Nationalisation sweeps Venezuela

Chavez wants to control the commanding heights of the economy

By James Ingham

Private investors and the political opposition hate it, President Hugo Chavez's supporters love it. A whirlwind of nationalisations and threats to private companies is changing Venezuela's economic climate and threatens to widen a tense social divide.

Mr Chavez is stepping up his campaign to turn Venezuela into a socialist state.

He is taking more control of the country's assets and warning companies that do not agree with his vision that he will take them over.

Taking over companies that are efficiently run can bring no benefit to the nation Robert Bottome, Editor, VenEconomia

He has promised that a far-reaching nationalisation programme will close the massive wealth gap, but critics say his plan is all about power and question the state's ability to run big companies effectively.

Nationalisation wave

"Everything that was privatised will be nationalised,'' Mr Chavez promised after he won an election late last year.

Chavez handed over the refineries as part of May Day celebrations

So far he's keeping to his word.

On 1 May, Labour Day, he took control of the last remaining private oil companies in the country.

The Orinoco Belt, one of the world's largest reserves, was being run successfully by a group of joint state and private ventures.

Difficult oil fields

Now the state company, PDVSA, is in charge of this huge resource, giving the government access to more of the profits.

While the Mr Chavez proclaimed at the handover ceremony that he had brought oil back to the people, and freed Venezuela of North American imperialism, sceptics were watching with concern.

Analysts predict PDVSA will struggle to manage these difficult oil fields.

See a map of the oil fields, projects and companies affected

They say that without the experience and expertise of the private firms, production will fall.

The state oil company has taken control of reserves

The poor could benefit as profits will be spent on social projects, but there is concern that this will be at the expense of long-term investment in the business.

The multinationals can of course stay as minority partners, but if they don't get a good deal from compensation negotiations, they will leave.

Phone lines

Next on the nationalisation list is Venezuela's main telecoms company, CANTV.

From June, the state will take control of the firm, turning it, according to Mr Chavez, from a "capitalist private company to a state run socialist enterprise".

Venezuelans queue to use public phone shops

Since 1991 when CANTV was privatised, it has become a lean and profitable business, but its coverage has never spread to the very poorest in the country.

Many Venezuelans rely on the network of shops run by phone companies that are filled with calling booths, or they make calls from stalls run on the streets.

Here, mobile phones are tied to a table and users pay the enterprising stall holders to borrow their phones.

If Mr Chavez has his way, the long lines of people waiting to phone home will shrink in the future.

"By 2011, every area with more than 500 residents will have access to landlines," he said.

He plans to install more than a million new lines and cut the cost of calls.

Sparking a change

Similar changes are afoot at the country's main electricity provider, Electricidad de Caracas.

Venezuela's banks have been threatened with nationalisation

Other businesses are also in the president's sights.

Cement and steel manufacturers that export the majority of their goods have been told they will be expropriated if they do not start selling more to Venezuelans.

Clearly the rules of the game are being changed and if companies do not agree to play, they could lose out.

For some, this is all too much. "Why touch something that's not broken?" said Robert Bottome, editor of the respected newsletter VenEconomia.

"It can only be to show he has power," he said, referring of course to Mr Chavez.

"Taking over companies that are efficiently run can bring no benefit to the nation. It will cost $2.5bn (£1.25bn) to buy the phone and electricity companies. That money could be spent in better ways," he adds.

Banking in sight

Banks might have thought themselves immune until now, but they are also in the government's sights.

"Private banking must give priority to financing the industrial sectors of Venezuela at low cost," Mr Chavez said recently.

"If banks don't agree with this, it's better that they go, that they turn over the banks to me, that we nationalise them and get all the banks to work for the development of the country, and not to speculate and produce huge profits."

It is hard to tell whether this is just a radical idea or whether Mr Chavez will go through with his threat, but it has the middle classes worried.

Other countries

The changes in Venezuela are being reflected elsewhere in Latin America.

Mr Chavez's allies in Bolivia and Ecuador are making similar moves.

"The neo-liberal governments gave away hills, rivers and mining concessions. We have to start recovering those concessions," Bolivia's President Evo Morales said before starting the process of nationalising the gas industry.

But critics question whether Mr Chavez's "21st-Century socialism" can be exported to countries that do not have the oil wealth of Venezuela.

It's a nervous time for investors and private companies.

But for the millions of people who rely on the president and his financial help, they will be content that money appears to be moving from the rich to the poor.

ORINOCO OIL BELT Oil projects and companies in affected fields 1. Sincor (PDVSA*, Total, Statoil); Petrozuata (PDVSA, Conoco Phillips) 2. Ameriven (PDVSA, Conoco Phillips, Chevron Texaco) 3. Cerro Negro (PDVSA, Exxon Mobil, BP) *PDVSA is Venezuela's state-owned oil company