Chavez Would Abolish Presidential Term Limit

'We Are Going to Deepen This Revolution,' Venezuelans Told at Swearing-In Ceremony

By Juan Forero
Washington Post Foreign Service
Thursday, January 11, 2007; A21

BOGOTA, Colombia, Jan. 10 -- Venezuelan President Hugo Chavez, sworn in to another six-year term on Wednesday, said he would seek a constitutional amendment that could extend his tenure as he hastens his country's transformation into what he calls "21st-century socialism."

In a three-hour discourse in the National Assembly that received widespread news coverage across Latin America, Chavez promised that "we are going to radicalize this process of ours, we are going to deepen this revolution."

Invoking the mantra once issued by his mentor and ally, Fidel Castro of Cuba, Chavez said the choice for Venezuela was clear: "Fatherland, socialism or death." The ceremony was full of symbolism. Chavez wore the tricolored presidential sash on his left side, switching it from his right, a nod to his leftist leanings. And he frequently alluded to Sim?n Bol?var, the 19th-century independence hero he reveres, God and Jesus Christ, whom Chavez called "the greatest socialist of the people."

"I will not rest," Chavez said, his right hand raised. "I would give my life for the construction of Venezuelan socialism, for the construction of a new political, social and economic system."

The swearing-in came during an enthralling day for leftists in Latin America, where Chavez has been among several populist leaders to win election in recent years. In Nicaragua, Daniel Ortega, the former guerrilla who formed an alliance with Cuba during the 1980s, returned to the presidency in a ceremony just hours after Chavez was sworn in.

All week in Caracas, Chavez has shaken markets and angered the Bush administration by promising to nationalize utilities, seek broader constitutional powers and increase the state's control of the economy. He has also frequently referred to the new, more radical phase in what he calls his revolution -- drawing comparisons with Castro's famous declaration on Dec. 2, 1961: "I am a Marxist-Leninist and will be one until the day I die."

If the theatrics are similar, however, the apparent goal is not. Chavez stresses that Venezuela will remain a democracy, and analysts do not believe his government will embark on a wholesale expropriation of companies, as Castro's government set out to do soon after taking power in 1959.

"There have been some echoes, and it's not surprising," said Wayne Smith, who was a diplomat in Cuba and now is a senior fellow at the Center for International Policy in Washington. "He's a declared admirer of Castro, and while times have changed and he can talk about moving in a certain direction, let's see what he actually does. I think conditions have changed. This is not 1959."

In Wednesday's speech, Chavez said the constitution should be changed to allow the government to take control of the natural gas industry from foreign companies, which now have wide rights in the sector. Earlier this week, he said he would increase state control over four key oil production projects. Those projects, in the Orinoco Belt of northeast Venezuela, are operated by U.S. firms such as Exxon Mobil and Chevron as well as foreign multinationals Total of France and BP.

Investors are still unclear about what his nationalization plan entails. But Ricardo Sanguino, head of the finance commission in the National Assembly, told reporters Wednesday that the government would negotiate settlements with companies it plans to nationalize.

"We're not going to do anything illegal," he said. "There will always be compensation."

Chavez said the plunge in the Caracas stock exchange this week was an exaggeration and instead lauded the country's booming economy, which expanded 10 percent last year. Shares of the CANTV telephone company, which is expected to be nationalized, rebounded after Sanguino's assurances to investors. Meanwhile, the oil markets and energy companies took a wait-and-see attitude, noted David Mares, a political science professor at the University of California at San Diego who has studied the Venezuelan oil industry.

"He's announcing that he's going to do what the markets already expected him to do -- take more control of the profits of the Venezuelan production," Mares said by telephone. "He has not said that nationalization in the Orinoco means 100 percent Venezuelan ownership."

Still, the tone and substance of Chavez's recent declarations have worried many Venezuelans, opposition leaders in Caracas and rights groups. The president reiterated Wednesday that he will advance a proposal to allow him to run for reelection in 2012.

"I've proposed, and we're writing the proposal for the indefinite reelection of the president of the republic," Chavez said to applause. With all 167 members of the National Assembly in his camp, thanks to an opposition boycott of congressional elections in 2005, the measure and others proposed by Chavez are expected to pass easily.

"With the indefinite reelection and the new model he's talking about, what has been announced today is part of an era that is much harder," Ernesto Alvarenga, a founder of Chavez's movement and now an opponent, said by phone from Caracas. "I think we're definitively in a phase of Chavista hegemony," he said, using the name given to the president's followers.

After winning office in December 1998, in an election that obliterated Venezuela's two long-ruling parties, Chavez set about purging elites from office and holding referendums that led to a redrafting of the constitution and a shift in control in the National Assembly. The new constitution lengthened presidential terms and permitted reelection, and in 2000 Chavez won his first six-year term.

He has installed military officers in all levels of government and packed the Supreme Court, and now says he will end the autonomy of the Central Bank.

Chavez has also become wildly popular among the poor, who have benefited from billions of dollars in oil revenue that Chavez has spent on education, nutrition and medical programs. But critics say he plays on the most base instincts of his countrymen, benefiting from conflicts with business sectors, opposition groups and the news media. On Wednesday, he reiterated his criticism of the Roman Catholic Church, which has questioned his plan not to renew a television station license.

