Nationalization of public utilities will entail dramatic changes for everyone
Many Venezuelans would see their investment opportunities shrunk
RAQUEL BARREIRO C., EL UNIVERSAL
The Venezuelan government's decision to nationalize key public utilities will bring about sweeping changes in the domestic market. Even though some people regard it merely as an issue of negotiation between the government and the private sector, that move will entail dramatic consequences for the average people.
The most immediate consequence of nationalization of uitilities firms has to do with the quality of the public services provided. The possibility that telephone conversations get crossed or that users have to wait some minutes before hearing the dial tone is a matter of concern for many Venezuelans who look back and remember the service major telecommunications company Compañía Anónima Nacional Teléfonos de Venezuela (Cantv) used to provide before its privatization in 1991. As from that year, however, the telecoms firm made significant technological progress that resulted in improved service quality and less hurdles.
But not the entire market has been performing well. The power sector, for instance, is still riddled with deficiencies that have raised doubts about the service the State may provide following the nationalization of some utilities.
In 2006, the national electricity system reported the highest amount of failures over the last eight years, which was up 9.5 percent as compared to 2005. According to figures provided by the Interconnected Systems Operation Division, now the National Management Center, the services at privately owned firm Electricidad de Caracas (EDC) were briefly suspended three times last year while Elelval (Valencia, Carabobo state) provided a flawless service.
On the contrary, state-run companies Cadafe reported 70 service failures; Edelca five; Enelbar three; Semda three; Enelven two and Enelco two. The difference in the quality of the services provided by Cadafe and by Edelca is quite clear. Yet it remains to be seen how the services of the planned nationalized public utilities will be. The newly-created Empresa Nacional de Generación is to take responsibility for turning EDC into a publicly held power concern.
The State as employer
Once privately owned public utilities have been nationalized, all their staff would become public servants. The national government would then go though a remarkable expansion with the incorporation of 11,731 workers from Cantv and several power companies into its regular payroll.
The number of government employees would rise by more than half percentage point as soon as these public utilities end up in the hands of the Venezuelan State. Public servants would therefore amount to 17 percent of the working population across the country.
Some other implications of the government's nationalization move are to be taken into account as well, such as the wage and hiring conditions and the union representation of all these workers. However, it is still unknown whether the State will keep the same payrolls the private organizations it intends to nationalize used to work with.
Investment opportunities
Direct stock purchase both at Cantv and EDC had been an open option for Venezuelans when it came to invest their money. As banking interest rates did not make up for increasing inflation, many people resorted to the stock exchange to make more profitable investments.
Under the motto "Pass the good energy on", EDC launched a campaign aimed at selling 15 percent of the company's shares. Some 60,000 retail investors bought stocks from the power concern. ADR purchase had become a way to legally access the foreign exchange market, too.
Such retail investments turned 2006 into the best performing year for the Caracas Stock Exchange (BVC). But following the announcement of the government's nationalization plans, the BVC plunged into a downtrend, and the stock purchase ceased from being a good opportunity for small investors.
Off the record, the government said that once it takes control over Cantv and EDC, these privately owned public utilities would stop being publicly traded companies. And the unique opportunity to access the capital markets as a shield against the economic ups and downs would definitely be missed.
Translated by Servio Viloria
RAQUEL BARREIRO C., EL UNIVERSAL
The Venezuelan government's decision to nationalize key public utilities will bring about sweeping changes in the domestic market. Even though some people regard it merely as an issue of negotiation between the government and the private sector, that move will entail dramatic consequences for the average people.
The most immediate consequence of nationalization of uitilities firms has to do with the quality of the public services provided. The possibility that telephone conversations get crossed or that users have to wait some minutes before hearing the dial tone is a matter of concern for many Venezuelans who look back and remember the service major telecommunications company Compañía Anónima Nacional Teléfonos de Venezuela (Cantv) used to provide before its privatization in 1991. As from that year, however, the telecoms firm made significant technological progress that resulted in improved service quality and less hurdles.
But not the entire market has been performing well. The power sector, for instance, is still riddled with deficiencies that have raised doubts about the service the State may provide following the nationalization of some utilities.
In 2006, the national electricity system reported the highest amount of failures over the last eight years, which was up 9.5 percent as compared to 2005. According to figures provided by the Interconnected Systems Operation Division, now the National Management Center, the services at privately owned firm Electricidad de Caracas (EDC) were briefly suspended three times last year while Elelval (Valencia, Carabobo state) provided a flawless service.
On the contrary, state-run companies Cadafe reported 70 service failures; Edelca five; Enelbar three; Semda three; Enelven two and Enelco two. The difference in the quality of the services provided by Cadafe and by Edelca is quite clear. Yet it remains to be seen how the services of the planned nationalized public utilities will be. The newly-created Empresa Nacional de Generación is to take responsibility for turning EDC into a publicly held power concern.
The State as employer
Once privately owned public utilities have been nationalized, all their staff would become public servants. The national government would then go though a remarkable expansion with the incorporation of 11,731 workers from Cantv and several power companies into its regular payroll.
The number of government employees would rise by more than half percentage point as soon as these public utilities end up in the hands of the Venezuelan State. Public servants would therefore amount to 17 percent of the working population across the country.
Some other implications of the government's nationalization move are to be taken into account as well, such as the wage and hiring conditions and the union representation of all these workers. However, it is still unknown whether the State will keep the same payrolls the private organizations it intends to nationalize used to work with.
Investment opportunities
Direct stock purchase both at Cantv and EDC had been an open option for Venezuelans when it came to invest their money. As banking interest rates did not make up for increasing inflation, many people resorted to the stock exchange to make more profitable investments.
Under the motto "Pass the good energy on", EDC launched a campaign aimed at selling 15 percent of the company's shares. Some 60,000 retail investors bought stocks from the power concern. ADR purchase had become a way to legally access the foreign exchange market, too.
Such retail investments turned 2006 into the best performing year for the Caracas Stock Exchange (BVC). But following the announcement of the government's nationalization plans, the BVC plunged into a downtrend, and the stock purchase ceased from being a good opportunity for small investors.
Off the record, the government said that once it takes control over Cantv and EDC, these privately owned public utilities would stop being publicly traded companies. And the unique opportunity to access the capital markets as a shield against the economic ups and downs would definitely be missed.
Translated by Servio Viloria
posted by Alice at
Friday, February 02, 2007
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