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Hugo Chavez Takes Aim at Spanish Bank

Reuters
Friday, 1 Aug 2008 | 4:59 AM ET

Venezuela's President Hugo Chavez has added a large Spanish-owned bank to the list of companies to be run by the government in the oil-exporting nation, furthering his plans of building a socialist state.

Hugo Chavez

Chavez said Thursday he will nationalize Grupo Santander's Banco de Venezuela, his latest purchase in a two-year oil-funded shopping spree that has already gobbled up oil projects and a telecoms firm, along with steel and cement plants.

Chavez threatened to kick Spanish banks out last year in a diplomatic fight sparked by a row with Spain's king, but said he had decided to buy Banco de Venezuela after Santander asked for permission to sell it to a local group.

"I said no, I'll buy it from you -- what's it worth? We'll pay it," Chavez said during a live television broadcast. "We are going to nationalize Banco de Venezuela," he said.

Santander spokesmen in Madrid and Caracas declined to comment on the news.

Market speculation in June that Santander planned to sell its Venezuelan unit caused Banco de Venezuela shares to jump 25 percent on the Caracas stock exchange, but the deal was apparently blocked by the government.

Nationalizations are popular with Venezuelans used to a strong state financed by oil bonanzas. Chavez, who lost a referendum on extending his powers last year, believes in state control of key industries but may also have his eye on regional and local elections in November.

Venezuela's benchmark global bond due 2027 fell 1.750 points to bid 89.875, driving the yield up to 10.443 percent, in an apparent sign of investor concern.

"It's looking like a negative development; I don't see why the banking sector needs to be under the purview of the public sector," said Alberto Ramos, a senior economist with Goldman Sachs. "The private sector does a much more efficient job of running that type of business."

Gianfranco Bertozzi, an analyst with Lehman Brothers in New York, said the fact that Santander was looking to sell made the takeover less alarming for investors.

"The government sees logic in expanding its network of banks in the country, and Santander may benefit as it has a buyer and can exit," he said.

Grupo Santander owns 98.4 percent of Banco de Venezuela, which is the country's third largest bank with deposits worth 7.9 billion euros ($12.3 billion).

It made a net profit of 179 million euros in 2007, up 22.6 percent year-on-year.

While banks have benefited from Venezuela's economic growth of more than 8 percent last year on record oil prices, inflation of 23 percent in 2007 complicated lending.

Banco de Venezuela is the South American nation's third-largest bank in terms of deposits and the fourth measured by its credit portfolio. Venezuela already has several state-run banks.

Banks