Chavez said that one archbishop, Roberto Luckert, is "going to hell," and he told Cardinal Jorge Urosa that the church had gone too far by meddling in state affairs. "Mr. Cardinal," Chavez said, "the state respects the church. The church should respect the state."

Chavez's Economic Plans Set Latin Markets Reeling

White House Warns Venezuela Over U.S. Companies

By Juan Forero
Washington Post Foreign Service
Wednesday, January 10, 2007; A07

BOGOTA, Colombia, Jan. 9 -- Financial markets from Buenos Aires to Caracas reeled on Tuesday following Venezuelan President Hugo Chávez's announcement that he plans to nationalize some private companies, and the White House warned that it expects U.S.-based corporations to be compensated for any losses.

The U.S. Energy Department also expressed concern after Chávez, who has pledged to accelerate his socialist "revolution," said Monday that he would nationalize telephone and electric utility companies and increase state control over four major oil projects in which American and other foreign companies have invested $17 billion.

At the White House, Gordon Johndroe, a spokesman for the National Security Council, said that "if any U.S. companies are affected, we would expect them to be promptly and fairly compensated." He also said that a nationalization plan, if it proved far-reaching, could be harmful to Venezuela.

Meanwhile, White House press secretary Tony Snow lambasted Chávez's plan, saying: "Nationalization has a long and inglorious history of failure around the world. We support the Venezuelan people and think this is an unhappy day for them."

The Venezuelan leader did not say whether his nationalization plan would mean outright expropriation, higher taxes or majority state control. And as is often the case after Chávez's announcements, Venezuelans scrambled Tuesday to play down the news, with energy officials saying the president was only reiterating existing policy.

But the announcement, made in a bombastic speech in which Chávez also attacked the Catholic Church and insulted the secretary general of the Organization of American States, sent stocks into a tailspin in Venezuela and generated market jitters across Latin America.

In Venezuela, the stock market suffered its biggest loss on record, plunging 19 percent, according to the Bloomberg news agency. The currency was also hit hard. The bolivar, which is officially pegged at 2,150 to the dollar, dropped to more than 4,000 to the dollar on the black market.

Trading on shares of CANTV, Venezuela's largest telephone company, was suspended for 48 hours after shares fell 30 percent. And trading on shares for the electric utility, Electricidad de Caracas, was halted after a drop of more than 20 percent. On the New York Stock Exchange, shares of AES Corp., the Arlington-based company that owns 86 percent of Electricidad de Caracas, fell 86 cents, or 4 percent, on news of the Chávez speech.

In Mexico, the stock prices of Telefonos de Mexico and America Movil SA also dropped. The two companies, both owned by the richest man in Latin America, Carlos Slim, had launched a joint effort to take control of CANTV, whose largest shareholder is now Verizon Communications Inc. Stocks in Argentina and Colombia, the latter a close trading partner of Venezuela's, dipped, as well.

"Obviously, the markets responded," said Maya Hernandez, an analyst with HSBC in New York. She said that although Chávez had said he would move to consolidate his socialist agenda, "what surprised us was the urgency with which he moved, not the direction."

Still, she said, the government has generated numerous questions that officials in Venezuela say should be answered Wednesday, when Chávez is to be sworn in to a third term.

"It's very unclear how he will go about this, especially the nationalization," Hernandez said. "What will he do? Is he going to compensate the companies? Is he going to expropriate the companies?"

Since first being elected in 1998, Chávez has moved quickly to overturn the old social and economic order, sidelining his opponents and spending billions of dollars in oil revenue to found state-run cooperatives and government companies. He has steadily taken a larger share of the pie from companies such as Exxon Mobil, Chevron, Total of France and BP, multinationals drawn to Venezuela in the 1990s. New state lending agencies have been created, and new regulations have been imposed on banks, which are now required to dedicate a percentage of loans to micro-businesses and other sectors identified by the government as important to the economy.

But Chávez has promised more. Emboldened by a landslide electoral win in December that gave him another six-year term, the former paratrooper has announced he will seek special constitutional "enabling" powers to pass laws affecting the economy, as he did in 2001 when the government first pushed through legislation to increase the state's hold.

Chávez also said the Central Bank, one of the few semi-independent entities in the country, would come under state control as its directors are replaced. The Central Bank controls cash flow and releases economic data, operations the administration wants to wrest away.

One of the bank's outgoing directors, Domingo Maza Zavala, decried the government's moves.

"The Central Bank must be autonomous," Maza said in an interview Tuesday on Globovision, a Caracas news station. "Otherwise, the people will lose confidence in the currency."

In Venezuela, businessmen were bracing for more details about the government's plan while hoping for the best. Many have long complained that private investment has plummeted under Chávez, hurting industry.

Flavio Fridegotto, a businessman speaking by phone from Venezuela, said the government has to understand that it needs foreign companies to operate freely in the country.

"We don't think that they're going to be that radical," he said. "He needs businessmen. They need to take care of the transnationals."

