Venezuela Experience

In the early hours of January 3rd, U.S. special forces carried out Operation Absolute Resolve in Caracas, Venezuela, capturing Nicolás Maduro before flying him to New York where he will face U.S. narco-terrorism charges. 

One thing we do not hear mentioned in the news reports following the capture of the indicted gang member, drug dealer, criminal, former leader from Venezuela, is the fact that a number of major U.S. oil companies had agreements with the government of Venezuela that have been breached by the dictator who took over the country. Should our government take a hand in enforcing such agreements?

Do only the private companies benefit and bear the risk? Is, or was, our county a beneficiary of those agreements and thus do we all have an interest in enforcing them. How far does that interest go?

I recall the time when my wife's sister and her husband were sent by his employer to Venezuela. They lived there for a two-year period. His job, he was a lawyer and CPA, working for one of the three largest accounting firms in the world, was to serve as an auditor of the agreements between his company’s United State clients and Venezuela.

There were agreements that called for investments by American interests in exchange for the right to take and process natural resources, mainly oil. Apparently, his assignment, from his view, was one of the steps that corporate employees go through as they have opportunities for advancement within their large company. Generally, I was told they liked living there. They enjoyed the countryside. They were treated well.

Except, I remember hearing about how expensive eggs were. Eggs were a luxury. Other items, for example a common can of soup, were available at inflated prices in relation to what we and they experienced here in the United States.

The people who were assigned to tasks in a foreign country were often being tested in relation to their leadership possibilities available to them just around the corner. He became a general equity partner in his accounting firm not long after he was returned to the United Sates. He must have performed well there.

Presumably the natural resource companies, specifically the oil industry, will be looking at the opportunities and the risks that the latest action in removing a criminal dictator may present. Natural resource companies were forced out in the past. They suffered losses in terms of the investment they had made that they had to leave behind when their agreements, the companies they worked for, were nationalized by the socialist dictatorship.

There is an old saying once burned twice warned^[1]. Whether they will go back into Venezuela and again make substantial investments will, I believe, depend on their confidence in the American government’s ability and interest in enforcing agreements that caused them to again make substantial investments. Any businessperson must balance the risks and rewards, and certainly consider the risks, in any transaction.

They certainly are not going to enter into agreements again that they know cannot be enforced. They're not going to enter into obligations or undertake obligations where the reward does not exceed the risk and the cost.

I don't hear this aspect of the situation being openly discussed. It certainly is something to be thought of.

It's not different, except being on a larger scale, from a person who decides to invest in his small business on Main Street. I recalled a discussion with a photographer who rented space at the corner of Main and Mine Streets. He selected that location, he told me, because he was hoping to get wedding photography business from people he expected to use the Union Hotel as their wedding venue.

We know how that turned out. I remember seeing a banner in front of the Union Hotel

claiming that it would be reopened in 2016. The combination of a series of unenforceable agreements, enthusiastic optimism, and entering into agreement that did not pay attention to the time schedule in the up and downside of his opportunity caused him to stay in that location even beyond the time that it was obvious he would not enjoy the benefit of the location he had anticipated.

I've been involved in many leasing situations. I remember a lease that started at a reduced rate to be increased when the various units in a shopping center were nearly filled. The benefit of location in a shopping center for the small occupants was to enjoy the traffic generated by three things: (1) the large anchor tenants on each end of the strip who were expected to draw large crowds. (2) the combination and exclusivity of all of the other small businesses located between the anchor tenants, and (3) the representation of the landlord that the additional rent, the CAM, being collected to service and promote the facility would mean a sharing of the expense of promotion and a well-maintained location.

The arrangement was like that in a different shopping center in the same general area. The difference was that after the second center was fully occupied, for a variety of reasons, tenants left at the end of their short leases. They concluded they would and could not do business at a level expected or do business that was profitable. The one or two tenants with longer term leases were left to occupy an almost vacant center with no one except their own businesses to draw traffic to them.

Although it seems expensive to have an experienced real estate lawyer, or at least a businessman with experience, and with a law background, to review not only the words and terms of the lease, but the total overall experience that is expected so that the individual businessperson has the basis to make reasonable decisions.

Just a few of the questions we think of in any leasing situation:

·      How long is the term of the lease;

·      What is the bargaining strength of the landlord in relation to the tenant

·      Can the lease be renewed

·      At what cost

·      Are there, in addition to rent, (CAM) common area maintenance charges

·      Can either party change or end the lease;

·      Can the space be customized for the intended use, and who pays the cost

·      Can the use be changed

·      Can the lease be assigned if the business is sold or on any basis

·      Will rent automatically be increased over time

·      Can another tenant make the same and competing use of space near by

The high-power expensive law firms, and executives of and working on behalf of the major U.S. oil companies, will this time, working with the government of Venezuela and our government, look for better assurances, enforceable terms, and guarantees.

It makes sense that our government would want to keep oil out of the control of our adversaries.  We should also want to keep foreign adversaries from getting a physical base or presence in our back yard. Think of the Cuban Missile Crisis of October 1962.

^[1] "Once burned, twice warned" is a variation of the proverb "Once bitten, twice shy," meaning that a negative or painful experience makes someone extremely cautious or hesitant to repeat that action or trust that person again; it signifies learning a lesson from a mistake to avoid future harm, like someone refusing to invest in stocks after losing money or avoiding a certain food after getting sick.

• Meaning: A single bad experience makes you wary and careful the second time around.

• Origin: The concept has roots in Aesop's fables, with early English versions appearing in the 18th century, evolving from "He that hath ben ones begyled by somme other ought to kepe hym wel fro(m) the same".