This can't be good. From the Associated Press/Quito, Ecuador:
Ecuadorean officials said Tuesday that the cancellation of U.S.-based Occidental Petroleum Corp.'s contract and the seizure of its assets did not mean the Andean nation is nationalizing its oil industry.
Seizure of its assets? Whoa.
Looks like all is not well in a post-CAFTA world.
I think it's important to emphasize what CAFTA is supposed to represent. The Central American Free Trade Agreement. Doesn't seem too free to me.
Occidental officials said that the Ecuadorean government hasn't yet taken over the company's operations. Well, that's a relief...sort of.
"The state awarded Occidental the development of a resource, but now it must leave the country for having failed to meet its contract and violated the laws," Fernando Gonzalez, president of state-run Petroecuador, told reporters.
And what laws and/or contracts did they violate?
Energy Minister Ivan Rodriguez told a news conference late Monday that Occidental's contract was "void" following a long-standing contract dispute.
The dispute with Occidental is one of the sticking points that led to an impasse in free trade talks with Washington early last month.
Another stumbling block is a hydrocarbons reform law passed last month to give the government 50 percent of oil company profit whenever the international oil market exceeds the prices established in existing contracts.
Most of those deals were pegged to 1990s oil prices when crude was worth a fraction of today's market.
Larry Meriage, vice president of communications and public affairs for Occidental, said;
"We're just trying to feel (our way) through this. We're in uncharted waters. This is the largest expropriation of assets in this hemisphere in the last 30 years," he said. When they take over your assets without remuneration it is tantamount to an expropriation."
Gonzalez denies the government has plans to nationalize the Ecuadorean oil industry.
So, this is what can happen in a global economy. A bit unnerving isn't it. Imagine the uproar if the US government did this to a foreign company.
"From today, Petroecuador is taking effective possession of the fields," Gonzalez said.
Remember this statement. Not far away is another leader with tremendous oil assets and and similar world view. Venezuala's Hugo Chavez.
Capitalism - Socialism. Which one would you rather operate a business under?
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