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Chavez adds Spanish bank to nationalization drive PDF Print E-mail
Saturday, 02 August 2008

REUTERS, CARACAS - Venezuelan 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.

Chavez said on Thursday he will nationalize Grupo Santander's Banco de Venezuela, his latest buy in an oil-funded shopping spree that has already gobbled up crude 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 dispute 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, without specifying a price. "We are going to nationalize Banco de Venezuela," he said.

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

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.

Chavez has long been interested in nationalizing a large bank to help channel state resources but analysts do not expect Thursday's move to spark a wider takeover of the sector.

Venezuela's benchmark global bond due 2027 fell 1.750 points on Thursday 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."

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. No price was disclosed.

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.

The government already runs several smaller banks and will likely use its purchase to offer credits to small businesses.

Chavez usually fairly compensates his takeover targets. Asdrubal Oliveros of Caracas-based analysts Ecoanalitica value Banco de Venezuela at between $1.6 billion and $1.8 billion.

Grupo Santander owns 98.4 percent of Banco de Venezuela, which has deposits worth 7.9 billion euros ($12.3 billion). Banco de Venezuela made a net profit of 179 million euros in 2007, up 22.6 percent year-on-year.

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

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.

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