terça-feira, maio 08, 2007

209) Venezuela again: uma analise do The Economist Intelligence Unit

Venezuela politics: Threats and bluster
May 7th 2007

It should come as no surprise that Venezuela’s president, Hugo Chávez, is again threatening private companies with takeover by the state. Emboldened by his landslide December 2006 re-election, he has moved to put additional sectors of the economy under state control. This is line with his goal of implementing his vision of socialism by increasing state authority over key parts of the economy. It is also designed to enhance his own already formidable power.
Just one month after his re-election, Mr Chávez shocked the market by declaring the energy and telecommunications sectors to be “strategic” and therefore subject to nationalisation. Within weeks of the announcement, the government had acquired controlling stakes in both CANTV (Venezuela's largest telecoms company, privatised in the early 1990s) and Electricidad de Caracas (EDC, a private electricity company), buying out US companies in both cases.
Most recently, in early May, he fulfilled a promise to a seize majority equity share and operational control of four heavy-oil joint ventures in the Orinoco oil basin. These were previously controlled by six foreign companies: US-based ConocoPhillips, Chevron and Exxon Mobil, along with the UK’s BP, Norway’s Statoil and France’s Total.
Threats to banks
Facing no significant opposition—indeed opposition political parties remain weak and Mr Chávez’s approval ratings are high—he has now laid his eyes on a foreign-controlled steel maker, Siderúrgica del Orinoco (Sidor), and the banking industry. In the case of Sidor, Mr Chávez has ordered the company to cease exports until it has met the needs of the domestic market, and has threatened to nationalise the company if it resists. Sidor is controlled by the Argentina-based Techint Group.
Mr Chávez has long tried to strong-arm financial institutions in the country, dictating, for example, that a share of their loan portfolios should go to priority sectors such as agriculture, small business and tourism. Now he wants banks to agree to lend to domestic industries at low interest rates. He has warned them that he could take them over, too, if they don’t comply.
It may be difficult for banks to protest or resist, especially since they have registered strong profit growth—up 33% in 2006—thanks to booming domestic credit demand amid fast-paced economic expansion (averaging more than 12% in the last three years). Even short of nationalisation, the government is said to be contemplating other reforms to the sector, which might include a cap on bank profits (with the excess going to social development projects), and further direct control over the setting of interest rates and the allocation of credit.
Free hand
Should the president decide to take such steps against Sidor or the banks, this would be facilitated by special decree powers that the National Assembly granted him in January. For a period of 18 months thereafter, Mr Chávez is empowered to issue decrees in 11 key areas without having to seek legislative approval. In any case, there is little risk that he would not get lawmakers’ authorisation, as the National Assembly is completely controlled by Chávez loyalists (the opposition boycotted the last legislative elections, leaving it with no presence in the body). The decree powers, therefore, serve only to give Mr Chávez the ability to move quicker.
Nationalisation of Sidor or the banks is not likely to be imminent, however. For one, Sidor is controlled by an Argentinian company, and Mr Chávez retains good relations with Argentina’s president, Néstor Kirchner. Moreover, the government already has much to absorb with the takeover of the phone and electricity companies, as well as operational control of the Orinoco oil ventures. It must reimburse the foreign companies for their seized assets as well as take over their debt obligations. The cost of this could be as much as US$10bn for the oil companies alone, according to some estimates.
Money to burn?
With a windfall in oil export income in recent years—oil brought in nearly US$59bn in 2006—and bulging foreign reserves, the Chávez administration has funds to spare. However, when combined with its other spending obligations, especially costly social programmes and subsidies, this will put further pressure on an already widening budget deficit. The deficit was equivalent to 1.8% of GDP in 2006, and the Economist Intelligence Unit projects it will grow to 4.9% of GDP this year. (The true fiscal picture is worse, because some spending is channelled off-budget via the state-owned oil company and the national development fund.) GDP growth itself is slowing—to 5.8% this year and 3.2% in 2008, according to our forecasts.
The radicalisation of policy under Mr Chávez, combined with signs of growing strains on the economy—evidenced not only in the deterioration of public finances and slowing growth but also persistent double-digit inflation, the highest rate in Latin America—are generating more fears among investors. The Caracas stock exchange index has been declining in recent days. Private direct investment has also declining for several years, and this trend is apt to be exacerbated since January. Foreign direct investment was negative last year. The reduction in investment will further lower GDP growth over the medium term.
In addition, the premium paid for the dollar on the black market has been climbing, with the bolívar weakening to around Bs3,950:US$1 (compared with a fixed official rate of Bs2,150:US$1), near to the low point in January of around Bs4,000:US$1. This will increase pressure on the government to devalue the official rate, although it will be reluctant to do so, given an annual inflation rate nearing 20%.
Political risks rise
Despite these negative trends, there are few obstacles to the government’s current policy mix—given its complete control of the legislature and significant influence over weak and politicised institutions. However, the government determination to radicalise its economic programme has the potential to destabilise the political environment, by provoking renewed objections from the opposition political class and also some discontent among more moderate or pragmatic members of the broad pro-Chávez coalition. With no presence in the legislature and little confidence in the impartiality of institutions, the opposition will express its discontent with the direction of economic policy via public demonstrations, keeping the risk of unrest high.
A deteriorating security environment will heighten tensions further, while a lack of checks and balances will raise the risk of heightened corruption and mismanagement, particularly in the context of the current huge expansion in public investment programmes. These risks do not present a challenge to Mr Chávez as yet, but could do so in the medium term. In particular, failure to deliver on issues such as crime, corruption, housing and inflation will eventually erode support for the government.

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