Chavez Continues Nationalization Drive

A year ago, after completing the takeover of the last privately owned oil fields, Hugo Chavez threatened to nationalize Venezuela's banks. Now he's making good on this threat.

Last Thursday, Chavez announced he was nationalizing Banco de Venezuela, a subsidiary of Spain's Banco de Santander. Banco de Venezuela is the country's third-largest bank.

While accounting for only a small fraction of Banco de Santander's profits, Banco de Venezuela -- which had been privatized a few years ago -- is Venezuela's fourth-largest lender. It owns a network of branches that Chavez can use for politically motivated loans and for distributing welfare payments and cash subsidies to his core constituency: the Venezuelan poor. It gives Chavez an important means for the (re)distribution of wealth and widening the state control over the financial services industry.

With its name, Banco de Venezuela also brings a nationalistic pride into the picture, even though the Venezuelan government owns other banks.

Chavez claims that the government will buy the bank. He didn't specify for how much, but said he had decided to buy Banco de Venezuela after Banco de Santander asked for permission to sell it to a local finance group. The price may be as high as $1.9 billion. International analysts believe it is unlikely that Chavez would take over more financial institutions.

The news of the Banco de Venezuela nationalization brought about a brief run on bank deposits, and Venezuelan bonds dropped.

But the bigger news, which mostly went unnoticed in the American media, was that on July 31, Chavez also enacted 26 new laws, announced only by their titles -- not their text -- in the official bulletin La Gaceta. Caracas's El Universal reported that (my translation):

The content of the new laws is unknown, since La Gaceta only specifies the name of each decree.

The laws were enacted under the special powers of the Enabling Law: as I explained in my Pajamas Media article last year, the Enabling Law gave Chavez full powers to rule by edict. It has been in effect since January 2007, and expired on July 31, 2008. Chavez attempted to make the Enabling Law permanent but was defeated in last December's referendum.

Rather than desist in his efforts to accumulate power, he has continued to turn Venezuela into a Communist country, one step at a time. Chavez enacted the 26 laws without consulting with the legislature, which he controls.