VZCZCXYZ1156
PP RUEHWEB
DE RUEHBO #0911 0672109
ZNR UUUUU ZZH
P 072109Z MAR 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC PRIORITY 1823
INFO RUEHCV/AMEMBASSY CARACAS PRIORITY 0068
RUEHLP/AMEMBASSY LA PAZ MAR 9294
RUEHPE/AMEMBASSY LIMA PRIORITY 5989
RUEHZP/AMEMBASSY PANAMA PRIORITY 1362
RUEHQT/AMEMBASSY QUITO PRIORITY 6641
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
UNCLAS BOGOTA 000911
SIPDIS
SENSITIVE
SIPDIS
WHA/EPSC FOR PMAIER; EEB/OMA FOR ASIROTIC; TREASURY FOR
MEWENS
E.O. 12958: N/A
TAGS: ETRD ECON PREL PGOV CO
SUBJECT: VENEZUELAN NATIONALIZATION THREAT RATTLES
COLOMBIAN MARKET
REF: A. (A) BOGOTA 903
B. (B) BOGOTA 901
1. (SBU) SUMMARY: Adding fuel to the diplomatic crisis
between Colombia and Ecuador over the killing of FARC senior
commander Raul Reyes (ref A), Venezuelan President Hugo
Chavez warned he may nationalize Colombian companies
operating in Venezuela. While a number of Colombian private
sector representatives we talked to believe GOV
nationalizations remain unlikely, the threat was enough to
rattle Colombia's stock market March 6 and drive the peso
lower against the U.S. dollar, before rebounding March 7.
GOC officials acknowledged the threat, but limited their
reaction to insisting that the GOV pay fair market values
should any nationalizations take place. END SUMMARY.
Raising the Specter of Nationalization
--------------------------------------
2. (U) Following a March 5 statement by President Chavez
indicating the GOV would look at Colombian businesses in
Venezuela for potential nationalization, stock prices for
Colombian companies with major assets in Venezuela dragged
the local market down almost 1 percent March 6. The firms
with the largest exposure include food processor Nacional de
Chocolates, cement maker Argos, and textile producer
Coltejer. Market jitters also pushed the Colombian peso to a
two-week low against the U.S. dollar. However, reflecting
post-crisis market volatility, Colombian stocks rallied on
March 7 to finish the week only slightly down from the
pre-crisis February 29 close.
Measured GOC Reaction
---------------------
3, (U) Finance Minister Zuluaga and other GOC officials
reacted in a measured fashion to the prospect of
nationalizations of Colombian companies in Venezuela. In
public statements, Zuluaga said only that, in the event of a
possible nationalization, the GOC expected Venezuela to pay
fair market values for any properties taken.
Nationalization: More Trouble than its Worth?
---------------------------------------------
4. (SBU) Despite the nervousness circulating in the local
business community, Colombian Stock Exchange (BVC) President
Juan Pablo Cordoba described market concerns as
"disproportionate" to the threat. Similarly, German Verdugo,
Director of Economic Research at the local brokerage firm
Correval, downplayed to us the likelihood of Venezuelan
expropriations or even large-scale nationalizations. Verdugo
pointed out that should the GOV pursue expropriations it
would have to confront the prospect of court-ordered
indemnifications such as with the case of ExxonMobil.
Likewise, given the increasing shortages of food products in
Venezuela, the GOV will likely remain hesitant to exacerbate
the problem by going after Colombian food processing
companies. Verdugo noted that the GOV had made similar
threats against Italian food processor Parmalat, but so far
they have failed to materialize.
Brownfield