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Monday, March 20, 2023

Venezuela plans stock sale apart from socialist model

by Regina Garcia Cano | The Associated Press

CARACAS, Venezuela — The Venezuelan government is seeking private investors to pump money into vital but crippled state-run companies decades after they seized them in the name of socialism.

The government on Monday intends to offer 5% to 10% stake in companies ranging from telephone and internet service providers to petrochemical makers. In another country, those industries may be attractive targets for investors, but the question remains as to who would be willing or able to take a minority position in Venezuelan companies that have suffered from years of neglect and mismanagement.

Adding to the mystery is the lack of details provided by the government about the sale, including what price it is seeking for shares in the companies and on which stock exchange they can be listed. Some are speculating that the move could be the first step towards returning the companies to private hands.

“We need capital to grow all public companies,” Maduro said during a televised program on Wednesday. “We need technology. We need new markets, and we’re going to move forward.”

It is a marked departure from Maduro’s predecessor, the late President Hugo Chávez, who nationalized several companies in his bid to transform the South American country into a socialist state. Among the companies Maduro mentioned are CANTV and its subsidiary Movilnet, petrochemical manufacturer Petroquimica de Venezuela, and a group focused in the mining sector.

Interest, however, may be limited to investors with ties to the government or those with a risk appetite.

The country is still subject to economic sanctions imposed by the US and other countries that prevent investors from being able to invest money in Venezuelan state-owned companies. And the percentage that Maduro announced would not give private investors the decision-making power to make much-needed changes within corporations.

At the turn of the century, Chavez made several acquisitions in the power, telecommunications, natural gas and oil sectors. But the government has made minimal investment in some of these companies, which has stopped providing them substandard services.

It is common for the entire country to have power outages throughout the day. Lakhs of homes either have no water or the service is running intermittently. Internet and phone services are lacking.

Supporters and opponents of the government alike complain about poor basic services across the country, even when elections are not near. But economists point out that Venezuela’s government needs to reform some of those services, even if it is slightly ahead of the 2024 presidential election.

“There is no doubt that we are witnessing a change that is largely forced by circumstances, but also largely driven by political survival,” said Luis Prato, senior economist at the firm Torino Capital. “From June 2014, with this significant drop in oil prices, the Maduro administration began to see a decline in oil revenues. Then, we went through a period of price control, from 2014 to 2019, of a more interventionist situation.”

But as the state lost its ability to generate wealth and growth, Prato said, “it began to make room for private sector participation.”

Venezuela is still in a protracted social, economic and humanitarian crisis, attributed to falling oil prices, economic sanctions and two decades of mismanagement by socialist governments. But the government has taken steps to relieve some of the economic pressure, including abandoning its long and complicated efforts to restrict transactions in US dollars in favor of the local bolivar, whose value has been depleted by inflation.

Some of the CANTV shares have long been traded on the country’s oldest exchange, the Stock Exchange of Caracas. During this week’s announcement, Maduro said state-owned companies would be listed on the country’s “various stock exchanges” without specifying.

But as of Friday, the chairman of the Stock Exchange of Caracas, Gustavo Pulido, had not received any information about the planned stock sale. He said the process of registering and eventually listing other companies is lengthy and requires disclosure of financial documents.

“It takes as long as you want to make a placement successful. I can’t tell you a certain amount of time,” Pulido said, noting that an offering on Caracas’ stock exchange may not be structured until Monday.

The government set up its own exchange in 2010. A government spokesperson did not respond to a request for comment from the Associated Press about the exchanges it intends to use.

Prato said the government is likely to use its own exchange or a separate digital system for now, but that this will have limited consequences.

Henkel García, director of Caracas-based firm Econometrica, said companies needed significant investments to improve the quality of their services, which were much better before nationalization. But he cautioned that the country lacks a mechanism to oversee the accounting and financial reporting processes of companies, which makes it impossible to guarantee that private investment in state companies will be spent appropriately.

The missing component, he said, creates a scenario similar to the post-Soviet reforms in which a large number of state-owned companies were privatized.

World Nation News Desk
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