Chavez's plans to nationalise strategic sectors rattle investors
January 10, 2007
By Alex Kennedy and Guillermo Parra-Bernal
Caracas - President Hugo Chavez's plans to nationalise Venezuela's top phone firm and other utilities, gain greater control over the oil industry and seek authority to make laws by executive order are sending investors racing for the exits.
Venezuelan bonds and shares fell for a second day yesterday after Chavez's announcement. A tumble to an 18-month low in the price of oil, Venezuela's biggest export, added to declines. The yield on the government's benchmark 9.25 percent dollar bonds due in 2027 rose to a one-month high of 7.01 percent.
US-traded shares of CA Nacional Telefonos de Venezuela (Cantv) plunged 24 percent in early trading after sinking 14 percent on Monday. Cantv has the second-heaviest weighting in the IBC, the main index of the Caracas Stock Exchange, which more than doubled last year and gained an additional 19 percent this month before Monday.
Chavez signalled his ambition to remake the oil-rich nation along socialist lines both before and since his December 3 re-election. Even so, the sweep of his plans - which include stripping the central bank of its autonomy and possibly nationalising heavy oil joint ventures - went beyond what many anticipated.
"Chavez seems bent on modelling Venezuela after the old Soviet economy, where the state controls everything," said Robert Bottome of research firm Veneconomia.
Chavez said: "Those sectors that are so strategic, such as electric power, everything that was privatised, will be nationalised. Venezuela will recover the strategic means of production. Cantv, let's nationalise it."
Richard La Rosa, an equities trader, said: "This took markets completely by surprise."
Chavez attacked foreign companies' role in Venezuela's heavy oil industry.
The energy ministry said four joint ventures might be nationalised. It has been negotiating to give majority control of them to state-run Petroleos de Venezuela, while leaving a minority stake with foreign owners including Exxon Mobil, Chevron, Total, ConocoPhillips, BP and Statoil. - Bloomberg
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