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Venezuela's Chavez: On Road To Socialism?

Tuesday, 9 Jan 2007 | 11:25 AM ET
Pres. Hugo Chavez of Venezuela
AP
Pres. Hugo Chavez of Venezuela

Venezuelan stocks plunge 10% today after Hugo Chavez speech. Chavez is president of Venezuela--and in a televised speech last night in Caracas (he was just elected to a third term) he said he wanted his country to nationalize power and telecom companies. U.S. firms are major invstors in Venezuelan oil--and these new efforts in telecom by Chavez will also have affect on American companies beyond energy. On "Morning Call" CNBC's Michelle Caruso-Cabrera went over who's "hurt" but all this.

There are two American companies immediately affected. First--Verizon . They are invested in the Venezuelan company--C.A. Nacional Telefonos de Venezuela, known as CANTV--the firm Chavez wants to nationalize--and the country's largest publicly traded company. Verizon has 25% of that firm and has been trying to sell it to a Mexican company-before yesterday's speech by Chavez.

The other U.S. company affected is AES --based in Virginia. They own 86% of Electricidad de Caracas--the electrical power firm Chavez wants to nationalize.

But it could even get "worse" for American oil companies. In that same speech--Chavez said he wants to nationalize a part of Venezuela's oil production in an area that produces some 600,000 barrels a day. (The country produces a total of 2.55 billion barrels a day).

Chavez starts a new six year term. Here's a direct quote from what he said last night: "We're moving toward a socialist republic of Venezuela, and that requires a deep reform of our national constitution,, we're heading toward socialism, and nothing and no one can prevent it."

FYI: The U.S. is the largest buyer of Venezuelan oil.

Chavez Pushes to Nationalize
Hugo Chavez, Venezuela's president, plans to nationalize the country's telecoms and electricity companies as he is sworn in for his third term as president. CNBC's Michelle Caruso-Cabrera speaks to Mauro Toldo, Economist at Dekabank, for analysis of the situation.
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