Jan. 26 (Bloomberg) -- Venezuelan President Hugo Chavez's threat to expel U.S. Ambassador William Brownfield over comments about compensation in nationalizations may further discourage foreign investment in the oil-rich country, analysts said.

``The signal it sends is `Don't invest in Venezuela','' said Robert Bottome, a political and economic analyst for Caracas-based research group Veneconomia. ``It's very hard to find a sane person willing to invest in Venezuela right now.''

Chavez last night made his second threat in 10 months to expel Brownfield after the ambassador demanded Venezuela pay ``fair and quick'' compensation to U.S. shareholders of phone and energy companies targeted for nationalization. Chavez said the government has no obligation to pay full price and may take over the companies first and pay investors later.

The renewed threat to Brownfield underscores Chavez's lack of interest in easing almost five years of growing tensions with the U.S., marked most publicly by Chavez calling President George W. Bush ``the devil'' in a speech to the United Nations General Assembly in September. The U.S. suspended arms sales to Venezuela in May and the U.S. Defense Intelligence Agency, in a review of potential security threats worldwide, reported this month that Venezuela more on weapons since 2005 than China, Pakistan or Iran.

Chavez has accused the U.S. of plotting to kill him and deploying espionage agents in Venezuela.

More than $10 billion in compensation is at stake for U.S. holdings in CA Nacional Telefonos de Venezuela, power utility CA Electricidad de Caracas, controlled by Arlington, Virginia-based AES Corp. and four oil joint ventures that Venezuela wants control of, according to analyst estimates.

`Transparent and Legal'

``The obligation that any government has is to do the nationalization in a transparent and legal way, offering fair and quick compensation to the people affected,'' Brownfield told reporters yesterday in Maracaibo, the country's second-largest city.

Chavez responded in a ceremony in Caracas, ``If you keep involving yourself in Venezuelan affairs, you could be declared persona non grata, and you'll have to leave.''

Eric Watnick, a spokesman for the State Department's Bureau of Western Hemisphere Affairs, said Brownfield is ``doing a good job representing U.S. interests and we continue to hope for an opportunity to deepen our dialogue with Venezuela.''

To contact the reporter on this story: Alex Kennedy in Caracas at Akennedy1@bloomberg.net.

Last Updated: January 26, 2007 12:11 EST