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Seized Heinz processing plant in Venezuela illustrates hazards of global operations
Saturday, September 17, 2005

While Venezuelan President Hugo Chavez was making a splash in New York, calling for the United Nations to be moved and blasting world leaders for avoiding action on real problems, representatives of the H.J. Heinz Co. on Thursday were meeting with officials in Venezuela to discuss a tomato-processing plant seized by authorities there earlier this month.

The meeting came as newspapers in the South American country reported that another food company that has had grain storage silos seized by the government is being pressured to drop prices on corn flour sold to the poor as a condition for resolving the dispute.

For Pittsburgh-based Heinz, this week's meeting involving staff with the Venezuelan operation simply marked a beginning of discussions, said company spokeswoman Debbie Foster.

The situation, which Heinz has said will have no material impact on its global business, illustrates that even a growing pile of international trade organizations and treaties have not eliminated the differences that come from operating across nations' borders. From lumber disputes between the United States and Canada to restrictions on plant closings in parts of Europe, the challenges continue.

Venezuelan officials have been quoted as arguing plant seizures there may be justified as a means of taking idle or under-used assets and, by putting facilities and equipment back to work, serving the public interest.

"Expropriation is not as common as it used to be," said Josephine Olson, a professor of business administration and economics at University of Pittsburgh. She said differences have become more subtle in recent years.

But companies must always be alert to the changing political and economic situations.

Heinz stepped back from its business in Zimbabwe a few years ago during a period when the government was resettling farmers and the economic environment became very uncertain. "All kinds of things can happen that can reduce the profitability of an investment," said Olson.

Heinz and Alimentos Polar, the food company trying to gets its corn silos back, are among a growing group of corporations sorting through the implications of the Venezuelan government's latest steps. Heinz has said it was trying to sell the affected plant anyway, but the broader business community will likely be watching to see what comes next, said Olson.

In this case, the company seems unlikely to walk away from a country where it has operated for more than 45 years and continues to employ 700 workers at plants that have not been seized.

According to a Heinz Canada release last year, Canadians and Venezuelans tied as the second largest global consumers of ketchup at 1.4 liters per capita.

First published on September 17, 2005 at 12:00 am
Teresa F. Lindeman can be reached at tlindeman@post-gazette.com or at 412-263-2018.