The Hostile Corporate Takeover of an Entire Country
· The Atlantic
Since shortly after the United States military’s 2 a.m. seizure of Nicolás Maduro from his bedroom in early January, people in Venezuela and D.C. alike have struggled to characterize what exactly the Trump administration was doing. Regime change, finally! was the chorus in Caracas, at least for a few hours. Then President Trump said he would back Maduro’s No. 2, Delcy Rodríguez, sidelining the democratic opposition. That was more like regime management, said the Center for Strategic and International Studies in Washington. The U.S. had left pretty much the same people in power, but following orders from afar. The Guardian settled on regime tweak.
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The benefit of 11 weeks of hindsight suggests that a different framing might best explain what happened in Venezuela. Think of the whole drama as Chairman Trump’s hostile corporate takeover of a resources-extraction company (or country) with all the plot twists, headaches, and possibilities such foreign acquisitions typically entail. Trump is not the only president to see commercial opportunity in an overseas foray. But he may be the first to so blatantly eschew lofty goals—promoting democracy, countering terror—in favor of a playbook and vocabulary that are more Wall Street than Washington.
The takeover of Venezuela Inc. wouldn’t even rank in the top five biggest acquisitions in U.S. history. The country’s entire economy is valued at about $80 billion, less than half the value of Time Warner’s merger with America Online in 2000 ($165 billion) and on par with the biggest corporate energy merger, between Exxon and Mobil in 1999.
From the acquisitive president’s perspective, Venezuela was ripe for the taking, a once-promising operation sitting on rich assets that had been crippled by mismanagement. As recently as 2012, the enterprise (as measured by GDP) was valued at $370 billion, much of it generated by one business unit, the state-owned oil company. But under Maduro, the political class used Venezuela’s resources as its own private piggy bank, enriching its members while ordinary citizens suffered.
As with other undervalued prospects, financial intermediaries sought to entice foreign interest. On Wall Street, these promoters are typically investment bankers; in Venezuela, they were leaders of the pro-democracy opposition. Last spring, María Corina Machado and her team pitched the idea at a press conference that under new leadership, Venezuela could produce $1.7 trillion over 15 years, “the greatest opportunity for wealth creation in the region for decades to come.” They pointed to the country’s oil fields, gold mines, and untapped economic potential. They also might have assumed that they would play a management role if their sales pitch succeeded.
[Read: Venezuela is open for investment*]
Trump was a willing audience, keen on settling old business scores and reviving his Keynesian animal spirits. He has groused that “American talent, drive, and skill” built the Venezuelan oil industry only for those assets to be “stolen” from U.S. companies through two rounds of nationalization. (Chevron continued to operate there under a special license.) Months of negotiations with Maduro didn’t yield a deal on satisfactory terms. So Trump upped the ante. He bypassed Congress, the government’s equivalent of seeking shareholder approval. Then he launched what was, it must be said, a unique hostile-takeover campaign featuring an armada of Navy ships in the Caribbean. Takeover campaigns can be expensive; this one cost $31 million a day.
The heads of takeover targets almost always get the boot to mark the beginning of a new era; Maduro was no exception. At a press conference after Maduro’s seizure, Trump announced that he would now “run” Venezuela, as if countries are run rather than governed. Ditching a potentially disruptive partner in Machado, Trump selected for his chief executive a candidate offering a measure of continuity: Rodríguez, the vice president.
Since then, Trump has publicly praised the performance of his pick, saying Rodríguez is “wonderful” and “doing a great job.” As a show of confidence, he announced that “billions and billions” would be invested by Washington. And he told Congress in his State of the Union speech at the end of February that dividends were already flowing: “We just received from our new friend and partner, Venezuela, more than 80 million barrels of oil.”
Rodríguez, meanwhile, has been experiencing the pleasures of middle management. Her role is to keep the new bosses happy while maintaining the existing regime, which might explain the pendulum swings in her rhetoric and policies. On her first day in charge, more than 10 journalists who covered her swearing-in ceremony were arrested. Then Trump posted on social media that political prisoners were about to be released “in a BIG WAY,” and the cell doors in Caracas began to open.
The pattern has continued since. Alfredo Romero, the founder of Foro Penal, a human-rights group, showed me a graph of prisoner releases that spikes when Trump or a high-ranking American official mentions the topic of political prisoners, a sign that local management is paying attention and eager to please.
