor is still in Venezuela. They’d all be doing themselves a favor if they left now. As well, they’d be doing Venezuela a favor; their departure (with as much of their assets as possible) would help further undermine the economy there, and in so doing, hopefully hasten the economic and political demise of the Chavez government…


  2. Zandor says:

    It is seldom that I agree with advice from any government, especially a Mexican one, however in this case Gruma should go directly to ICSID and save itself a lot of time and money.

    It is better to get stiffed today rather than get stiffed a year from today.

    The Gruma folks seem to be betting on the Easter bunny philosophy.

    If Gruma is drinking tequila they should stop, if Gruma is not drinking tequila they should start.

    Either of these drinking decisions would point Gruma in a more realistic direction than it is presently on.

    Venezuela reminds me of a Three Stooges movie minus two of the Stooges.

    When you have a mega super Stooge on center stage, as does Venezuela, why have two extras?


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