Chavez speech hits stock values

Markets react to Venezuelan president's plan to widen his nationalisation drive.

    Chavez said on Monday he wants to nationalise key
    telecom and electricity companies [AP]

    Emboldened by his landslide re-election last month, Chavez said on Monday he would nationalise the Caribbean state's largest telecommunications company CANTV and unspecified electricity firms.
     
    He also reiterated his threat to take over foreign-run energy projects in the fourth biggest crude exporter to the US.
     
    Manuel Rosales, the opposition leader who accuses Chavez of seeking to create a Cuban-style centralised economy run by a single-party, said: "He is behaving like a despot, speaks like a despot and governs like a despot."
     
    US reacts
     
     Washington reacted sharply to this intensification of socialist policies in a country where US oil giants such as Chevron, ConocoPhillips and Exxon Mobil are working to extract crude.
     
    Gordon Johndroe, a spokesman for the White House National Security Council, said: "If any US companies are affected, we would expect them to be promptly and fairly compensated ...
     
    "We've also seen the results of nationalisation in other places, and in general these types of actions do not produce economic benefits as expected."
     
    Sam Bodman, the US energy secretary, also called for contracts to be respected. CANTV's leading shareholder is New York-based Verizon, and AES Corp has a majority holding in Electricidad de Caracas, a power firm tipped for nationalisation.
     
    Stock market loss
     
    Chavez's remarks sliced 19 per cent off the value of the Caracas stock exchange leading index IBC.
     
    The fall was led by benchmark stock CANTV which closed down 30 per cent while Electricidad de Caracas slumped 20 per cent.
     
    The stock exchange suspended trading in both companies for 48 hours.
     
    On foreign markets, Venezuela's internationally traded benchmark dollar-denominated global bond due in 2027 fell 1.625 percentage points, a six-week low.
     
    Currency traders said the local bolivar currency, officially pegged at 2,150 bolivars to the dollar, was now changing hands at more than 4,100 to the dollar.
     
    The Caracas stock market plunge had a knock-on effect in Mexico's benchmark IPC stock index which fell more than two per cent on Chavez's nationalisation plans.
     
    Salty language
     
    In Tuesday's trading in New York, CANTV's American Depository Shares sank 35 per cent, while AES lost more than four per cent of its value.
     
    In his Monday speech, Chavez mixed his radical policy moves with typically salty language, sending ripples through Latin America. Chavez's close ally in Nicaragua, former Marxist leader Daniel Ortega, sought to distance himself from the Venezuelan.
     
    Jaime Morales, due to be vice-president in Ortega's new government, said: "There will be no nationalisation in Nicaragua."

    SOURCE: Agencies


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