CNBC: Venezuela's Stocks Hit by Worries Over Nationalization
The Caracas Stock Exchange plunged over 12% Tuesday on continued worries about President Hugo Chavez's plans to nationalize several of Venezuela's key industries, including oil.
According to CNBC's Michelle Caruso-Cabrera, who is in Caracas, a lot of that nervousness stems from the fact that Chavez hasn't explained much about how the nationalization will work.
"A week ago today, Hugo Chavez said he wanted to nationalize what he sees as the strategic sectors of the economy," Caruso-Cabrera said. "And yet we have no details about what he means."
The Caracas market fell more than 20% last week after Chavez announced his plans.
In a live interview from Caracas, stock exchange chief executive Nelson Ortiz told Caruso-Cabrera: "I'm worried but not panicked."
Still, Ortiz defended Chavez's nationalization plans, saying they are consistent with a new breed of socialism that can be broad enough to include private ownership. He cited both China and Vietnam as other examples of this type of socialism.
"We know that the stock market is about ownership," he said. "Multiple owners - so basically, what it does is it contributes to the democratization...of property."
Meanwhile, Oil Minister Rafael Ramirez said that Venezuela will end negotiations with foreign oil companies on how it will take a majority control of their operations along the Orinoco River.
Ramirez told reporters that "there's no possible negotiation" with the foreign firms, but that private companies would be allowed to own minority stakes in the lucrative Orinoco River basin oil projects. "Every case will be different," he said, according to a report from the Associated Press. "We will have an effective majority control."
The government has already taken majority ownership of Venezuelan oil-producing operations outside the Orinoco region through joint ventures controlled by the state oil company.
Asked about the upcoming nationalization of top power company Electricidad de Caracas, or EDC, owned by Arlington, Virginia-based AES, Ramirez said: "We will take 100% of that stake."
Ramirez did not give details on how much the state would compensate EDC shareholders, but said officials would "try to reach a final resolution for all these issues this year, or the first half of this year."
Stock Exchange Chief Ortiz told CNBC's Caruso-Cabrera that he expected AES's stake will be acquired by the government at a market price.
Helped by Oil
In a separate interview, Caracas Mayor Leopoldo Lopez told Caruso-Cabrera that high oil prices have allowed Chavez to continue to implement his strategies and push through his socialist programs.
"The society does not need to be productive because we depend on oil and that is why this is a model that is being presented," said Lopez, a Chavez opponent.
According to Caruso-Cabrera, the coountry has received about $28 billion in revenue from oil that has been used by Chavez to fund programs by the poor.
"Venezuelans are happy when the price of oil is high," Lopez told CNBC. "Venezuelans are not that happy when the price of oil is low. That is why we believe that we need to redefine the economy in Venezuela."
Despite Hugo Chavez's rants at the U.S. model of capitalism, not every Venezuelan businessman is scared.
"There are more companies being founded in Venezuela than in any other Latin American country," Alberto Cudemus, president of Venezuelan Pork Products told Caruso-Cabrera. "Why? Because Mr. Chavez is good for business. Everybody's making money."