SMURFIT KAPPA has become embroiled in a sweeping series of asset seizures at the hands of Venezuela’s socialist president Hugo Chavez, who has commandeered without warning a eucalyptus plantation from the packaging firm.

Smurfit Kappa said its management in Venezuela had entered discussions with the authorities in the oil-rich South American state after Mr Chavez declared on national television that his government would clear trees from the El Pinal farm and use the land for crops.

The development marks a setback for Smurfit Kappa, which previously managed to steer clear of Mr Chavez’s sudden seizures of private assets since he embarked on a nationalisation drive four years ago.

Mr Chavez’s seizure of property from the company, which uses the trees in the production of cardboard, comes three weeks after he won a referendum that allows him to run again for reelection in 2012.

He has moved to tighten state control over food production since then, nationalising a rice mill owned by giant US food company Cargill this week after demanding that it produce cheaper rice.

He has also sent troops into other mills.

In a stock market statement, Smurfit Kappa said the Venezuelan authorities had “taken over” about 1,500 hectares of forestry land with an approximate value of €500,000.

Analyst Robert Eason at Goodbody Stockbrokers said Smurfit Kappa owned some 30,000 hectares of land in Venezuela, representing about 35 per cent of its total Latin American land bank. “This represents a very small seizure,” he said.

While there was no additional comment from Smurfit Kappa yesterday, it is understood from informed sources that the company believes there is no further threat at present to its remaining holdings in Venezuela.

There were conflicting signals about the prospects of Smurfit-Kappa receiving any compensation for the seizure from the Chavez government, which has lost valuable income due to the decline in the price of oil in the past year.

Agriculture minister Elias Jaua indicated to reporters in Caracas that the government might pay Smurfit Kappa for the land, but gave no assurances.

He said Smurfit Kappa would have to prove first that it was the real owner of the farm.

The company, whose shares have lost more than 86 per cent of their value in the past 12 months, has been operating in Venezuela for more than 40 years.

Its stock lost almost 9 per cent in Dublin yesterday to close at €1.18, a valuation that puts a market capitalisation of €257.27 million on the firm.

Mr Chavez said he intervened in the farm because water-hungry trees were drying out local rivers.

“We are going to use this wood in a rational manner and then we will change the vocation of the land; we are going to plant other things that are not eucalyptus.”

Venezuelan newspaper El Nacional quoted public works and housing minister Diosdado Cabello as saying that timber grown on the farm “only benefits the owners of the firm”.

The seizure reflects a drive by Mr Chavez to make agriculture and food his priority as he nationalises assets and boosts production through land reform in his country, which is the largest oil exporter in South America.

It comes two years into a large-scale nationalisation drive by Mr Chavez, through which he has taken control of oil, telecommunications, electricity, banking, steel and other companies from the private sector.

In light of declining oil income, Mr Chavez has warned that he might carry on nationalising assets without immediately compensating companies with cash for their seized property.

He has long-term plans to double the amount of land under cultivation in Venezuela, where large tracts of property on its fertile plains and hills were abandoned when an oil boom in the 1920s crowded out coffee and cocoa farms.

In the past he has taken over big farms deemed idle and given them to small farmers. (Additional reporting: Bloomberg, Reuters)