Venezuelan President Hugo Chavez on Thursday threatened to nationalize the country’s banks and largest steel producer, accusing them of unscrupulous practices.
“Private banks have to give priority to financing the industrial sectors of Venezuela at low cost,” Chavez said. “If banks don’t agree with this, it’s better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits.” Chavez also warned the government could take over steel producer Sidor, which is majority controlled by Luxembourg-based Ternium SA.
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It was not clear if Chavez was only referring to Venezuelan banks like Mercantil Servicios Financieros CA and others, or if he was aiming the threat at major international banks that do business in the country, such as Banco Santander Central Hispano SA and Citigroup Inc.
Chavez also warned the government could take over steel producer Sidor, which is majority controlled by Luxembourg-based Ternium SA.
Sidor “has created a monopoly” and sold the bulk of its production overseas, forcing local producers to import tubes and other products from China and elsewhere, Chavez said.
“If the company Sidor … does not immediately agree to change this process, they will oblige me to nationalize it,” Chavez said.
“I prefer not to,” Chavez added, as he ordered Mining Minister Jose Khan to depart immediately for the company’s headquarters and return with a recommendation within 24 hours.
If we consider that this year, inflation in Venezuela was 4.1% till april and that last year was 14.7% till September, Venezuela can have huge bad results in not a distant future.
But that’s not all: Corruption in Venezuela has boomed as oil prices have soared ($225.ooo millions in benefits both in oil and bonds) and the fact that the national funds are managed in secrecy and with no transparency. But Venezuela is also giving away a lot of money to Cuba (estimated between $2,2oo millions y $2,300 millions per year). Gustavo Coronel, author of the study, member of the Oil Joint Council of Venezuela between 1976 and 1979, writes:
Desde registros sospechosos de votantes (Venezuela tiene 17.000 votantes nacidos en el siglo diecinueve, con una persona de 175 años de edad que todavía trabaja) hasta contratos estatales sin licitación previa, todos los niveles de la sociedad han sido afectados. La corrupción involucra a los ministros, los jueces, los militares, los banqueros y a los ciudadanos ordinarios.
Desafortunadamente, no hay mucha probabilidad de una reforma. Los casos destacados de corrupción no han sido castigados. Coronel concluye: “Para reducir la corrupción de manera significativa en Venezuela, sería necesario eliminar los motivos y las oportunidades y castigar a los responsables. Luego de ocho años de Hugo Chávez en el poder, resulta completamente claro que la lucha contra la corrupción en Venezuela no podrá comenzar hasta que Chávez se haya ido”.
Unfortunately, a reform is not probable. The most important cases of corruption had not been punished. Coronel concludes: “To reduce the corruption in a significant manner in Venezuela, it would be necessary to elimininate both the motives and the opportunities and punish the culprits. After 8 years of Chávez in power, it is very clear that the fight against corruption would not begin till Chávez has gone“.
Chávez has also began “agrotiendas socialistas“, sort of “Socialist agro-shops”. El Mentidero writes about these new shops:
La iniciativa consiste en repartir una especie de economatos propiedad del Estado, que a este paso será el único que pueda ejercer el derecho a la propiedad, que ofertan productos agrícolas con el fin de abaratar los “costos” de producción a los agricultores, como dicen ellos. Además, también “asesorarán” sobre qué productos deben (o pueden) comprar los campesinos. El caso es que controlarán hasta los productos que una persona debe comprar para sus cultivos, perjudicando así la competencia del sector y atacando de frente la libertad de empresa, pues mucho me temo que los establecimientos y productores privados no podrán hacer frente a precios públicos tan bajos.
In the link there is very interesting video, in Spanish, in which the man in charged of one of these agrotiendas says he is very happy to open another of these shops to serve the “revolusión bolivariana“.
Also in O Insurgente.
DIE Zeit calls Chávez “el caudillo izquierdista populista del petróleo”, that is the “oil leftist-populist leader” [Venezuelas linkspopulistischer Öl-Caudillo]. Very interesting the last paragraph which points out that he is doing really nothing to reduce the dependence of Venezuela from the profits of the raw materials, especially when the possibility exists of new materials or sources of energy which could be developed in the future.
Investors reduced exposure to Venezuela’s sovereign debt on Wednesday on fears that the country’s decision to leave the IMF could trigger a technical default on its external bonds.
Total returns on Venezuela’s debt declined 0.6 percent on JP Morgan’s EMBI+ index (11EMJ: Quote, Profile, Research after President Hugo Chavez announced on Monday that Venezuela will withdraw its membership from Washington-based lending organizations like the IMF and the World Bank.
You see, much of the country’s bonds, including those issued by Chavez as recently as a year and half ago, include a clause or a covenant which says that the country leaving the IMF would constitute a default event. Of course, Chavez knows it all, but apparently could not remember this detail, which led to the bonds dropping today. To make matters eve worse, the Minister of Finance, said Venezuela had no plans to default on its debt, demonstrating his ignorance about what default means. He repeated later in the day that Venezuela had no plans to default, referring to no plans of stopping paying the debt, but clearly failed to understand that a technical default would mean that bondholders could ask for accelerated payment, lowers ratings, more cost and even worse, the inability of the country to issue new debt while the condition exists.
bonds, Chávez, corruption, economy, inflation, Venezuela