Caracas , January 15, 2007 ( venezuelanalysis.com )— The Finance Chairman of the Venezuelan National Assembly, Ricardo Sanguino, said last Wednesday that his government would compensate those companies that are to lose out over the nationalization plans of his government.
Speaking to Bloomberg, Sanguino, trying to alleviate the fears of private investors, said that, “confiscation and expropriation are banned words in our dictionary. We will be tough but fair negotiators. There are legal mechanisms in the Constitution that give support to our plan.”
His remarks come only days after President Chávez announced the nationalization of the main telecommunications company CANTV, the power industry, and the Orinoco Oil Belt production. He said that all that was privatized under previous governments would be nationalized.
Trading on the shares of CANTV at the New York Stock Exchange was suspended last week after their price dropped 14% following Chavez’s announcement, but they recovered after Sanguino’s remarks.
Speaking of its nationalization yesterday, the new Minister for Telecommunications, Jesse Chacon, said it would mean the Venezuelan telecommunications network would be extended. “On passing into the hands of the state, it will mean that it will be able to … maximize the coverage rather than the performance [economic] of the company,” Chacon said.
The New York based company Verizon is currently the largest shareholder of Cantv, holding 28.5% of the stock, while Telefónica of Spain owns a 6.9% share.
All Electricity Companies to be Nationalized
Regarding the electricity company the government plans to take control of the shares of Caracas Electricity (EDC) that are held by the US company AES Corporation sometime in the first semester of 2007. AES holds 87% of EDC’s shares.
It was unclear last week whether EDC would be included in the nationalization plan because it has always been a privately held company.
Rafael Ramirez, the Minister of Energy and Mines, clarified today that small shareholders in EDC would not be affected by the nationalization.
The reason Chávez has given for taking up state ownership of these industries is that they are strategic and there is none more strategic than the oil industry for Venezuela.
Orinoco Oil Belt Production to be Nationalized
The Orinoco Oil Belt region has attracted the most foreign investment of any in Venezuela. ExxonMobil, BP, ConocoPhillips, Chevron, and Statoil are the big names that invest there. They have invested over $17 billion dollars over the last decade in the region. It is here where it is believed are the largest untapped oil reserves in the world.
The Chavez government’s nationalization plan for the Oil Belt region would mean that the existing joint ventures (strategic associations, as they are known in Venezuela) would be converted from minority to majority participation, according to Ramirez. Currently the Venezuelan state is involved in these projects via the state-owned oil company PDVSA.
Service companies for oil production, such as Halliburton and Schlumberger would not be affected, clarified Minister Ramirez, today, who is also president of PDVSA. Previously there was speculation that the nationalization would affect all companies that do business in the Oil Belt.
Ramirez further said that the companies should not be surprised by the announcement as they were kept fully informed by the developments. “The nationalization of the Strategic Associations in the Orinoco Oil Belt is the coherent development of the politics of Full Petroleum Sovereignty,” he said.
Chavez has made these announcements in the context of strategic policies that will take Venezuela towards his goal of creating a socialist republic. He plans to make changes in the constitution to do this. However, he has guaranteed that all changes will be put to a national referendum.