Venezuela Worse And Worse And Worse

The FT reports on the latest milestone on Venezuela's road to collapse:

Hugo Chavez has run the state oil company as his personal property, using its income to fund payola programs for his supporters. As oil prices have declined, the state company has found it harder and harder to pay bills from its suppliers. Solution? Expropriate the suppliers.

Troops were mobilised over the weekend to assist PDVSA, Venezuela's state-owned oil company, in seizing the assets of 60 oil service companies, after a law was approved last week that paved the way for the state to take increasing control of its all-important oil industry.

"To God what is God's, and to Caesar what is Caesar's," said Hugo Chávez, Venezuela's president, as he presided over the expropriation of at least a dozen rigs, more than 30 oil terminals and some 300 boats. "Today we also say: to the people what is the people's," the socialist leader said to roars of approval from red-clad supporters on the shores of Lake Maracaibo, the heart of the nation's oil production.

The expropriation will go effectively uncompensated. The law that enabled the seizures also authorized the state oil company

to pay debts with bonds rather than cash, and compensate assets at book value.

The market for Venezuelan bonds is obviously not a healthy one.