Chavez's nationalisation threats more than bluster
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| Published on Saturday, May 5, 2007 |
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By Ana Isabel Martinez and Christian Oliver
CARACAS, Venezuela (Reuters): President Hugo Chavez could well deliver on threats to nationalize banks, a steelmaker and cement companies, having taken over Venezuela's largest media firm despite its attempts to meet his demands.
Chavez, a close ally of Cuban leader Fidel Castro, on Thursday reprised his strategy of firing warning shots, telling companies to fall into line with his self-styled socialist revolution or face nationalization for what he describes as the benefit of the people.
A high-ranking government official said Chavez's remarks could not be dismissed as rhetorical bluster.
"I fear Chavez may well go through with it. This is not the first time he says he is going to do something, then does it," said the official, who requested anonymity because he opposes the nationalization policy despite working for the government.
Chavez, who has already taken over power utilities and oil projects in the OPEC country this year, told private banks and Ternium-Sidor, the country's largest steelmaker, to adapt their businesses to what he called the national interest.
Last month, Chavez said cement-makers could be nationalized if they were found to be worsening a housing shortfall by favoring exports over domestic sales.
But even ceding to Chavez's demands does not guarantee immunity from takeover.
Before Venezuela's largest telecommunications firm, CANTV, was nationalized, Chavez talked for months about a takeover if it did not adjust its pension payments.
In December, CANTV said in response to a court ruling it would make retroactive payments to more than 4,000 employees, but Chavez ordered its takeover a month later anyway.
"I think you have to consider very seriously that what he is gunning for is near complete state control of institutions," said Christian Stracke, lead emerging markets analyst at research firm CreditSights.
"Now he is setting his sights on the commercial sector."
INVESTORS ALREADY WORRIED
In office since 1999, Chavez is popular among the majority poor for lavishing high oil revenues on them even if polls show they generally do not share his enthusiasm for turning the South American country into a socialist state.
Chavez, an anti-U.S. president who laces his speeches with quotes from Marx and Lenin, burnished his anti-free-market credentials this week.
After vowing to leave the International Monetary Fund, raising the minimum wage 20 percent and ordering the working day to be reduced gradually to six hours, he took over the country's last privately run oilfields from some of the world's biggest companies.
"The impact on investment decisions is terribly negative. Whether or not (the nationalization) happens, you are increasingly turning up the heat on private-sector decisions," said Luis Vicente Leon, director of Venezuelan pollster Datanalisis.
Still, some of Chavez's threats come to nothing.
Despite vowing this year to take over the complete chain of food distribution to iron out problems that have caused periodic shortages on supermarket shelves, Chavez eventually limited confiscations to a few meat storerooms.
Stracke noted it was politically easier to take over companies, such as CANTV and power utilities, with leading shareholdings owned by companies in the United States.
While Chavez relishes upsetting the United States, Ternium-Sidor is owned by a company from Chavez's leftist ally Argentina.
The Spanish involvement in Venezuelan banks could prove thorny, with Banco Provincial being a unit of Banco Bilbao Vizcaya Argentaria and Banco de Venezuela a subsidiary of Banco Santander Central Hispano, Stracke said.
"Do you want to jeopardize political relations with Spain, with the most important socialist government in Europe?" he asked.
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