Staff writer Steven Mufson in Washington contributed to this report.

Venezuela’s Hugo Chávez lurches leftwards, again

The second coming

Jan 10th 2007 | CARACAS
From Economist.com

THE story of Hugo Chávez’s eight-year presidency in Venezuela is one of reinvention. This week, as he embarked on another six-year term, the left-leaning former army officer appeared to cast aside what remained of his “democratic socialist” clothing, to reveal a radical political, economic and social programme which is now avowedly communist in inspiration.

Mr Chávez seems determined, through his rhetoric and policies, to provoke angry reactions from opponents at home and abroad. Ahead of his reinauguration on Wednesday January 10th, he announced that elements of the economy deemed strategic—telecommunications, electricity, and the heavy-oil upgrading facilities which process production from the vast Orinoco belt—are to be nationalised or renationalised. Shares in several affected companies plunged on January 9th. The central bank will also lose its constitutional autonomy—something of a fiction in any case—letting the government print money at will to finance social programmes.

More rhetoric and revelations are likely in his inaugural speech, but some aspects of what Mr Chávez calls a “new era” are already clear enough. The constitution is to be reformed to allow socialist measures to be implemented. A fresh enabling law will let the executive issue decrees billed as even more explosive than a similar package in 2001 which sparked a three-year-long political crisis.

This week he scornfully advised church leaders who are confused about his plans to see Christ as an “authentic communist, anti-imperialist and enemy of the oligarchy”. He no longer talks of working to “improve capitalism”, but of the true path of “21st-century socialism”. Behind him as he spoke was a ten-metre-high close-up of his own face and hands, reminiscent of a bishop blessing his flock. The image reflected another salient feature of the Venezuelan regime: a growing cult of personality surrounding a leader who talks of resurrection and socialism in the same breath.

Private enterprise, already hedged in with price and exchange controls and subject to unfair competition from a state that is encroaching on everything from agriculture to banking, will be further restricted. The process of political decentralisation begun in the late 1980s will be reversed, and the restriction on consecutive presidential re-election will be removed, allowing Mr Chávez to remain in power indefinitely.

Channels for dissent look set to dwindle. A law now being considered in parliament will severely limit the flow of foreign money to non-governmental organisations. An independent television channel, RCTV, one of two which openly oppose the government, is to be shut down by the simple expedient of not renewing its licence, up for review in May. “There will be no new concession for that coup-mongering channel called Radio Caracas Television,” the president told the armed forces in late December, after winning the presidential election by a large margin. RCTV's boss Marcel Granier is an outspoken critic and was once seen as a possible opposition candidate.

Mr Chávez has also drawn international criticism. The secretary-general of the Organisation of American States, José Miguel Insulza, said the move to close the television station appeared to be a form of censorship and “a warning to others”. Mr Chávez, evidently relishing the scrap, responded with insults and by calling on Mr Insulza to resign, accusing him of acting like a “viceroy of the empire” (meaning the United States). As he has done consistently in relation to America in recent years, the Venezuelan president now appears to be consciously provoking a reaction from the rest of the continent. Despite significant differences in political and economic conditions, at home and abroad, the eerie echoes of Fidel Castro’s Cuba in the early 1960s are hard to ignore.

Chávez insta a tomar control sobre gas natural en Venezuela

El Universal

Caracas.- El presidente Hugo Chávez instó hoy a las autoridades a tomar el control del sector del gas natural, como parte de su anunciado programa de nacionalizaciones en el inicio de nuevo mandato, con el que quiere llevar al país hacia un Estado socialista, reportó Reuters.

La legislación actual permite a firmas extranjeras tener la propiedad de proyectos de gas en el país, por lo que Chávez propuso un cambio en la Constitución nacional para asegurar la propiedad estatal de estos recursos.

Chávez considera que debe reformarse el artículo 302 de la Constitución, en el que el Estado se reserva la actividad petrolera, pero no así la gasífera, por lo que cree que esta materia debe ser anexada a los cambios.

“Es una sola palabra, pero las palabras son las palabras. Allí debe estar la actividad de hidrocarburos líquidos, sólidos y gaseosos”, dijo el mandatario.

Anunció igualmente que se debe modificar el proceso de privatización del sector petrolero. “Aquí no se privatiza más nada, pero hay que cerrarlo en la Constitución”. -KAC / ICFA / Reuters

Chavez says he's ready to transform Venezuela

CNN

CARACAS, Venezuela (AP) -- President Hugo Chavez says nothing can stop him from swiftly transforming Venezuela into a socialist state, and he faces few obstacles now that a crushing re-election win has given him free reign to pursue more radical changes.

His first big move -- to nationalize "strategic" power and telecommunications companies -- heralds a series of planned "revolutionary laws" that remain vaguely defined. But with oil profits booming and his popularity high, Chavez appears to be in step with a majority of Venezuelans even as spooked investors dumped shares in the affected companies.

"Everything the man is doing is good," said Orlando Vera, a 63-year-old window washer, on Tuesday, adding that his economic situation has improved under Chavez. As for nationalization, Vera said it makes sense for companies that serve the public interest.

