Why Some Countries Stay Poor

amadeus said:
Would you invest in a country like Venezuela, where your assets can be seized without compensation at any time, for any reason?
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Heres an article with some more details
http://www.forbes.com/feeds/ap/2009/10/13/business-lt-venezuela-hilton_6996791.html
The decree clears the way for Chavez's government to expropriate the hotel. It's unclear how much Venezuela will pay or how soon.

Chavez last month hosted a summit at the hotel with leaders including Libya's Moammar Gadhafi, and suggested the hotel could become the headquarters of a new bloc of African and South American nations.

The Venezuela-based company Inversiones Pueblamar CA, listed as one of the hotel's owners, did not immediately respond to a request for comment. Another company listed as an owner, Desarrollos MBK CA, could not be reached for comment.

Officials at the McLean, Virginia, headquarters of Hilton Worldwide, which manages the hotel, did not immediately return a call and e-mail seeking comment.
The decree said the resort, once expropriated, will fall under the government's Tourism Ministry.

Chavez has carried out a series of nationalizations in recent years, buying up companies in sectors including telecommunications, electricity and construction. The government has also increased its ownership of hotels, although most in the country are still privately owned.
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Looks like he's going to pay.
 
Ecofarm said:
One of the best ways to fight communism is to inject a little capitalism and let the people see what is possible in a free-market system. Your statement seems to imply that doing so is unethical.
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I am pro ethical economics, be it communist or capitalist. I was merely trying to imply that a capitalist company will make any sort of investments (as long as they will gain profits from them). A good example is an American factory that produces buttons, flags and posters with communist/socialist images on them for the American teen/twen market.
 
Yeekim said:
Investment from foreign corporations is - as a general rule - good thing.
It can be bad thing, if they are, to use your words, "draining money and material wealth from the country" - but if this allowed to happen, it simply means the government is either incompetent or corrupt - usually both.
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And how exactly is a government supposed to do that? Any investment has two phases: firsts you spend (invest) in order to create something productive; then you accumulate earnings until you repay the initial investment and make some profit. Unless a government were to seize whatever productive structures are built after the first phase but before the second is completed, they won't be avoiding the "drain" in the from of profits.
Which is just what Chavez seems to be doing - seizing existing investments. Not being incompetent or corrupt, then? :p

Of course, most governments accept the full foreign investment cycle, admitting the repatriation of profits, just for the sake of developing the local economy: a foreign investment may become a customer of many local investments. And allowing the repatriation of at least some profits is necessary if foreign investors are not to be scared away. It's a balancing act.

Yeekim said:
And, as previously stated, it is very difficult to imagine, how a hotel business could be draining anything from the locals.
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It couldn't. But it could be a kind of "opportunity cost": while it remained a foreign business its profits could be drained away. As some kind of state company that won't happen. Since the only thing necessary to avoid that possible "drain" was to nationalize the thing, they did it. At the cost of making some more enemies.

Should the venezuelan government have instead put up the money to build its own network of quality hotels to compete with those foreign-owned ones? In this case, and without knowing the specifics of the situation, it sees to me that they should. On the other hand I suspect that they paid something to the owners of the seized property, as is usually the case with nationalizations of foreign interests. Judging from the lack of strong protests against it, and the continuing willingness of foreigners to invest in Venezuela, that was probably true with this one too.
 
Speaking generically of leftist regimes (and I think it's true specifically of Venezuela), most expropriations have involved compensation, they've been closer to forced buyouts than theft. This point seems to be missed surprisingly often in anti-nationalisation tracts going right back to, say, Cuban Revolution days.
 
To answer the OP: I would be reticent in investing in Chavez's country. It would be a bit like investing in a Ponzi scheme: you can make good money as long as the scheme is in the 'have good PR' stage, but you'll lose your capital if you stay too long.
 
innonimatu said:
It couldn't. But it could be a kind of "opportunity cost": while it remained a foreign business its profits could be drained away. As some kind of state company that won't happen. Since the only thing necessary to avoid that possible "drain" was to nationalize the thing, they did it. At the cost of making some more enemies.

