Venezuela plans stock sale in break from socialist model
CARACAS, Venezuela — Venezuela’s government is seeking private investors to pump funds into vital but crippled state-run companies, decades after seizing them in the name of socialism.
” We need capital to develop all public companies,” Maduro stated during a Wednesday televised event. “We need technology. We need new markets, and we are going to move forward.”
It’s a marked departure from Maduro’s predecessor, the late President Hugo Chavez, who nationalized many companies in his bid to transform the South American country into a socialist state. Maduro listed CANTV and its subsidiary Movilnet as well as Petroquimica de Venezuela, a petrochemical producer and a conglomerate that is focused on the mining sector.
Interest, however, may be limited to investors with ties to the government or those with an appetite for risk.
Venezuela is still subject to economic sanctions from the U.S. and other nations that prevent investors from funneling money to Venezuela’s state-owned businesses. The percentages Maduro announced wouldn’t give private investors the ability to make necessary changes within the corporations.
Chavez had a series takeovers in electricity, telecommunications and oil sectors at the turn of this century. The government made minimal investments in some of these companies, leaving them with substandard services.
Days-long power outages are common across the country. Millions of households are without water or have intermittent access to the service. Internet and phone services are poor.
” We are witnessing a paradigm shift that is largely driven by the circumstances, but also fueled by political survival,” Luis Prato (senior economist at Torino Capital) said. “Since June 2014, with this significant drop in oil prices, the Maduro administration began to see a drop in oil revenues. Then, we went through a period from 2014 to 2019 of price controls, of a more intervening state. ”
But as the state lost the ability to generate wealth and growth, Prato said, ”it began to make room for participation of the private sector.”
Venezuela is still under a protracted social, economic and humanitarian crisis credited to plummeting oil prices, economic sanctions and two decades of mismanagement by socialist governments. The government has taken steps to alleviate some of the economic pressures. This includes giving up its lengthy and complex efforts to limit transactions in U.S. Dollars in favor of local bolivar, whose value was obliterated due to inflation.
CANTV shares have traded for years on the Stock Exchange of Caracas (the country’s oldest) exchange. Maduro announced this week that the country’s state-owned companies would be listed on the country’s “various stocks exchanges”, without specifying.
But Gustavo Pulido (president of the Stock Exchange of Caracas) had not received any information about the planned stock sales as of Friday. He explained that the process of registering other companies and listing them eventually takes a long time and requires disclosure of financial documents.
” It takes as long to make the placement a success as you want. Pulido stated that he couldn’t give a time frame and added that it was impossible to structure an offering on the Stock Exchange of Caracas by Monday.
The government established its own exchange in 2010. A spokesperson for the government did not respond to a request from The Associated Press to comment on the exchanges it plans to use.
Prato stated that the government will likely use its own digital exchange or a separate one for now, but that it would only have limited results.
Henkel Garcia, director of Econometrica in Caracas, stated that the companies need significant investments to improve their services. They were much better before being nationalized. He warned that the country does not have a mechanism to monitor the financial reporting and accounting procedures of the companies. This makes it impossible to ensure that private investment in state-owned companies is properly spent.
This missing component creates a scenario similar to post-Soviet Reforms, in which many state-owned businesses were privatized.
“If it is the beginning of the total sales or the total handing-over of these companies, which I believe is a likely scenario, one would need to ask who they would be handed to because there have been episodes like the Russian one in which companies that were once owned by the state ended up in private hands. “So, it is a complex phenomenon that one could say opens the door to something positive, but with the institutional weakness that we have and with the lack of credible referees, well, it might not end in the best way.”
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