Chavez, an admirer of Fidel Castro, says he is crafting a new sort of "21st Century Socialism." Critics say it is starting to look like old-fashioned totalitarianism by a leader obsessed with power.

"They want to nationalize everything. This is the beginning," said Marisela Leon, a 47-year-old engineer who said she might consider leaving the country because she sees difficult times ahead.

In Washington, White House press secretary Tony Snow suggested Venezuela was making a mistake. "Nationalization has a long and inglorious history of failure around the world. We support the Venezuelan people, and think this is an unhappy day for them."

But optimism reigns among Chavez supporters like Miguel Angel Martinez, a 52-year-old street vendor, who says the president "has dedicated himself to studying communist, socialist and democratic models and has taken the best of those models."

Chavez, who will be sworn in Wednesday for a third term that runs until 2013, also told Venezuelans on Monday that he will ask the National Assembly for special powers allowing him to enact a series of laws by decree.

"We're heading toward socialism, and nothing and no one can prevent it," he said.

Chavez, first elected in 1998, has cemented his popularity by using a bonanza in oil profits to set up state-funded cooperatives and fund social programs from subsidized grocery stores to free universities.

An Associated Press-Ipsos poll conducted three weeks before Chavez won re-elected on December 3 found 62 percent supported nationalizing companies when in the national interest -- a result that paralleled Chavez's victory with nearly 63 percent of votes.

But that support also has its limits. The poll found 84 percent said they oppose adopting a political system like Cuba's, despite Chavez's reverence for Castro.

The nationalization move appeared likely to affect the telecommunications company C.A. Nacional Telefonos de Venezuela, known as CANTV, the country's largest publicly traded company.

Chavez last year threatened to nationalize CANTV, which was privatized in 1991, unless it fully complied with a court ruling and adjusted pension payments to current minimum-wage levels.

Dozens of CANTV retirees who were blocking a Caracas avenue outside a courthouse in protest on Thursday cheered Chavez's move, saying they now have hopes of being paid what they are owed.

"The one who guarantees us a future is the Venezuelan government," said Jose Chacon, a leader of the retirees.

Venezuela's electricity sector is largely state-run already, and it was not clear if the decision would affect the capital's energy provider, Electricidad de Caracas, which has never been government-run and is owned by Arlington, Virginia-based AES Corp.

The nationalization moves seem to be a throwback to past efforts that were complete failures, opposition politician Teodoro Petkoff said. What is really on display, he said, is the "autocratic power" of a president who can act without checks and balances.

During the election campaign, Chavez said he would seek constitutional reforms including scrapping presidential term limits, which bar him from running again in 2012. Chavez also said Monday that he wants a constitutional amendment to strip the Central Bank of its autonomy.

Bank director Domingo Maza Zavala, a critic set to retire soon, told The Associated Press that it is important for the Central Bank to make decisions independently to support sound monetary policy, especially in containing inflation.

"Why a Central Bank without autonomy? That isn't conceivable anywhere in the world," Maza Zavala said.

Copyright 2007 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.

Vicepresidente: La economía está más sólida que nunca

Caracas.- El vicepresidente de la República, Jorge Rodríguez, desestimó hoy los bruscos descensos que experimentaron acciones de empresas que cotizan en la Bolsa de Caracas, tras los anuncios del presidente Hugo Chávez de nacionalizar la compañía telefónica Cantv y las empresas de electricidad del país.

"No hubo ningún desplomamiento de nada. La Bolsa (de Caracas) está más sólida que nunca, la economía está más sólida que nunca, las reservas están más fuertes que nunca, así que nada de eso está pasando", dijo.

Durante la colocación de una ofrenda floral ante el Panteón Nacional con motivo de la toma de posesión del presidente Hugo Chávez en su nuevo período constitucional 2007-2013, el vicepresidente ratificó que se seguirán las líneas estratégicas de acción que proponga el mandatario nacional.

En función de estos planes enfatizó que sería necesario adaptar el ordenamiento jurídico legal, por lo que justificó la necesidad de la Ley Habilitante solicitada por Chávez al Parlamento.

"Nosotros tenemos leyes draconianas. Por poner un ejemplo que acabo de recordar, la Ley de Comercio data de 1904, entonces tienen que adaptarse al Estado moderno, al Estado ágil y al Estado socialista que estamos fundando", sentenció. -KAC

Venezuela Stocks, Bonds Sink on Chavez's Nationalization Plans

By Guillermo Parra-Bernal and Alex Kennedy

Jan. 9 (Bloomberg) -- Venezuelan stocks had their biggest drop on record and bonds tumbled after President Hugo Chavez pledged to nationalize the country's largest phone company and utilities.

Shares of Caracas-based telephone company CA Nacional Telefonos de Venezuela, or Cantv, plunged 28 percent in U.S. trading to $12.20. The local shares, which account for almost a fifth of the Caracas Stock Exchange Index, didn't trade in Caracas until about 15 minutes before the close of trading, then fell 30 percent, their biggest drop ever. Trading of Electricidad de Caracas, the nation's largest private power company, was halted in the morning after the shares slid 20 percent.

