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Chavez to nationalize companies

CARACAS, Venezuela – 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 revolution in Cuba.Chavez, who will be sworn in Wednesday to a third term that runs until 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.”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 new Cabinet. “We’re heading toward socialism, and nothing and no one can prevent it.”Before Chavez was re-elected by a wide margin last month, he promised to take a more radical turn toward socialism. His critics have voiced concern that he would use his sweeping victory to consolidate more power in his own hands.Cuba, one of Chavez’s closest allies in the region, nationalized major industries shortly after Castro came to power in 1959. Bolivia’s Evo Morales, another Chavez ally, moved to nationalize key sectors after taking office last year.”The nation should recover its ownership of strategic sectors,” Chavez said. “All of that which was privatized, let it be nationalized,” he added, referring to “all of those sectors in an area so important and strategic for all of us as is electricity.”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.Chavez said lucrative oil projects in the Orinoco River basin involving foreign oil companies should be under national ownership. He did not 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.Chavez did not appear to rule out all private investment in the oil sector. 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.The United States remains the top buyer of Venezuelan oil, which provides Chavez with billions of dollars for social programs aimed at helping Venezuela’s poor as well as aid for countries around the region.Chavez threatened last August to nationalize CANTV, a Caracas-based former state firm that was privatized in 1991, unless it fully complied with a court ruling and adjusted its pension payments to current minimum-wage levels, which have been repeatedly increased by his government.CANTV is the dominant provider of fixed-line telephone service in Venezuela, and also has large shares of the mobile phone and Internet markets.Electricidad de Caracas is the largest private electricity firm in Venezuela. U.S.-based AES, a global power company that today has businesses in 26 countries, bought a majority stake of Electricidad de Caracas in a hostile takeover in 2000.After Chavez’s announcement, American Depositary Receipts of CANTV – the only Venezuelan company traded on the New York Stock Exchange – immediately plunged 14.2 percent to $16.84 before the NYSE halted trading. An NYSE spokesman said it was not known when trading might resume.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.CANTV said it was aware of Chavez’s remarks but added in a statement: “No government representatives have communicated with the company, and the company has no other information.”Chavez cited the communist ideals of Karl Marx and Vladimir Lenin at other points in his speech.”I’m very much of (Leon) Trotsky’s line – the permanent revolution,” he said.In the fiery address, the president also used a vulgar word roughly meaning “idiot” to refer to Organization of American States Secretary-General Jose Miguel Insulza. He lashed out at Insulza for questioning his government’s decision not to renew the license of an opposition-aligned TV station.


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