ECONOMY-VENEZUELA: Nationalisation Drive Takes Broad Aim

By Humberto Márquez Reprint | | Print |

Humberto Márquez

CARACAS, May 11 2007 (IPS) - Venezuela’s nationalisation drive is moving full-steam ahead. After placing telecoms, electricity and oil companies in state hands, President Hugo Chávez has warned that he is prepared to nationalise everything from banks to the largest steel company, and even health clinics and chicken farms.

“Some people are trying to create a food crisis,” said the president, in response to criticism of shortages of a number of products in the market. “If they do that, I will go after them too. If chicken farmers and ranchers refuse to take their animals to the slaughterhouse, we will seize the cows within the framework of the constitution and the country’s laws.”

Shortages have been a problem in Venezuela since Chávez began to strengthen price controls in 2003 with the aim of fighting the high inflation rate and keeping prices down for the poor.

In his near-daily public remarks, Chávez has warned that he will nationalise as many segments of the economic food chain as is necessary to guarantee supplies at the officially regulated prices, and added that he is prepared to hand the businesses over later to cooperatives or collectives.

After he began a new six-year term in January, declaring his aim of building “21st century socialism”, Chávez launched a major wave of nationalisations, starting out with the CANTV telephone company, which was privatised in 1991 and in which U.S.-based Verizon Communications was the biggest shareholder.

Telecommunications Minister Jesse Chacón reported Wednesday that after negotiations with the main shareholders, the state bought a controlling stake in CANTV for 1.3 billion dollars. It now holds 86.2 percent of shares in the company.

In addition, the state has acquired 82.1 percent of shares in the country’s largest private electric utility, Electricidad de Caracas, from the U.S. corporation AES, for 739 million dollars. Another 109 million dollars went towards purchasing the power company on Venezuela’s Caribbean island of Margarita.

The state, which already generates more than 80 percent of electricity in Venezuela, mainly through the giant Guri hydroelectric complex in the southeast, will put the entire industry in the hands of a National Electricity Corporation, Chávez announced.

Professor Víctor Poleo, an oil analyst at the Central University of Venezuela, told IPS that “this is a misguided attempt at centralism which is mixing cultures of corporations dedicated to producing hydroelectricity while protecting forests and managing rivers with those of companies that generate thermoelectricity by burning fossil fuels, for instance.”

The nationalisations have encompassed the joint ventures with foreign oil companies in the southeastern Orinoco Belt, which yields 600,000 barrels a day of crude – nearly one-fifth of the oil produced by Venezuela, the world’s fifth-largest oil exporter.

The state-owned oil company, Petróleos de Venezuela (PDVSA), assumed control on May 1 over the Orinoco oilfields. The state now has majority control, although foreign firms like the U.S.-based Exxon Mobil, ConocoPhillips and Chevron, France’s Total, Norway’s Statoil and the British BP continue to hold a stake.

PDVSA was a minority partner in the joint ventures, and is currently negotiating the terms under which it will hold at least a 60 percent stake. “If they (the foreign oil companies) don’t want this, they can leave,” said Energy Minister Rafael Ramírez.

Venezuela’s annual oil export revenues currently amount to over 50 billion dollars, or one-third of gross domestic product, and several billion dollars, depending on the price of oil, go into a discretional fund administered by the president, which makes it possible for him to make buyout bids.

The government also decided to regulate the prices of services offered by private health clinics, which according to studies serve 20 percent of the country’s 27 million people. “If they don’t accept, they’ll have to be nationalised,” warned the president.

His decision was influenced by the cost of private health insurance policies that the state contracts for many employees in public enterprises and other state bodies.

The next warning was aimed at the banking sector, which “must give priority to low-cost financing for the industrial sectors of Venezuela,” said Chávez.

“If the banks don’t want to do this, then they should leave, and turn the banks over to us. We’ll nationalise them and put them to work for the integral development of the country, rather than have them speculating and producing huge profits,” he added.

Nevertheless, the president of the banking association, Francisco Aristeguieta, said “we did not take it as a threat, but as a call to work together to help Venezuela grow.”

“Nationalisation of the banking sector is an absolutely unnecessary and extreme measure, because the state already sets guidelines that govern a large part of the credits and has financial muscle, through its own banks, to fulfil development goals,” financial analyst José Grasso, director of Softline Consultores, a banking sector research and consultancy firm, told IPS.

He pointed out that banks must by law earmark 21 percent of their loans to agriculture, 10 percent to housing, three percent to microcredit and 2.5 percent to tourism, “while in some cases, they are operating close to cost, because they have limits on the interest rates they can charge.” Furthermore, they are fined if they fail to meet the stipulated percentages.

In the past week, the nationalisation drive has set its sights on Siderúrgica del Orinoco (Sidor), Venezuela’s biggest steel mill, in which the Argentine-Italian conglomerate Techint holds a majority stake.

Chávez threatened to seize control of Sidor if it fails to prioritise steel supplies for the domestic market over exports. He also complained that it pays low prices for iron ore supplied by the state.

Sidor produces 4.2 million tons of steel a year, 63 percent of which goes to the domestic market, according to the company’s reports.

Chávez said he would talk to Techint president Paolo Rocca to explain his demands and tell him that “if you don’t agree, I’ll take the company. Give it to me. I’ll pay you what it’s worth, I’m not going to rob you.”

Lastly, although it is not strictly speaking nationalisation as such, the broadcasting concession for the country’s oldest private TV station, Radio Caracas Televisión (RCTV) – which is staunchly opposed to the Chávez administration, like the majority of privately-owned media outlets in Venezuela – expires on May 27 and will not be renewed.

Instead, the broadcast signal of the country’s most popular station will be awarded to a foundation that will distribute airspace to independent producers, with the aim of developing public service radio and television programming. The initial capital will come from the state coffers.