Chavez's threat yesterday to take control of ``everything that was privatized'' went beyond what investors had anticipated, sending the stock exchange index down 19 percent. Foreign companies with operations in Venezuela, including power company AES Corp. and steelmaker Ternium SA, also fell.

``Nobody knows what's going to happen so investors are assuming the worst,'' said Urban Larson, who helps manage $2 billion in stocks in emerging markets assets at F&C Investments in Boston. ``Some markets are riskier than others, and it's been clear for some time that Venezuela is riskier.''

A drop to an 18-month low in the price of oil, Venezuela's biggest export, added to declines in the country's stocks and bonds. Crude oil for February delivery fell 45 cents, or 0.8 percent, to $55.64 a barrel on the New York Mercantile Exchange, the lowest close since June 15, 2005.

Yields Rise

The yield on the government's benchmark 9 1/4 percent dollar bonds due in 2027 rose to a one-month high of 7.05 percent. The yield has jumped 39 basis points, or 0.39 percentage point, since Jan. 3. The bond price, which moves inversely to the yield, fell 0.95 cents on the dollar to 123.7 cents, according to JPMorgan Chase & Co. The bonds now yield 2.34 percentage points more than similar-maturity U.S. Treasuries.

The yield on the 6.25 percent so-called Interest and Principal Protected bonds, due April 2017, fell to 3.99 percent from 4.02 percent yesterday, according to Banco Bilbao Vizcaya Argentaria SA. The price, which moves inversely to the yield, rose to 119, the highest in three weeks. The TICC. which is dollar-denominated and traded in the local market, offers currency protection.

An index of Venezuelan ADRs fell 35 percent. U.S.-traded shares of Ternium, a Luxembourg-based steelmaker with mills in Argentina, Mexico and Venezuela, fell $1.07, or 3.9 percent, to $26.38. Ternium is controlled by Argentina's Techint Group.

Shares of Canada's Crystallex International Corp., which is developing Venezuela's biggest bullion deposit, fell 37 cents, or 9.2 percent, to C$3.66, after falling 9.4 percent yesterday. Arlington, Virginia-based AES Corp., which owns an 85 percent stake in Electricidad, fell 86 cents, or 4.1 percent, to $20.16 in New York.

Suspended

Trading of both Cantv and Electricidad, known as EDC, will be suspended for the next two days, Fernando de Candia, the nation's stock exchange regulator, said in a statament. The drop in the index is ``temporary,'' he said.

President George W. Bush's administration urged Venezuela to compensate U.S. companies that would be affected by Chavez's plan to transfer the country's utilities to state ownership, White House spokesman Gordon Johndroe said.

``Political risk clearly reached a new peak after all this,'' said Claudia Calich, who manages $900 million in emerging market debt for Invesco Inc. in New York. ``Investors will be very attentive to upcoming announcements.''

The plunge in the index, the biggest since Bloomberg started tracking it at the end of 1993, will be temporary, Ex-President Carlos Andres Perez sold Cantv to a group of private investors led by GTE Corp. in 1991, a year before Chavez became a national figure by trying to overthrow Perez.

Political Ceremony

Chavez, speaking from Caracas as he swore in new cabinet members, pledged to exert greater control over the oil industry. Chavez, a 52-year-old former lieutenant colonel who has clashed with U.S. President Bush, won re-election to a new six-year term last month.

Chavez's plans may result in further declines in investment in an economy that, after growing 10 percent each of the past three years on the back of rising oil prices, risks overheating. Since 1999, manufacturers have trimmed spending on new plant and equipment to the point that non-government investment equals no more than 4 percent of gross domestic product, one of the lowest in the region.

The plan also risks making the economy of Venezuela more dependent on oil. The Chavez administration has benefited from oil prices that averaged more than $60 a barrel last year, compared with about $15 a barrel when he first won office in 1998.

``If Chavez chooses this path then we'll see a flight of capital away from bonds and Venezuelan assets in general,'' said Luis Costa, an emerging market debt strategist at ING Groep NV in London. ``Foreign investors will become scared of developments.''

`Strategic'

Chavez yesterday said that ``those sectors that are so strategic, such as electric power, everything that was privatized, will be nationalized.''

Nationalization would probably be the biggest step toward reversing the legacy of previous governments that privatized companies and opened Venezuelan markets to foreign investors. It would add to restrictions in foreign-currency trading Chavez first imposed in early 2003. Banks endure interest-rate caps in Venezuela and phone, power rates and rents are also controlled.

The perceived risk of owning Venezuela's bonds surged today. Credit-default swaps based on $10 million of the nation's U.S. dollar-denominated bonds jumped 9.7 percent to $169,000 from $154,000 yesterday, according to data compiled by Lehman Brothers Inc. An increase in price indicates deterioration in the perception of credit quality; a decline suggests improvement.

Unregulated Trading

The currency, which the government sets at an exchange rate of 2,150 bolivars per dollar, was bought today about 4,000 per dollar in unregulated trading, said Nelson Corrie, a trader with Interacciones Casa de Bolsa CA in Caracas. The government, under current restrictions, is the only entity allowed to buy and sell foreign currency.

