Venezuela plans to break socialist model to sell stocks

CARACAS, Venezuela (AP) — The Venezuelan government is seeking private investors to pump money into vital but paralyzed state-run companies, taking them decades later in the name of socialism.

On Monday, the government intends to offer 5% to 10% stakes in companies ranging from telephone and internet service providers to petrochemical producers. In another country, these industries may be attractive targets for investors, but the question remains of who is willing or able to take a minority among Venezuelan companies that have suffered for years of neglect and mismanagement.

Even more puzzling, the government did not provide details about the sale, including the price it sought for the companies’ shares and which stock market they might be listed on. Some have speculated that the move could be the first step in getting the companies back into private hands.

“We need capital to develop all listed companies,” Maduro said at a televised event on Wednesday. “We need technology. We need new markets, and we’ll keep going.”

That’s a sharp departure from Maduro’s predecessor, the late President Hugo Chavez, who nationalized many companies to transform the South American country into a socialist state. The companies mentioned by Maduro include CANTV and its subsidiary Movilnet, petrochemical producer Petroquimica de Venezuela and a conglomerate focused on the mining industry.

However, interest may be limited to investors with government ties or risk appetite.

The country remains subject to economic sanctions imposed by the United States and other countries that prevent investors from funding Venezuela’s state-owned companies. The percentages announced by Maduro will not give private investors decision-making power to make much-needed changes within the company.

At the turn of the century, Chavez made a series of acquisitions in the power, telecommunications, gas and oil industries. But the government has made minimal investments in some of these companies, making the services they provide substandard.

Day-long power outages are common across the country. Millions of households either lack access to water or have intermittent service. Inadequate internet and telephone service.

Both government supporters and opponents have complained about poor basic services across the country, even when elections aren’t looming. But economists point out that the Venezuelan government needs to improve some of those services, even if it comes slightly ahead of the 2024 presidential election.

Luis Prato, senior economist at Turin Capital, said: “There is no doubt that we are seeing a paradigm shift that is largely forced by circumstances, but in a very It’s also largely driven by political survival.” “Since June 2014, as oil prices fell sharply, the Maduro government started to see oil revenues fall. Then we experienced price controls from 2014 to 2019. It’s a more intrusive state.”

But as the country loses its ability to create wealth and grow, Prato said, “it’s starting to make room for private sector participation.”

Venezuela remains in the midst of a protracted social, economic and humanitarian crisis, attributed to plunging oil prices, economic sanctions and 20 years of mismanagement by a socialist government. But the government has taken steps to ease some of the economic strain, including abandoning long-standing and complex efforts to limit dollar trading in favor of the local bolívar, which has been devalued by inflation.

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

But as of Friday, Gustavo Pulido, president of the Caracas Stock Exchange, had not received any information about the planned sale of the shares. He said the process of registering other companies and eventually taking them public was lengthy and required disclosure of financial documents.

“As long as you want to be successful, it takes a long time. I can’t tell you exactly when,” Pulido said, adding that the offering on the Caracas Stock Exchange would not be available until Monday.

The government established its own exchange in 2010. A government spokesman did not respond to The Associated Press’ request for comment on the exchange it intends to use.

Prato said the government could currently use its own exchange or a separate digital system, but with limited success.

Henkel Garcia, director of Caracas-based Econometrica, said the companies needed a lot of investment to improve service quality, which was much better before nationalization. But he warned that the country lacks a mechanism to oversee companies’ accounting and financial reporting procedures and cannot guarantee that private investment in state-owned enterprises is being used appropriately.

That missing piece, he said, created a scenario akin to post-Soviet reforms, in which large numbers of state-owned enterprises were privatized.

“If this is really the beginning of a sale or handover of all these companies, which is a possible scenario for me, then people will have to ask who they’re going to hand over because we have plots like Russia, where These companies that once belonged to the state ended up in the hands of people with close ties to the government,” Henkel said. “So it’s a complex phenomenon that arguably opens the door to something positive, but with our institutional weaknesses and lack of credible referees, well, it may not end in the best possible way.”

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