Venezuela Nationalizes Guardian Glass Plant

Guardian Industries, one of the largest manufacturers of float glass in the world, announced that the Venezuelan government nationalized its float glass plant in the State of Monagas in July. Following the shutdown, the government invoked a law that allows it to seize abandoned manufacturing facilities. Guardian says that the facility was not abandoned, and that the company had shuttered the facility to replace aging production equipment. Typically, the equipment in glass plants runs around the clock for about 15 years before being shut down for maintenance or replacement.

The Guardian glass plant was not the government’s only seizure target. Kimberly-Clark also lost control of a diaper manufacturing plant in the country. That plant, near Caracas, manufactured nearly half of the diapers sold in Venezuela.

In early August, the Venezuelan government announced that it had “restarted” the Guardian plant, but it is not clear what, if anything, is being manufactured there. The government said it intends to manufacture about 350 tons of flat glass per day. Following the seizure, Guardian issued a warning about the condition of the plant, saying that the existing equipment in the plant was “end-of-life” and that continued use could be dangerous.

Manufacturing is exceptionally difficult in Venezuela at the moment due to the country’s runaway inflation. Kimberly-Clark said it ceased manufacturing at its Caracas-area plant because it could no longer purchase raw materials. Guardian said it shut down its Monagas glass plant as part of a planned upgrade to the equipment there.

Venezuela has a history of seizing the assets of foreign companies since the 1990’s. Extreme economic pressures are contributing to the increasing desperation inside the country. Venezuela is heavily dependent on the sale of oil to fund its national treasury. Since the price of oil has dropped to near-record lows, the country’s economy has spiraled into a deep depression. Widespread unemployment and high inflation have both stripped the shelves of retailers and made importing products next to impossible.

Guardian could petition the World Bank for a judgment in its favor, but even being compensated for the seizure could be meaningless. Owens-Illinois was awarded compensation from the World Bank in 2011 for the loss of two glass manufacturing plants in Venezuela, but has yet to receive any payments. Guardian could also write off the loss, which would take both the asset and the associated expenses (including debt) off of the company’s books.

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Photo Credit: Julio Cesar Mesa, via Flickr.com