His April 23rd article, GM and Lessons in Surviving Tit for Tat Political Risk, delves into the recent expropriation of GM’s assets in Venezuela. Disparte discusses how this expropriation sends an obvious message that Venezuela is not a safe place for cross-border investment. It also shows, however, that sectors dealing with “heavy assets” such as automotive and energy are, “among the first to pay a heavy toll through nationalization, expropriation and asset seizures.” Disparte attributes the heightened political risk in these sectors to their historical association with military infrastructure. He continues by saying this expropriation, although not ideal for GM, makes Venezuela one of the worst countries for cross-border investment in exposed sectors, especially the automotive sector as seen in this case.
Given Venezuela’s hostile behavior toward cross-border investment it is practical for most investors to “run for the hills”, but Disparte sheds light on a potential opportunity associated with the country’s volatility. Specifically he says that, counter-intuitively, under fragile, conflict-ridden and violent states business leaders and investors do not need to worry nearly as much about an even greater threat to their enterprises, namely competition.
“The future has always been set by risk-takers,” says Disparte in regard to the inherent potential for risk/reward with cross-border investment in Venezuela.
Disparte concludes with a discussion on ways to mitigate the political risk of operating in a situation as dire as Venezuela’s. He highlights political risk insurance as important for investors attempting to, “navigate increasingly turbulent waters in the search for yield.” Doing this with “the confidence of a GM, can greatly change attitudes and risk appetite for geographic expansion, while giving global consumers the products, services, capital and opportunities they deserve.”