The upcoming Socialist Republic of Venezuela

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First thing I saw in this morning’s news: BBC News video of Chavez’s thoroughly expected announcement, “We’re heading towards socialism”

“We’re heading toward socialism, and nothing and no-one can prevent it.”

Curiously, the BBC reporter, Daniel Schweimler, was in Buenos Aires. According to this chart Caracas is 3,168 miles from Buenos Aires. I’m in the New York City area, some 2,100 miles from Caracas, which means this blogger’s nearer to Caracas than the Beeb reporter.

The BBC article reads,

His calls for nationalisation appeared in particular to affect Electricidad de Caracas, which is currently owned by US firm AES, and CA Nacional Telefonos de Venezuela (CANTV), the country’s largest publicly traded company.

The effect was immediate (emphasis added): Chavez’s Nationalization Plans Rock Venezuela Markets

Venezuelan President Hugo Chavez’s plans to nationalize the country’s largest phone company and utilities, gain greater control over the oil industry and seek authority to make laws by executive order are sending investors racing for the exits.

U.S.-traded shares of CA Nacional Telefonos de Venezuela plunged 14 percent yesterday and the currency fell 17 percent after Chavez unveiled his plans for the company, and the nation, in a televised speech. Traders braced for the likelihood of additional shock waves today: Cantv has the second-heaviest weighting in the Caracas Stock Exchange Index, which more than doubled last year and gained an additional 19 percent this month before yesterday.

Chavez signaled his ambition to remake the oil-rich nation along socialist lines both before and since his Dec. 3 re- election. Even so, the sweep of his plans — which include stripping the central bank of its autonomy and possibly nationalizing heavy-oil joint ventures in the Orinoco region — went beyond what many anticipated.

I can’t imagine how anyone could not have anticipated this. I’ve been banging the drum, so to speak, for over two years. Anyone following the Venezuelan economy closely must have been able to see it coming. As you can see from that link, other countries in Latin America were aware of the situation.

“Chavez seems bent on modeling Venezuela after the old Soviet economy, where the state controls everything,” said Robert Bottome, an analyst with Veneconomia, a Caracas-based research company. “If his intentions weren’t clear before, they are now.”

Chavez’s intentions all along have been very clear: consolidating power around himself.

My friend Daniel has a post on What Venezuelans voted for: socialism of the XXI century (a.k.a. rehashed communism)

In what seems to be unstoppable, Venezuela Real blog is reporting that the case of Chavez’s closing RCTV television network in Venezuela will be sent to the Organization of American States as a violation of freedom of speech. The article, in Spanish: Caso RCTV con condiciones para ser llevado a la OEA. In his latest speech, Chavez scorned the OAS Secretary General:

In the fiery address, the president also used a vulgar word roughly meaning “idiot” to refer to Organization of American States Secretary – General Jose Miguel Insulza. He lashed out at Insulza for questioning his government’s decision not to renew the license of an opposition- aligned TV station.

Carlos Alberto Montaner explains how Chávez used to muzzle his foes

Hugo Chávez intends to shut down Radio Caracas Televisión. He won’t renew its license. The reason alleged by the government is that the company supported the muddled coup d’etat of April 2002.

But that’s not true. Col. Francisco Arias Cérdenas backed the coup passionately, as anyone who takes the trouble to find the video with his statements on YouTube can see, yet Chávez appointed him ambassador to the United Nations.

What Chávez rewards or punishes is the degree of submission to his exalted person. He acts not on principles but on strategic calculations. If you kneel, he’ll bedeck you with honors and even make you rich. If you oppose him, he’ll destroy you. It’s the ”silver or lead” proposition of South American drug lords elevated to state policy.

Of course, Montaner’s article was written before President Chávez announced plans Monday to nationalize electrical and telecommunications companies. Now the game has new rules.

What comes next for Venezuela? This:

• Venezuela’s private economy will disappear as we know it.
• in the next 14 years parts of the economy will simply vanish. “Private health care and private education will be first in line to be scrapped by the government as part of its drive towards socialism,” said Mr Garrido.
• The whole country will be geared towards the motto: one leader – one party – one ideology,” he added
• Venezuela is also trying to substitute the US with China as its number one commercial partner

The article also says,

senior Venezuelan diplomats privately admitted they could envisage a completely different relationship with a Democrat in the White House, particularly with somebody from the Clinton family

Remember that, too.

Update: After reading the WaPo, Blue Crab Boulevard notices how Chavez has also purged loyalists from his administration,

The people he has removed from power are ones that had actual name recognition with within Venezuela and internationally.

Further round-up and insightful analysis at Publius Pundit, including Goldman Sachs’s grim assessments.

Update 2: XXI Century Socialism according to Hugo Chavez
Just another day in the fake revolution!

Lest there are any remaining doubts, Chavez specifically said,

On Monday, Chavez openly referred to himself and his former vice president, Jose Vicente Rangel, as “communists” and said those who wanted to understand his proposed ‘”21st century socialism” should look at the works of Marx and Lenin, as well as the Bible.

He ended his speech with the call Fidel Castro used to wind up his speeches throughout his nearly five decades in power: “Patria o Muerte, Venceremos — Fatherland or Death, We will triumph!”

Any questions?

Update 3 I received an email asking, did he really say “socialist republic of Venezuela?” The answer is categorically yes:

“We’re moving toward a socialist republic of Venezuela, and that requires a deep reform of our national constitution,” Chavez said in a televised address after swearing in his new Cabinet. “We are in an existential moment of Venezuelan life. We’re heading toward socialism, and nothing and no one can prevent it.”

Today’s stockmarket close update: The OPEC nation’s stock market lost almost a fifth of its value, debt prices tumbled to a six-week low and the currency changed hands at nearly twice the official exchange rate.
…
FIFTH OF STOCK MARKET WIPED OUT:

Chavez’s remarks sliced 19 percent off the value of the Caracas stock exchange leading index IBC
…
Currency traders said the local bolivar currency, officially pegged at 2,150 bolivars to the dollar, was now changing hands at more than 4,100 to the dollar

[As I posted last year, Iran and Venezuela joined forces to undermine the U.S. dollar. Read about Iran’s oil production problems (h/t: Pajamas Media).]

Bloomberg reports that Venezuelan stocks had their biggest drop on record and bonds tumbled after President Hugo Chavez pledged to nationalize the country’s largest phone company and utilities

A drop to an 18-month low in the price of oil, Venezuela’s biggest export, added to declines in the country’s stocks and bonds. Crude oil for February delivery fell 45 cents, or 0.8 percent, to $55.64 a barrel on the New York Mercantile Exchange, the lowest close since June 15, 2005.
…
The yield on the 6.25 percent so-called Interest and Principal Protected bonds, due April 2017, fell to 3.99 percent from 4.02 percent yesterday, according to Banco Bilbao Vizcaya Argentaria SA. The price, which moves inversely to the yield, rose to 119, the highest in three weeks. The TICC. which is dollar-denominated and traded in the local market, offers currency protection.

An index of Venezuelan American depositary receipts fell 35 percent.
…
The possible nationalization of Cantv may deprive Venezuelans of a means to withdraw money from the country. Since 2003, investors realized they could legally acquire dollars by buying the company’s local shares, converting them into ADRs and selling them abroad.

“Portfolio investors should try to find an exit,” said said Richard Segal, head of research at Argonaftis Capital Management in London.

January 10, Follow-up post Aftermath.
Thursday, 11 January Oil prices drop