Should the venezuelan government have instead put up the money to build its own network of quality hotels to compete with those foreign-owned ones? In this case, and without knowing the specifics of the situation, it sees to me that they should. On the other hand I suspect that they paid something to the owners of the seized property, as is usually the case with nationalizations of foreign interests. Judging from the lack of strong protests against it, and the continuing willingness of foreigners to invest in Venezuela, that was probably true with this one too.
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Hilton get's to write it off, and given the RevPar numbers that's a good thing.
 
I like to see Chavez take Paris Hilton away.

For good!
 
ya, it sucks... But to be fair, all revolutions (including the American Revolution) appropriate existing assets. I'm not sure, but I thought Ben Franklin insisted we pay England for the stuff we took but I dont know if we did. Chavez is a bully and a dictator and his country will pay the price for letting him get away with nonsense.
 
The resource curse has not been kind to anyone under authoritarian rule. It should be interesting to see how Ghana handles their new found wealth and whether they'll abide by contract law now that Exxon has a letter of intent acquire Kosmos' stake.
 
We should bomb it. Give 24 hours notice so nobody is inside, then flatten the thing. Compensate Hilton, of course.
 
VRWCAgent said:
We should bomb it. Give 24 hours notice so nobody is inside, then flatten the thing. Compensate Hilton, of course.
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Can we put Paris Hilton in the hotel, THEN bomb it?
 
innonimatu said:
And how exactly is a government supposed to do that? Any investment has two phases: firsts you spend (invest) in order to create something productive; then you accumulate earnings until you repay the initial investment and make some profit. Unless a government were to seize whatever productive structures are built after the first phase but before the second is completed, they won't be avoiding the "drain" in the from of profits.
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The profit wouldn't necessarily be drawn from the same place the investments were made into. ;)
A company may build a factory into country A (because of logistical considerations, attractive taxation scheme, affordable/skilled workforce etc), import raw materials from country B and sell them in country C - as long as A is smart enough to not let them dump toxic waste around, it is a pure win situation for them.
 
Why some countries stay poor?

The title should read - Why some countries brainwash their people.

The real story behind this is that the Hilton in question violated several laws in the state of Nueva Esparta - Such as polluting their junk straight into the ocean. The government took action, and this wasn't Chavez' doing, this was the state of Nueva Esparta.

Go ahead American Media. Continue brainwashing your people into believing this place is some 3rd world african craphole, while the real story is how screwed up the American Economy is.

Any questions?
 
TheLastOne36 said:
Why some countries stay poor?

The title should read - Why some countries brainwash their people.

The real story behind this is that the Hilton in question violated several laws in the state of Nueva Esparta - Such as polluting their junk straight into the ocean. The government took action, and this wasn't Chavez' doing, this was the state of Nueva Esparta.

Go ahead American Media. Continue brainwashing your people into believing this place is some 3rd world african craphole, while the real story is how screwed up the American Economy is.

Any questions?
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I suppose it's possible Chavez could be different than all the other autocratic regimes that have fallen to the "natural resource curse" but the odds appear to be stacked against him. Norway has been the model to follow but rarely have we seen others follow their lead.

Overleveraged is fixable but autocratic self-interest has shown to be more elusive.
 
Cheezy the Wiz said:
Some countries stay poor because of neo-liberal policies promoted by First World nations and morons like you who want to drain money and material wealth from those countries to line their own pockets. Globalization isn't about "helping people" its about economic imperialism and neo-colonialism. You're just bitter because Chavez threw your boy Caldera out and refuses to take the crap the US is dealing out to Venezuela's neighbors.

Why can't Venezuela just be a good footstool like Colombia?
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We're not talking about strip mining Venezuelan mountains - it's a hotel. How is building a hotel (Probably using local workers - and having foreign company people staying in the city to oversee/run the construction) where foreigners will come to stay (and spend their money) draining money and material wealth from Venezuela?

I understand responding this way to Ama, given how unabashedly capitalist he is. But I think you're overreacting, in this case.
 
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