The possible nationalization of Cantv may deprive Venezuelans of a means to withdraw money from the country. Since 2003, investors realized they could legally acquire dollars by buying the company's local shares, converting them into ADRs and selling them abroad.

``Portfolio investors should try to find an exit,'' said Richard Segal, head of research at Argonaftis Capital Management in London. ``Chavez has been trying to do this for a long time and he felt that the latest presidential victory for him gives him that mandate.''

Venezuela, a founding member of OPEC, is the world's fifth- largest oil exporter.

Joint Ventures

The energy ministry said yesterday that four joint ventures may be nationalized; the government has been negotiating to give majority control of them to state-run Petroleos de Venezuela SA while leaving a minority stake with foreign owners including Exxon Mobil Corp., Chevron Corp., Total SA, ConocoPhillips, BP Plc and Statoil ASA.

``We are in constant contact with Venezuelan authorities and the word `nationalization' is not a word we've been confronted with yet,'' said Peter Mellbye, Statoil's head of international operations, in an interview today. Total spokesman Paul Floren and BP spokesman David Nicholas declined to comment on Chavez's statements.

Chavez also said he will seek to strip the central bank of independence from the government. ``The central bank shouldn't be autonomous,'' Chavez said. ``That is one of the biggest mistakes of the constitution.''

Speaking to reporters today in Caracas, outgoing central bank Director Domingo Maza criticized Chavez' decision. Maza's term ends this month.

``The central bank must be autonomous. Otherwise, the people will lose confidence in the currency,'' Maza said in an interview on Globovision television station.

To contact the reporters on this story: Guillermo Parra-Bernal in Caracas at at gparra@bloomberg.net

Last Updated: January 9, 2007 16:21 EST

Chávez Moves to Nationalize Two Industries

New York Times
By SIMON ROMERO

Published: January 9, 2007

CARACAS, Venezuela, Jan. 8 — President Hugo Chávez signaled a vigorous new effort to assert greater control over Venezuela’s economy on Monday by announcing plans to nationalize companies in the telecommunications and electricity industries.

Mr. Chávez, who will be sworn in Wednesday to another six-year term, announced his plans at the swearing-in of his new cabinet to a cheering crowd of supporters, sending a chilling message to foreign investors.

American corporations, including Verizon Communications, have large stakes in Venezuela’s largest telecommunications company, CANTV, and its biggest publicly traded electricity company, Electricidad de Caracas.

“Let it be nationalized,” Mr. Chávez said of CANTV. “All that was privatized, let it be nationalized.”

Financial markets appeared to be caught off-guard by Mr. Chávez’s announcement, as speculators reacted with a sell-off of assets that would be affected by the decision. Shares in CANTV plunged 14 percent in New York trading. Venezuela’s currency, the bolívar, fell as much as 20 percent in black market trading here on Monday, traders said.

The announcement was the latest in a series of bold steps Mr. Chávez has taken since his re-election in December to consolidate his power and move Venezuela toward what he calls a socialist revolution. Mr. Chávez said he would also seek a “revolutionary enabling law” from Congress that would allow him to approve bills by decree, as well as a measure stripping the central bank of its autonomy.

“While this is a break with the past, it is consistent with Chávez’s drive to concentrate ever greater power in his hands and the hands of his government,” said Robert Bottome, editor and publisher of Veneconomía, a business newsletter.

Last month, Mr. Chávez announced plans to meld the broad coalition of parties that support him into a single socialist party, raising concerns that he was following in the footsteps of Fidel Castro.

On Monday, in addition to the telecommunications and electricity nationalizations, Mr. Chávez also appeared to signal that he wanted control over four multibillion-dollar oil projects in the Orinoco River basin, which he said should become “state property.”

It was not clear what Mr. Chávez meant, however, since Venezuela’s government already has stakes in those ventures together with some of the world’s largest private oil companies, including Exxon Mobil, Chevron, BP and ConocoPhillips.

Venezuela, which has the largest conventional oil reserves outside the Middle East, has already increased its control over numerous oil production ventures in the past year. The largest consumer of Venezuelan oil, of course, remains the United States, despite efforts by Mr. Chávez to export larger quantities of oil to China and other Asian markets.

Details were vague as to how any of the nationalization plans would play out. For instance, Mr. Chávez omitted from his remarks whether Venezuela would compensate foreign investors for their holdings or expropriate them outright. He has already clashed with investors over small-scale takeovers of farms and even a tomato-processing plant owned by H. J. Heinz, but his government has negotiated settlements with owners in those cases.

The nationalizations would, at least for Venezuela, reverse a trend that got under way in Latin America in the 1990s, when governments throughout the region sold many of their assets, particularly state telephone companies, to private investors. Those deals, together with the auction of licenses to provide wireless phone services, led to a sharp increase in the usage of such services among poorer Venezuelans.

They would also be a significant shift of Mr. Chávez’s economic policies since he became president in 1999. Though Mr. Chávez steadily adopted more strident rhetoric, he let most of Venezuela’s private companies operate unfettered as long they did not actively engage in politics.

