Venezuelan President Hugo Chavez ordered an investigation of Toyota Motor Corp., saying the world’s largest carmaker “can leave” should it fail to meet production quotas and technology-transfer laws.
Toyota has refused to make four-wheel drive models used for public transportation, Chavez said in comments on state television yesterday. Chavez said he will impose a production quota for the cars, which are used to ferry residents into Caracas slums.
“I’m ordering an investigation into Toyota, to see how it is that they don’t want to assemble these cars,” Chavez said. “We have to force them to, and if they don’t want to, they can leave.”
More here, here, here, and here. It's not too surprising to hear about this sort of thing in the oil industry, or with other commodities. But the car industry? This suggests that every foreign investment in Venezuela is at risk. Will anyone invest in Venezuela anymore? Chavez doesn't seem too worried about this prospect:
“I suggest they gather their things and go, and we’ll bring in the Russians, Belarusians and Chinese who want to make cars here.”
Would companies from these countries be any more willing? Will car producers (and other industries) abandon the Venezuelan market altogether?
I don't quite see what Chavez is going for here. In addition to making certain kinds of vehicles, he says it's about technology transfer:
“We’re not interested in these traditional companies that have been here 50 years or more, they’ve never transferred technology,” Chavez said.
But technology transfer to whom? Is there a Venezuelan joint venture partner? I don't follow this part.
Finally, what do international trade and investment obligations have to say about this? From what little I can gather about the actions being taken, I'm not sure I see any WTO violations. I see references to "production quotas," "technology transfer," and orders to build "all-terrain vehicles." If there is nothing else involved, there may not be any violation. The only thing that comes to mind is that requiring all-terrain vehicles to be made in Venezuela discriminates against foreign all-terrain vehicles in some way, but it doesn't seem to be a very straightforward argument (assuming foreign all-terrain vehicles can still be imported).
As for investment, I'm not sure of the status of Venezuela's investment treaties, but if they do exist, nationalization is pretty likely to be covered. (There's also the issue of performance requirements.) As long as market value is paid in relation to the nationalization, this should be OK, and Chavez says they'll pay: "And we'll take those same warehouses and factories, we'll pay them whatever they are worth, we aren't going to rob anyone, and then we'll quickly call the Chinese."
This part of the story is even more interesting:
Chavez made yesterday’s announcement during an event to sell Volkswagen AG cars imported by the government from Argentina at lower prices than dealerships owned by foreign automakers.
The government is selling cars, clothing and food through a new socialist market network to reduce inflation and undercut prices of “capitalist” companies, Chavez said.
Questions that occur to me are:
-- why are prices lower in Argentina than Venezuela?
-- is it just Volkswagen, and if so, why?
-- did Venezuela make any GATS commitments on distribution services, and if so, do these actions violate them?