Archive for August 29th, 2006

Expropriations of golf courses: Threat to property rights or much ado about nothing?

August 29, 2006

Today the
Mayor of the Metropolitan area of Caracas Juan Barreto created another ruckus
by issuing a decree declaring the “forced acquisition” of the golf courses at
Caracas Country Club and Valle Arriba Country Club. Last week, in his by now infamous speech,
Barreto had threatened that he was going to expropriate the golf courses at La
Lagunita Country Club, but that particular course was not part of the decree today.

question is what does this mean? Is it a real serious threat to private
property rights? Is it legal? Does he mean it or is it just political?

To begin
with, expropriation is part of Venezuela’s
legislation. However, to be able to expropriate, you have to first show that
the expropriation is for the “common good” and serves a social purpose, in this
case this should be done by the city council, but was not done prior to the decree. The second step
is to issue a decree and finally, you can not take over the property until you
have provided the owners with “adequate” compensation and legal recourse. Thus, in terms of the
legal framework, the process begins weakly, due to the absence of the decision
by the city council on the matter.

The next
question is what is adequate compensation for this land? That is harder to
gauge given the extensions of land and their implied valuations, but le’s say the area is
some two million square meters per course and at $1,000 per square meter you
are talking a few billion dollars each of the golf courses.

The Metropolitan
Mayor’s office certainly does not have that type of money to spend around and
in Venezuela
it does not have the legal ability to issue bonds, so the Central
would have to do it. Would the Central Government be interested?
Anything is
possible in the revolution, but it seems like a mighty steep price for
something which has relatively low impact, no more than 10-15,000
hosuing units. The land we are talking about can be
seen below in these maps from Google Earth, showing at equivalent
scales the 18
holes of each course, with Country Club on the left below and Valle
Arriba on the right. You shoudl be able to discern the golf courses


problem is that the process required to build housing would simply not stop here. In order to truly use
these land for building residential units for people, one would have to change
the zoning from recreational to residential and then obtain the required
building permits. The difficulty is that both rezoning and permits are out of
the hands of the Metropolitan Mayor’s office and are only within the domain of the
individual municipalities where the golf courses are. In this case, Country
Club is 85% within the Chacao municipality and Valle Arriba is within the
Baruta municipality. Curiously, the La Lagunita golf course mentioned last week by
Barreto, was not included and that one is within the El Hatillo municipality
which is not in the hands of the Primero Justicia party, which Barreto seems to

I believe
that this is just a ploy to distract attention and generate confrontation. The Chavez
administration’s style has always been to walk a fine line from a legal point of
view. Fights and confrontations are always carried out within gray areas in
legislation, so that it is quite confusing to discern whether the Government is
within its rights or not.

There is
no such gray area here. The Venezuelan
guarantees the right to private property in its Article 115, which says in it that
only for reasons of public utility or social reasons, under a firm sentence and
opportune and just payment can the expropriation of anything be declared. It
would take a large step to fulfill these conditions. Moreover, it is very clear
from a legal point of view that the Mayor of the Metropolitan area can neither
rezone or approve construction permits within the municipalities involved,
which would then also require a huge legal step and violation of the law, for
them to go over the Mayors of Chacao and Baruta. It would thus be a huge
violation of the law and abuse of power for the Metropolitan Mayor to do this.
So far, the Chavez administration has always been hesitant to take such a
drastic and clear step of clearly stepping outisde the realm of the rule of law .

Note that
I do not imply that they may not want to do it, or are incapable of doing it.
It just does not seem like they would pull something like that off just before
the Presidential election, when polls clearly say that 76% of Venezuelans strongly
believe in the right to private property.

creating this scandal certainly distracts attention from the important issues.
It is not only a confusing issue, but clearly golf courses only get the
sympathy of a minority. Perhaps candidate Manuel Rosales had the right idea
when he said today that he would not let “an outgoing Government set the agenda
for discussion in the Presidential campaign”.

There were
however some strong reactions to the decree today. A City Councilman from the
Metropolitan area called
it demagoguery
, Rosales’ running mate Julio Borges said Caracas needed an
integral urban plan not “hormonal responses”, Baruta Mayor said that the
Metropolitan Mayor did not have legal authority to even expropriate and Chacao Mayor Leopoldo Lopez said
the Minister of Housing has
already said there are n plans to build anything in those golf courses and
reiterated that the La Carlota airfield could be used to build housing in a
large extension of land.

rejected once again the possibility of the use of La Carlota for
housing. This is truly a huge puzzle. Chacao Mayor Lopez has proposed a
for that area. The La Carlota airport is only used these days for
helicopters (all other flights were banned)
but it occupies a huge part of the city. Below on the left you can see
the La Carlota
airport on the same scale as the golf courses above. Clearly the area
larger, wider and completely open, easier to develop and a change in
would be justified and definitely approved by the Mayors of those
areas. And nothing woudl have to be paid as the land is owned by the
Government itself! A
similar case could be made for the Tiuna Fort that can be seen on the
scale, basically occupying the whole image, on the right below:


While the
news has clearly has people concerned (The parallel market shot up, the stock
market went down) I think for the time being the issue should be taken with a
grain of salt and efforts should concentrate on showing the Government’s incompetence
and promoting Rosales’ candidacy without allowing Barreto and Chavez to set the
agenda for discussion. If they really mean it and the law and the Constitution would
be bypassed, then it would be the announcement that this is a dictatorship and
the autocracy has moved one step forward. I simply don’t think that Chavez is
yet ready for that. Nor do I think he would show such a hand before the election.

While Chavez’ campaign says Rosales abuses position, Government continues massive abuse.

August 29, 2006

I was away due to family matters and there is quite a bit of interest to write about later. The most obnoxious thing I saw was how he headlines were filled with Chavistas denouncing that Rosales was taking adavantge of his position as Governor to advertise and advertise “subliminally”. I don’t quite get the silnece by both Rosales, the opposition and the media on how much Chavez is taking advantage of his position, including the dozens of ads that are published daily by Government offices and isntitutions, without anyone noticing it or reporting it. I certainly hope that some reading this that has contacts with the media or the Rosales campaign  will let them know about Bruni’s “Hall of Shame” compilation of all illegal ads published day after day since the camapign began. That is enough to give the term unfair advantage a new meaning.