Chavez nationalises Banco de Venezuela

Original source:

President Hugo Chavez has made a great leap towards increasing democratic control over the economy by nationalising Venezuela's third-largest bank.

The government took over Banco de Venezuela after agreeing to pay Spanish privateer Grupo Santander more than $1 billion (£612m) for its subsidiary.

The purchase makes the state by far the largest player in Venezuela's banking system, owning one-fifth of all bank deposits.

Mr Chavez has spent about $23 billion (£14.1bn) in the past two years nationalising telecommunications, electricity, steel, oil and other companies.

His push into banking will reinforce the government's increasingly dominant role in the economy.

The banking sector is already highly regulated, with the government setting interest rates and commissions.

The government of Mr Chavez will now be able to 'indirectly regulate prices and market strategies,' said Leonardo Vera, an economist and professor at Venezuela's Central University.

In taking over Banco de Venezuela, Mr Chavez is bringing an institution that was privatised in 1996 back under democratic control.

When Santander agreed to the sale in May, Banco de Venezuela had 3.2 million clients, 10 per cent of the country's deposits and 6,000 employees.

Combined with other state banks, the government will now control about 21 per cent of deposits and 16 per cent of loans, a payroll of 15,000 employees and 651 bank branches.

Mr Chavez has made it a pillar of his socialist programme to nationalise businesses in 'strategic sectors' of the economy to ensure that they are run for the benefit of all Venezuelans.

In the past, he has also seized oil projects previously run by private companies.

And Mr Chavez has introduced a series of progressive economic measures such as exchange and price controls.

The government, with support from the predominantly pro-Chavez National Assembly, has approved some 150 new laws and economic regulations since 2001.