But with his re-election in December, Mr. Chávez seems determined to use the momentum — and margin — of his victory to solidify his power and deepen his socialist policies in ways that are increasingly unnerving his opponents.

Supporters of Mr. Chávez already control every institution in the federal government, including Congress and the Supreme Court, so it was unclear what hindrances Mr. Chávez was attempting to overcome by seeking expanded powers.

Mr. Chávez is also going forward with a plan to effectively take RCTV, a television station that persistently criticizes his government, off the air in May by not renewing its broadcast license. The move has drawn fierce criticism both here and abroad, with critics claiming it will restrict freedom of expression.

On Monday, Mr. Chávez described one of the most prominent critics of the decision, José Miguel Insulza, the general secretary of the Organization of American States, in a vulgar term that loosely translates as “idiot.” Mr. Chávez also called on Mr. Insulza to resign.

Flush with more than $50 billion in revenue from oil exports, Mr. Chávez is also retooling Venezuela’s economy to focus on what his economic theorists describe as “endogenous development” that prioritizes the domestic production of agricultural goods and industrial products from worker-owned cooperatives.

Venezuela has undergone a nationalization push before, when the populist government of Carlos Andrés Pérez took control of companies in various sectors, including the oil industry, in the 1970s. The economy, however, suffered from poor growth and inefficient services after oil prices crashed in the 1980s, leading subsequent administrations to privatize state companies and open the oil industry to foreign investment.

American companies reacted cautiously to Mr. Chávez’s comments on Monday. “Verizon has of course been carefully monitoring the news reports on President Chávez’s comments today,” said Eric Rabe, a spokesman for Verizon, which has had a large stake in CANTV since the early 1990s. “We are not aware of the details of the government’s plan and therefore cannot comment at this time.”

While Mr. Chávez referred specifically to the telephone company CANTV, his nationalization plans for the electricity sector remained unclear. The AES Corporation of Arlington, Va., controls Electricidad de Caracas, but did not acquire the company through a privatization auction. Robin Pence, a spokeswoman for AES, declined to comment.

CMS Energy of Jackson, Mich., controls an electricity utility that provides power to Margarita Island that it bought from the Venezuelan government in the 1990s. Jeffrey Holyfield, a spokesman for CMS, said the company had a “good relationship” with Mr. Chávez’s government but was awaiting more details about its plan before it could comment.

Chavez to nationalize U.S.-based utility

CARACAS, Venezuela (AP) -- Venezuelan President Hugo Chavez announced plans Monday to nationalize Venezuela's electrical and telecommunications companies, pledging to create a socialist state in a bold move with echoes of Fidel Castro's Cuban revolution.

"We're moving toward a socialist republic of Venezuela, and that requires a deep reform of our national constitution," Chavez said in a televised address after swearing in his Cabinet. "We are in an existential moment of Venezuelan life. We're heading toward socialism, and nothing and no one can prevent it."

Chavez, who will be sworn in Wednesday to a third term that runs through 2013, also said he wanted a constitutional amendment to eliminate the autonomy of the Central Bank and would soon ask the National Assembly, solidly controlled by his allies, to give him greater powers to legislate by presidential decree.

The nationalization appeared likely to affect Electricidad de Caracas, owned by Arlington, Virginia-based AES Corp., and C.A. Nacional Telefonos de Venezuela, known as CANTV, the country's largest publicly traded company.

"All of that which was privatized, let it be nationalized," Chavez said, referring to "all of those sectors in an area so important and strategic for all of us as is electricity."

"The nation should recover its ownership of strategic sectors," he said.

Before Chavez was re-elected last month with nearly 63 percent of the vote, he promised to take a more radical turn toward socialism.

Chavez said that lucrative oil projects in the Orinoco River basin involving foreign oil companies should be under national ownership. He didn't spell out whether that meant a complete nationalization, but said any vestiges of private control over the energy sector should be undone.

"I'm referring to how international companies have control and power over all those processes of improving the heavy crudes of the Orinoco belt -- no -- that should become the property of the nation," Chavez said.

Partnerships sought

In the oil sector, Chavez didn't appear to be ruling out all private investment. Since last year, his government has sought to form state-controlled "mixed companies" with British Petroleum PLC, Exxon Mobil Corp., Chevron Corp., ConocoPhillips Co., Total SA and Statoil ASA to upgrade heavy crude in the Orinoco. Such joint ventures have already been formed in other parts of the country.

Chavez threatened last August to nationalize CANTV, a Caracas-based former state firm that was privatized in 1991, unless it adjusted its pension payments to current minimum-wage levels, which have been repeatedly increased by his government.

After Chavez's announcement on Monday, American Depositary Receipts of CANTV immediately plunged 14.2 percent on the New York Stock Exchange to $16.84 (€12.95) before the exchange halted trading. An NYSE spokesman said it was unknown when trading might resume for CANTV, the only Venezuelan company listed on the Big Board.

Investors with sizable holdings in CANTV's ADRs include some well-known names on Wall Street, including Deutsche Bank Securities Inc., UBS Securities LLC and Morgan Stanley & Co.

