Gov’t Intervention of Tropigas Sparks New Concerns

October 10, 2008

The recent government intervention of liquid gas provider Tropigas de Nicaragua has raised new concerns here about both the business climate under the Sandinista administration and unscrupulous business practices by certain companies here.

On Sept. 24, President Daniel Ortega decreed an economic state of emergency that allowed the Nicaraguan Institute of Energy (INE) to take over Tropigas for six months to assure the continued importation and distribution of cooking gas following reports the company had suspended its distribution.

Previous to the state intervention, national media reports claimed that Tropigas, which represents some 60 percent of Nicaragua’s liquid-gas market, had frozen distribution to demand a 100 percent increase in the price of gas, which is controlled by INE.

Tropigas denies that it ever froze the distribution of gas. But a Sept. 19 letter from the company mentions the need for a 100 percent price increase and clearly warns that a freeze in gas distribution was “inevitable in the coming days.”

On Oct. 2, Efrén Báez, legal adviser for Tropigas, went before the National Assembly to defend the company’s practices and ask the government to lift the emergency decree to allow the company to continue operating normally.

“The 55 years that Tropigas has existed in Nicaragua is the best guarantee we can give that we will continue to administer gas,” Báez said.

Despite the company’s long history here, it has come under increased attack in recent years, including accusations of “robbing” consumers by selling gas tanks that are not completely full – a claim the company denies.

Both Sandinista and Liberal lawmakers questioned the company’s business practices during the congressional testimony, although not everyone agreed on the measures taken by the government to resolve the issue.

Liberal lawmaker José Pallaís, president of the legislative judicial commission, said that there were other legal mechanisms available to protect consumers without going to the extreme of a presidential emergency decree, which suspends constitutional rights. Yet despite disagreeing with the means, Pallaís said the end goal of maintaining a supply of cooking gas was achieved.

The question raised by others, however, is what long-term effect the government’s intervention will have on the business climate when investors are already edgy about the possibility of confiscation.

“The image of this country is devaluating,” said Liberal lawmaker Fabricio Cajina.

 

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