Oil is still the biggest game in town as far as foreign investors are concerned

Caracas Daily Journal (Jeremy Morgan): Direct foreign investment in Venezuela's non-oil sectors tumbled in 2007 to just $48 million, the lowest level in years, according to latest official figures, in what is seen as a sign of increasing caution towards President Hugo Chávez' government.

The statistics from the Superintendency of Foreign Investment (SIEX) mark a serious reverse for the government's plans to reduce the economy's overwhelming dependence on oil. Foreign companies including big non-oil names are seen as keys to diversifying the economy.

Oil continues to dominate foreign investment. Overall foreign investment in Venezuela totalled $646 million last year, and the figures make it clear the lion's share went into oil.
Oil is seen as a good bet, even in the face of the president's nationalistic declarations about oil sovereignty. Rising world prices are taken to mean that demand will continue on a steady upwards trend, even if there is a downturn in the United States – the world's biggest energy market and Venezuela's primary oil customer.

Last year's non-oil investment was directed into manufacturing, property, financial services, trade, transport, food supply, communications, construction and personal services, SIEX said. Of these, the most interesting are manufacturing and property.

Manufacturers sufferred badly during the recession earlier this decade. Venezuelan companies are still wary of sinking funds in new plants and payroll costs.

In a sense, foreign investors are filling in at least some of the gaps, albeit on a very modest scale. That foreign investors are still chasing up opportunities in property undermines suggestions that Chávez' defiant statements about private property rights are taken with a grain of salt.

Evidently, for them he's not quite the demon some of his critics at home claim.

As to the other non-oil sectors in which foreign investors showed some still very limited interest, they're regarded as forms of business which will go on regardless of what happens to or in the country. But all this said, the overall trend is anything but encouraging in terms of investor confidence. Analysts say the government fell far short of its target for foreign investment not only last year but also in 2006.

You have to go back to 2005, when the inflow of foreign investment came out at $2.5 billion, to find anything like a respectable level of investor spending, analysts add.

Nationalization of the telecommunications company, Cantv – in which United States investors held around 80 percent – and Electricidad de Caracas are thought to have had an impact on sentiment among potential foreign investors.

The continuing tussle between Venezuela and ExxonMobil has also cooled investor sentiment as outsiders wonder what will happen next.