VENEZUELA-ECONOMY: Thousands Queue for Telecoms Stock

By Humberto Márquez Reprint | | Print |

Humberto Marquez

CARACAS, Nov 19 1996 (IPS) - Venezuelans from all walks of life have responded with enthusiasm to the share offer by CANTV, the telecommunications company, with more than 30,000 individuals taking a stake in the venture.

Pro-privatisation advocates have been rubbing their hands with glee at the sight of weatherbeaten postmen, secretaries in modest outfits, traffic agents, housewives, yuppies and messengers of Chief Executive Officers (CEOs) forming queues at banks and discuss their stock purchase plans.

On Friday, Nov 15, just 10 days after the stock went on sale, brokers acting on behalf of CANTV (the acronym stands for National Telephone Company Incorporated) had sold 105 million dollars worth of stock to 30,000 takers.

Buy orders can be placed until Wednesday.

The government, eager to use the sale of CANTV as a test of its commitment to further privatisation and structural adjustment, has offered to lend investors up to 10,600 dollars to buy shares, meaning they would need to find only 212 dollars.

Repayment is spread over 24 months. Interest is set at 12 percent, a third of what a commercial loan would cost.

“With these inducements, you’d be a fool not to invest and leave your money in the bank, only to be eaten by inflation,” said Ana Ramos, a secretary in a paper company who managed to find 1,000 dollars from relatives “to buy a little more security”.

Juan Hernandez, a cinematographer, agreed, though he sounded less enthusiastic. Commenting on his 700 dollar investment, he said: “It’ll make money, but in the long run”.

In fact, Alberto Poletto, Minister of Investment, has presented the venture in just those terms, saying it was in tune with the government’s objective of stimulating long-term savings.

Edgar Vargas, a traffic agent, wanted to “be an owner”. Without revealing the amount of his investment, Vargas commented wryly to IPS that he was making the investment although his home has been without a phone for years and his neighborhood is no longer hooked up to the telephone grid.

CANTV is a telephone monopoly in this country of 22 million which has more than 2.4 million telephone subscribers and a nascent cellular and Internet market.

In 1991, the government sold 40 percent of its shares in the company, ceding control to consortium headed up by the American conglomerate GTE for 1.8 billion dollars, or 4.71 dollars per share. Eleven percent of the stock was reserved for CANTV’s 20,000 employees.

The government of Rafael Caldera, elected in 1994 on a promise to “stop the hemorrhage of privatization”, stipulated a month ago that the 49 percent of shares which remained under its control were worth less than those sold five years ago, the government not being permitted to vote for a Board of Directors.

At the end of the month, when the buy orders are tallied, the shares of the 30,000 adult Venezuelans who represent the “minority” shareholders are expected to be worth between 3.07 and 3.50 each.

“This deal and the inducements the government is giving is sweeter than cotton candy, and its no wonder everyone wants to buy in,” Juan Velutini, president of the investment house Bancaracas told IPS.

To Velutini, “this is an excellent opportunity, and in my opinion, the first time the government is exercising its power to encourage long term savings among Venezuelans.”

“This spirit of investing and participating economically is a novelty and an important change for our society,” sociologist Roberto Briceno-Leon, head of the social science laboratory at Central University told IPS.

Briceno-Leon said that propaganda “not to be the last kid on the block,” to take part in the mania played a part. But another element was “the knowledge that a hedge against inflation is critical because the value of present savings will soon evaporate.”

He observed too that “many of the investors come from an urban middle class which used to invest savings or other excess income by buying a house to rent out and create more income, but with the new market reality, that’s no longer possible.”

Laws now govern rentals and limit the freedom of landlords to act against delinquent tenants and set rates. Over the last few years, inflation has resulted in skyrocketing prices for housing suitable for rentals.

Briceno-Leon says the fever for investing “is not that strange if you consider that it trickled down from the top of the social pyramid from the richest 10 percent of the population who, in the last 10 years and in the midst of crisis, have increased earnings by almost eight percent of the income ‘pie’.”

Minister of Planning, Teodoro Petkoff, said the wealthiest 10 percent of the population received 46 percent of all income, while the poorest 10 percent earns barely 1.6 percent.

The government accelerated privatization to complement its structural adjustment plan launched in April. In included as one of its goals selling off businesses in order to free up resources to revitalize the public sector and economic productivity and create jobs and reduce poverty.

“Popular investment” in the CANTV will stimulate sales in the capital markets of the steel and aluminum industries which are due to be privatized in 1997, according to managers of these now state- run complexes.

“It’s as if before anyone could believe it or stop it, it just happened. But we’re promoting a new culture of savings and investment, as well as a broadening the base of capital markets in Venezuela,” Poletto declared.