Chavez Nationalizes Bank of Venezuela on Last Day of Presidential Decree Period

Mérida, August 1, 2008 (venezuelanalysis.com)– Venezuelan President Hugo Chávez announced Thursday that the Venezuelan government will nationalize the Bank of Venezuela, the country's third largest bank. Its private owner, the Spanish Santander Group, has been attempting to sell to a private Venezuelan banker. Thursday also marked the expiration of Chávez’s 18-month, National Assembly-approved permit to pass law-decrees independently from the National Assembly.

“[The Santander Group] wanted to sell the bank to a Venezuelan businessperson who asked for permission, like the law requires. But now I say no… We are going to recuperate the Bank of Venezuela for all the people, since this is a country that is recuperating its wealth in order to put it at the service of the people,” Chávez announced.

In a company statement released Friday, the Santander group confirmed that it had been negotiating the sale of the Bank of Venezuela to a private Venezuelan entity, but the transaction did not concretize. The group “has since gained knowledge of the interest of the Venezuelan government in the Bank of Venezuela, being in this moment in conversations to that effect,” according to the statement.

Vice President Ramón Carrizalez has already met with the Santander Group to initiate negotiations which Chávez said he is “sure will not be anything conflictive or generate any problems.”

Venezuela assured the Santander Group that the government will pay a fair price for the bank. A communiqué from the Information and Communications Minister, Andrés Izarra, stated that the government “will act with total respect for the procedures established by our laws and with due respect to the current stockholders of the Bank of Venezuela.”

Nonetheless, several Venezuelan officials predicted that the Spanish media would respond harshly to the nationalization, even in the wake of Chávez’s visit to Spain last Friday to renew diplomatic relations with both President José Luis Rodríguez Zapatero and King Juan Carlos I after 8 months of strife.

“Starting right this moment the media war against me will begin… they will try to brand me an autocrat who wants to break up relations with [Spain] once again,” said Chávez in a press conference Thursday.

Chávez guaranteed the clients of the Bank of Venezuela that the nationalization is no cause for alarm. “To those who have their savings in the bank, don’t worry… you will be more than guaranteed in the hands of the Republic,” Chávez declared Thursday. “You know the banking sector of Venezuela is one of the most solid in the world.”

While complementing the private management for achieving a “high level of efficiency” in the bank, the president made clear that his administration plans to shift the bank’s priorities from profits to social investments. “The profit will not be of one group, but to invest in socialist development,” he said.

To assuage concerns among the workers at the bank, the President pointed to his previous nationalization of the Venezuelan telecommunications company CANTV and steel company SIDOR as examples of good state management.

Shortly after nationalizing SIDOR last April, the government negotiated a collective contract with the steel workers which many considered a boost to the revolutionary sectors of the Venezuelan labor movement and a break from the harsh exploitation by the private management. The state management of CANTV and the workers also signed a collective contract last month, and the company offers discounted rates for local community organizers, alternative community media workers, and new internet subscribers.

The 118-year old Bank of Venezuela was privately owned until 1994, when the Venezuelan government became the majority stockholder. Two years later, the bank was re-privatized and the Santander Group acquired the controlling share, according to the company website.

In the second semester of 2007, the bank held 11.3% of total deposits in Venezuela, ranking it among the largest banks in the country, according to its 2007 financial report. Still based in Spain, the Santander Group now operates in 24 countries.

In the last year and a half, Chávez has also nationalized Venezuela’s cement industry and the electricity sector, all of which his administration considers “strategic” for the sovereign development of Venezuela, using decree powers granted to him by the National Assembly for an 18 month period which expired Thursday.

One of Chávez’s final decrees was a reform of the National Banking and Finance Law, but the details of the changes will not be made public until next week, according to Reuters.

On Tuesday, Chávez and several other Venezuelan officials met privately with representatives from the largest state-owned bank in Latin America, the Caixa Económica do Brasil, but the agenda of the meeting was not made public.

Likewise, the details of the final four laws passed by presidential decree Thursday have not been divulged. The laws include the Law for the Promotion and Development of the Popular Economy, the Integral Agricultural Health Law, National Railway System Law, and a law to create a Venezuelan Agricultural Bank.