By Francisco Toro of CaracasChronicles

Does Venezuela single out U.S. companies seeking to do business there for worse-than-usual treatment?

At first glance, it might seem like a churlish question. After all, Venezuela ranks 172nd out of 183 countries – and dead last in Latin America – in the World Bank’s Ease of Doing Business Report. Even Haiti, Zimbabwe and Uzbekistan ranked better than Venezuela in the Bank’s report. In terms of investor protection and easing access to credit, Chávez’s Venezuela does even worse, ranking 179th and 181st respectively. The same study finds that, in 2010, Venezuela boasted the most rapidly deteriorating business environment in the world.

Where standard treatment of businesses in general has fallen to such abysmal levels, it takes some doing to treat those from a given country even worse than the rest. Yet, that’s arguably what Venezuela has managed to do to U.S. investors.

In a political climate where the government blames most problems – real or imagined – on the evils of capitalism, no one’s property is safe. But, even among the prevailing hostility towards the private sector, U.S. firms are repeatedly singled out.

American businesses in Venezuela carry the burden of association with the government’s favorite bogeyman: U.S. capitalism. Stable brands, such as McDonald’s and Coca-Cola, are continuous targets of harassment and government intervention. In 2008, both U.S. companies faced 48-hour punitive shut-downs over alleged accounting irregularities that neither was given a chance to refute in a formal setting.

A State Department imposed ban on exports to Venezuela of U.S. weapons – in place since 2006, – has led Venezuela to seek weapons elsewhere. The measure eliminates a potential leverage point for U.S. diplomacy, which may come in handy in advocating for U.S. companies.

Venezuelan businessmen seeking protection from Mr. Chávez’s nationalization binge have been hurriedly exploring ways to register their companies as Spanish. Like Brazil, Canada, Peru and several other countries, Spain signed a bilateral investment protection treaty with Venezuela over a decade ago. The treaty gives Spanish firms a measure of diplomatic representation if and when they become targets of the Venezuelan government. Beyond that, Venezuela’s increasing reliance on Spanish firms for, among other things, naval procurement and electric plants has created a deep bond of interdependence that, at times, serves as somewhat of a “break” on the Venezuelan government’s excesses.

The tangible results of such cooperation are plain to see. For example, when the ownership stake of Spain’s Banco Santander in Banco de Venezuela was a target for forceful acquisition by the State, the Spanish owners were generously compensated, by about $1.05 billion. Moreover, this compensation figure was agreed to quickly, within a year of the takeover announcement, sparing Santander the uncertainty that has plagued similar negotiations with enterprises from other countries.

No sane Venezuelan businessman would consider registering in the United States for diplomatic advantage. Because there is no bilateral investment protection treaty between Caracas and Washington, American firms slated for a State takeover in Venezuela are left to fight their own battles against a deeply hostile government. In those cases, compensation is seldom generous and never agreed to quickly.

In the most well-known case – the government’s takeover of ExxonMobil and ConocoPhillips operations in the Orinoco Belt in 2006 are to this date under negotiation, dragging on for the better part of half a decade. The arbitrators from the World Bank’s International Center for the Settlement of Investment Disputes (ICSID) are not expected to hand down a final settlement agreement any time soon.

That said, a bilateral investment protection treaty does not entirely shield foreign investors in Venezuela, as Swiss cement maker Holcim found out in 2008 when its Venezuelan operations were taken over by the Chávez government despite a 1994 bilateral investment protection treaty. Unable to settle matters with Caracas, Holcim was forced to go to the ICSID. The Swiss company eventually settled its claim privately in 2010 for a relatively modest $650 million. Plenty of other firms from countries allegedly protected by investment protection deals – from Britain’s Vestey Group to Argentina’s Ternium – have faced long, uncertain compensation processes after rushed, unilaterally-decided State takeovers.

In final analysis, the Chávez government has gone out of its way to make Venezuela uncommonly hostile to foreign investors. From exceptionally cumbersome labor regulations to major hurdles in the foreign exchange of currency, Chávez’s policies have resulted in the near total collapse of foreign investment in Venezuela. Under such circumstances, businesses can hardly afford one more competitive disadvantage, but no enterprise is worse off than that with a “Made in USA” label.