Chavez speeds pace toward socialism
Venezuelan President Hugo Chavez announced Monday he would nationalize his nation’s telecommunications and electricity industries and take over four major oil production facilities controlled by foreign companies.
The moves would accelerate the pace of Chavez’s pledged socialist transformation of Venezuela, the eighth largest exporter of crude oil worldwide and the fourth largest foreign supplier to the United States.
“We are in an existential moment of Venezuelan life,” Chavez said in a televised address. “We’re heading toward socialism, and nothing and no one can prevent it.”
Although Chavez’s associates and his allies in parliament had threatened such takeovers, the announcements took many people by surprise and led to speculation about how soon the nationalizations would be carried out and whether and how much the government would reimburse owners for their stakes.
Squarely affected is Compania Anonima Nacional Telefonos de Venezuela, or CANTV, Venezuela’s largest telephone concern, which was privatized in 1991. Verizon Communications is negotiating the sale of its 25% stake in the company to America Movil, controlled by Mexican telecommunications magnate Carlos Slim.
Trading in CANTV’s shares at the New York Stock Exchange was halted Monday afternoon after the announcement precipitated a 14% drop. A major holder of American depository receipts of CANTV is Brandes Investment Partners of San Diego. Through a spokesman, the company declined to comment Monday.
Although Chavez didn’t name specific electric companies susceptible to takeover, Electricidad de Caracas, or EDC, the largest power generator in Venezuela, is apparently targeted. AES Corp. of Virginia holds an 86% stake in the 100-year-old firm, according to the companies’ websites.
Chavez has said he wants to consolidate his country’s hybrid private-public utility system into one nationwide company under state control.
The nationalization of the four oil fields will most affect U.S.-based oil companies ConocoPhillips and Chevron Corp., each of whom depends on the facilities in eastern Venezuela’s Orinoco Belt for a sizable percentage of their global oil production and reserves. ExxonMobil Corp. and France’s Total also have major interests in the Orinoco, but they are less significant shares of their total.
The status of billions of dollars in bonds taken out to finance the projects, and secured by oil receipts they produce, also was in doubt Monday. The four Orinoco plants produce about 550,000 barrels of crude a day, about one-fifth of Venezuela’s total crude production.
The takeover of the Orinoco projects has been hinted at by Chavez loyalists in the National Assembly in recent months. Last year, Chavez forced foreign companies to turn over majority control of 32 oil-field projects to the state oil company, Petroleos de Venezuela.
Chavez was returned to office by a landslide in December and immediately announced he would take measures to deepen his “Bolivarian Revolution.”
The moves announced Monday are consistent with a Chavez plan to shift the economy from private enterprise to a hybrid model favoring ownership of businesses by the state and worker cooperatives. He sees his “socialism for the 21st century” as a means of redistributing oil wealth and creating jobs for the poor. The model is a response, he says, to failed market-driven economic policies promoted by the U.S. that swept Latin America beginning in the late 1980s.
Chavez’s declaration Monday gave rise to speculation that other industries might come under state control.
On Dec. 28, Chavez announced he would not renew the broadcast license of RCTV, the largest broadcast network in Venezuela, for allegedly supporting an abortive coup against his government in April 2002.
Times special correspondent Mery Mogollon in Caracas, Venezuela, contributed to this report.