President Hugo Chavez announced plans on Monday to nationalize Venezuela's electrical and telecommunications companies, pledging to create a socialist state in the spirit of the Bolivarian revolution.
"We're moving toward a socialist republic of Venezuela, and that requires a deep reform of our national constitution" Chavez said in a televised address after swearing in his new Cabinet. "We are in an existential moment of Venezuelan life. We're heading toward socialism, and nothing and no one can prevent it." Chavez who next Wednesday takes office for a third term that runs through 2013 said he wanted a constitutional amendment to eliminate the autonomy of the Central Bank and would soon ask the National Assembly, solidly controlled by his allies, to give him greater powers to legislate by presidential decree. Chavez was re-elected last month with nearly 63% of the vote. "All of that which was privatized, let it be nationalized" said Chavez referring to "all of those sectors in an area so important and strategic for all of us as is electricity." The nationalization seems targeted to Electricidad de Caracas, owned by Arlington, Virginia-based AES Corp, and C.A. Nacional Telefonos de Venezuela, known as CANTV, the country's largest publicly traded company. After Chavez's announcement on Monday, American Depositary Receipts of CANTV immediately plunged 14.2% on the New York Stock Exchange before the exchange halted trading. An NYSE spokesman said it was unknown when trading might resume for CANTV, the only Venezuelan company listed on the Big Board. Investors with sizable holdings in CANTV's ADRs include well-known names on Wall Street such as Deutsche Bank Securities Inc., UBS Securities LLC and Morgan Stanley & Co. "The nation should recover its ownership of strategic sectors," he insisted. Chavez said that lucrative oil projects in the Orinoco River basin involving foreign oil companies should be under national ownership underlining that any vestiges of private control over the energy sector should be undone. "I'm referring to how international companies have control and power over all those processes of improving the heavy crude of the Orinoco belt - no - that should become the property of the nation," Chavez said. Nevertheless in the oil sector Chavez doesn't seem to be ruling out all private investment. Since last year, his government has sought to form state-controlled "mixed companies" with British Petroleum PLC, Exxon Mobil Corp, Chevron Corp, ConocoPhillips Co, Total SA and Statoil ASA to upgrade heavy crude in the Orinoco. Such joint ventures have already been formed in other parts of the country.