Rodríguez also established her authority with a staff shake-up, presumably sanctioned by her higher-ups. The attorney general resigned. The industry minister was thanked by Rodríguez for his service then sacked. On Wednesday, Rodríguez replaced the longtime defense minister with the intelligence chief. She appears to value the preservation of some institutional knowledge, however: Diosdado Cabello, the man who oversees much of Venezuela’s repression apparatus, remains interior minister.
That led to one of those all-too-familiar awkward moments with a visiting honcho from the head office. Interior Secretary Doug Burgum, in Caracas this month, shook hands with Cabello, unbothered by or unaware of the fact that the Venezuelan faces U.S. charges for his alleged role in a “narco-terrorist conspiracy.” The U.S. government has offered up to $25 million dollars for information leading to his arrest or conviction.
Belt-tightening has begun, too. Before January 3, the Venezuelan government could allocate as it saw fit whatever money the state-owned oil company generated from sales. All of the oil money that now enters Venezuela passes through American-controlled bank accounts, which Rodríguez & Co. need authorization to access. In business parlance, they must wait for sign-off from Corporate.
Jose Ignacio Hernández, a Venezuelan scholar, told me he hopes the added oversight will weaken the regime because officials can no longer siphon off funds to buy loyalty. “The party is over, my friend; you can’t continue hitting the pinata,” Hernández said. “Now you have to tell the State Department what you want to spend the money on and the possibilities to divert the money are much lower.”
Overall, the takeover has started to pay off financially with a helping hand (synergy!) from HQ. In the month following Maduro’s ouster, Venezuela’s oil exports rose 60 percent from the month before, boosted by roughly $500 million in U.S.-brokered sales by two commodity-trading firms. After returning from his visit, Burgum announced that $100 million of gold had been transported to the United States. And earlier this week, the Treasury Department eased sanctions to allow Venezuela to directly sell oil to U.S. companies and on global markets.
Every acquisition, though, comes with baggage. Multinationals often try to keep some legal distance from their foreign holdings to minimize blowback and liability. But Trump may have difficulty limiting Washington’s reputational risk in Venezuela, because he didn’t clean house right away. And now that he and Secretary of State Marco Rubio issue the orders, they are assuming responsibility for the performance of those in charge in Caracas.
The regime for years masked its ineptitude with repression and was known to be holding more than 1,000 political prisoners at the beginning of January. About half remain locked up, according to Foro Penal. “Those 500 political prisoners are no longer Maduro’s,” Pedro Burelli, an adviser to Venezuela’s opposition, told me. “They’re Trump’s and Rubio’s, and I hope they understand that.”
[Read: An early test for America’s control over Venezuela]
About 20 years ago, Carlos Graffe co-founded several advocacy groups that defended freedom of speech and property rights in the city of Valencia. In 2017, Cabello, the interior minister, called Graffe a terrorist on national television. A month later, Graffe was detained and spent four and a half months in prison, including three weeks with a dozen others in a punishment cell with no windows, no ventilation, no bathroom, and no beds. He told me he is grateful to Trump—as many Venezuelans are—and has felt some softening, even optimism, in the atmosphere. He used to avoid giving interviews because of security concerns but now feels more comfortable.
Still, he told me how weird he has found it to watch officials, who had always denied holding political prisoners, congratulate themselves for granting such prisoners amnesty. Nor does Graffe have any faith that Trump can rely on Rodríguez to perform the turnaround most companies would expect when they acquire a chronically underperforming asset. “This is a destroyed country,” Graffe said. “The destruction is palpable in every unfinished public work, in every dilapidated school, in all the hospitals without supplies, and the unpaved roads.” The fresh infusion of petrodollars gives the country a chance to rebuild. But, Graffe added, “my confidence that these people will manage resources well? None.”
Good-governance types—corporate or otherwise—might also note the importance of transparency and accountability. Here, the Trump administration and the regime fall well short of best practice. Publicly traded companies are required to disclose material information about their operations, and shareholders on both sides of an acquisition are often entitled to a vote.
In this case, neither U.S. nor Venezuelan citizens, who could be regarded as the ultimate shareholders, have been given any say at all. They can’t access the financial information any investor would want, because Caracas releases little. And they see scant evidence of long-term strategic planning that might, say, indicate the timing of a transition to democracy. But that is standard operating procedure for America’s first businessman to occupy the White House. The Trump Organization, which the president ran for decades and still owns, has always been a private company.