But the biggest shareholder, according to Thomson Financial, appears to be Brandes Investment Partners LP, an investment advisory company in California. Also holding a noteworthy stake is Julius Baer Investment Management LLC, a Swiss investment manager.

Chavez's nationalization announcement came in his first speech of the year, a fiery address in which he used a vulgar word roughly meaning "idiot" to refer to Organization of American States Secretary-General Jose Miguel Insulza.

Chavez lashed out at Insulza for questioning his government's decision not to renew the license of an opposition-aligned TV station.

"Dr. Insulza is quite an idiot, a true idiot," Chavez said. "The insipid Dr. Insulza should resign from the secretariat of the Organization of American States for daring to play that role."

Shades of Cuba

Cuba nationalized major industries shortly after Castro came to power in 1959, and Bolivia's Evo Morales moved to nationalize key sectors after taking office last year. The two countries are Chavez's closest allies in Latin America, where many leftists have come to power in recent years.

On Wednesday -- hours after Chavez is sworn in for another term -- former revolutionary Daniel Ortega returns to the presidency in Nicaragua.

In Managua, Venezuelan Ambassador Miguel Gomez indicated Monday that the two countries planned to work closely together, and said Nicaragua could eventually become Venezuela's top aid recipient -- getting even more help than Cuba and Bolivia, which benefit heavily from Venezuela's petro-diplomacy.

The United States remains the top buyer of Venezuelan oil, which provides Chavez billions of dollars for social programs aimed at helping the poor in countries around the region.

Gomez said Chavez and Ortega planned to sign an agreement on Thursday providing Nicaragua with resources -- he described them as loans -- for infrastructure, health, education, agricultural development and the construction of 200,000 houses, as well as energy and debt forgiveness.

Copyright 2007 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.

Chávez pide a Insulza renunciar a la OEA por declaciones sobre RCTV

El Univesal

Caracas.- El presidente Hugo Chávez llamó hoy "pendejo" al secretario general de la Organización de Estados Americanos (OEA) y le pidió que renuncie a su cargo en el órgano continental luego que el funcionario solicitó al gobierno venezolano que reconsiderara la medida de no renovar la concesión al canal Radio Caracas Televisión (RCTV).

"El insulso doctor Insulza", expresó el gobernante para referirse a José Manuel Insulza, en el acto de juramentación de su nuevo gabinete ministerial que se efectuó hoy en el Teatro Teresa Carreño.

Chávez profirió duras palabras para el funcionario. Lo llamó atrevido por "jugar el papel de qué, ¿qué quiere ahora ser Insulza? Un virrey del Imperio".

Le dijo que "Venezuela es libre, Venezuela se liberó para siempre". Y le sugirió que se vaya con su "insulsería para otro lado".

"Vaya que bien pendejo el doctor Insulza. Un verdadero pendejo, desde la P hasta la O", insistió Chávez en medio de los aplausos y vítores de su audiencia.

Chávez sostuvo que Insulza amenazó a su Gobierno de que "si nosotros no le damos la concesión a este canal de televisión habrá implicaciones políticas". Agregó "¡qué implicaciones políticas doctor Insulza! ¡No sea pendejo!", volvió a expresar.

Consideró que un secretario general "que llegue a ese nivel por dignidad debería salir de ese cargo", pues a su juicio, éste perdió la moral para continuar en ese cargo. "A menos que alguien quiere convertir de nuevo a la OEA en lo que una vez señaló Fidel Castro", dijo refiriéndose a que el mandatario cubano llamó al organismo "el ministerio de las colonias".

Afirmó que le extrañan las palabras de Insulza cuando éste se dice ser un hombre cercano a Salvador Allende, ex presidente chileno.

"Uno puede pensar cualquier cosa del doctor Insulza", indicó y le pidió al secretario general de la OEA que "no se meta con nosotros. Respete Venezuela. No le permitimos a nadie que se meta en los asuntos internos de Venezuela".

Chávez manifestó que denunciará ante todas las reuniones de la OEA la "injerencia y falta de respeto" de Insulza en los asuntos internos de Venezuela, "para ponerlo en su lugar. No le tenemos miedo. Usted está muy equivocado".

Contra la Iglesia

Chávez criticó también las recientes declaraciones del cardenal Jorge Urosa Savino y de la Conferencia Episcopal de Venezuela (CEV) sobre el tema de la concesión de RCTV. "Yo le pido al Cardenal que ocupe su puesto", dijo y valiéndose de un popular refrán lo exhortó a limitarse sólo a los asuntos de la Iglesia y no opinar sobre otros temas. "Zapatero a su zapato", expresó Chávez en su discurso exaltado.

"Aquí no valdrán amenazas, ni manipulaciones o intentos de manipulación", añadió. Acusó a la "oligarquía", "esa crema nauseabunda, pestilente" de querer "refugiarse detrás de las sotanas, detrás de instituciones como la OEA".

"Pero la revolución venezolana no se rinde (…) Nos disparan desde la OEA el mismísimo secretario general. Nos disparan desde la Conferencia Episcopal. La batalla comenzó temprano", dijo Chávez._LP