Venezuela's Chavez Threatens To Nationalize Banks

Friday, May 4th 2007, 8:42 am

By: News On 6

CARACAS, Venezuela (AP) _ Venezuelan President Hugo Chavez warned he could nationalize the country's banks and largest steel producer in an apparent bid to strong-arm the businesses to contribute more to local industry.

Delivered in a wide-ranging speech in which he promised Venezuela was headed for a classless society, Chavez's threat Thursday did not seem to signal an imminent takeover.

But coming alongside recent moves to nationalize telecommunications, electricity companies and the oil sector, the warning was yet another sign the Venezuelan leader is serious about deepening his socialist revolution.

``Private banks have to give priority to financing the industrial sectors of Venezuela at low cost,'' Chavez said. ``If banks don't agree with this, it's better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits.''

It was unclear if Chavez was referring only to Venezuelan banks including Mercantil Servicios Financieros CA and Banco Provincial SA, or also major international banks with subsidiaries in the country, such as New York-based Citigroup Inc. and Spain's Banco Bilbao Vizcaya Argentaria SA and Banco Santander Central Hispano SA.

Chavez also warned the government could take over steel producer Sidor, which is majority controlled by Luxembourg-based Ternium SA. Ternium's U.S.-traded shares fell $1.05, or 3.9 percent, to $26.15 Thursday.

Sidor ``has created a monopoly'' and sold the bulk of its production overseas, forcing local producers to import pipes from elsewhere, Chavez said.

The company should be giving priority to supplying national industries, he said, ordering Mining Minister Jose Khan to come back from Sidor's headquarters with a recommendation in 24 hours.

Sidor and banks in Venezuela did not respond to requests for comment.

``I don't think it'll happen immediately; they're just threats,'' said Franklin Rojas, director of Caracas-based economic institute CIECA.

Rojas noted that Chavez would likely run up against his close ally, Argentine President Nestor Kirchner, if he tried to nationalize Sidor. Sidor's parent company, Ternium, is controlled by a major Argentine conglomerate, Techint Group.

Chavez initiated a nationalization drive in January to impose state control over ``strategic'' companies. His government took over multibillion dollar oil operations from major foreign oil companies this week and announced earlier Thursday that it would not be paying cash compensation to them.

``We do not expect to pay out money in order to arrive at some arrangement with the companies,'' said Oil Minister Rafael Ramirez, according to a transcript of an interview with state TV.

Ramirez did not elaborate on how else the government might compensate BP PLC, ConocoPhillips, Exxon Mobil Corp., Chevron Corp., France's Total SA and Norway's Statoil ASA, which have invested more than $17 billion in the projects.

Ramirez also said one of the companies, Houston-based ConocoPhillips, would be expelled from the country and barred from staying on as a minority partner in a state-run joint venture if it continues to resist the state takeover. The company is the only one that has not signed an agreement in principle recognizing state control.