By REGINA GARCIA CANO, Associated Press
CARACAS, Venezuela (AP) — 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.
The government on Monday intends to offer 5% to 10% stakes in companies ranging from telephone and internet service providers to a petrochemical producer. In another country, those industries might be attractive targets for investors, but questions remain as to who would be willing or able to take a minority position in the Venezuelan companies that have suffered from years of neglect and mismanagement.
Adding to the mystery is lack of details provided by the government about the sale, including what price it is seeking for shares in the companies and on what stock market they might be listed. Some are speculating the move could be a first step toward returning the companies to private hands.
“We need capital for the development of all public companies,” Maduro said during a televised event Wednesday. “We need technology. We need new markets, and we are going to move forward.”
Political Cartoons on World Leaders
It’s a marked departure from Maduro’s predecessor, the late President Hugo Chávez, who nationalized many companies in his bid to transform the South American country into a socialist state. Among the companies Maduro mentioned are CANTV and its subsidiary Movilnet, petrochemical producer Petroquimica de Venezuela and a conglomerate focused in the mining sector.
Interest, however, may be limited to investors with ties to the government or those with an appetite for risk.
The country is still under economic sanctions imposed by the US and other countries that prevent investors from being able to funnel money to Venezuela’s state-owned companies. And the percentages Maduro announced would not give private investors decision-making powers to undertake much-needed changes within the corporations.
At the turn of the century, Chávez carried out a series of takeovers in the electricity, telecommunications, natural gas and oil sectors. But the government made minimum investments in some of these companies, which have left them providing substandard services.
Day-long power outages are common across the country. Millions of households either do not have access to water or the service is intermittent. Internet and phone services are deficient.
Government supporters and opponents alike complain about poor basic services across the country even if an election is not approaching. But economists point out that Venezuela’s government needs to improve some of those services even if it is slightly ahead of the 2024 presidential election.
“We are no doubt seeing a paradigm shift that is largely forced by the circumstances but also largely fueled by political survival,” Luis Prato, senior economist with the firm Torino Capital. “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. But the government has taken steps to relieve some of the economic pressures, including by giving up its long and complicated efforts to restrict transactions in US dollars in favor of the local bolivar, whose value has been obliterated by inflation.
Some shares of CANTV have long traded on the Stock Exchange of Caracas, the country’s oldest exchange. Maduro during this week’s announcement said the state-owned companies would be listed in the country’s “various stock exchanges” without specifying.
But by Friday, Gustavo Pulido, president of the Stock Exchange of Caracas, had not received any information on the planned stock sales. He said the process to register the other companies and eventually list them is lengthy and requires the disclosure of financial documents.
“It takes as long as you want to take to make the placement successful. I couldn’t tell you a certain time,” Pulido said, adding that an offering on the Stock Exchange of Caracas could not be structured by Monday.
The government established its own exchange in 2010. A government spokesman did not respond to a request for comment from The Associated Press regarding the exchanges it intends to use.
Prato said the government is likely to use its own exchange or a separate digital system for now but that it would have limited results.
Henkel Garcia, director of the Caracas-based firm Econometrica, said the companies require significant investments to improve the quality of their services, which were much better before they were nationalized. But he warned that the country lacks a mechanism to oversee the accounting and financial reporting procedures of the companies, making it impossible to guarantee the private investment in the state companies would be appropriately spent.
That missing component, he said, creates a scenario similar to post-Soviet reforms in which a large number of state-owned companies were privatized.
“If this really is the beginning of the total sale or the total handing over of these companies, which for me is a probable scenario, one would have to ask to whom they would be handed over because we have episodes like the Russian one, in which these companies that once belonged to the state ended up in the hands of people who were close to the government,” Henkel said. “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.”
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.