CNBC Reports: Chavez to Nationalize Phone Co.'s...Verizon Stock

[KoKo]

Aparently a few other US Companies who own stock in Venezuela's phone companies are also tanking. CNBC Reporter said "Hugo's Socialist Programs" to cut out American Companies and said the stocks were being hit. :sarcasm: (edited to add sarcasm because reporter was breathless about Verizon getting hit along with the other stocks invested there and apparently Verizon is okay according to a poster on this thread).

Also reported that Chavez will nationalize the Oil from the Orinoco River which cuts out ALL the major Oil Companies.


EDIT to Add from Bloomberg:


Chavez May Nationalize Venezuela Phone, Oil Companies (Update5)

Currency, Shares Plunge

The currency, pegged to the U.S. dollar at a rate of 2,150 bolivars, posted its biggest plunge in unregulated trading since at least 2004 on the president's remarks, falling to 4,062 bolivars to the dollar. The currency shed 54 percent in the past six months.

Trading of Cantv's American depositary receipts was halted after Chavez spoke. Cantv fell 14.2 percent to $16.84 in New York when trading was halted at 3:04 p.m. New York time. The company's local Class D shares rose 0.8 percent to 9.780 bolivars in Caracas, where trading ended before the speech. Each ADR is equal to seven Class D shares.

``What was surprising is that for the first time he named a specific company. It was frightening,'' said Richard La Rosa, a stock trader with Activalores Casa de Bolsa CA. ``The question is, how are we going to be compensated? No one doubts Chavez's intentions at this point.''

Cantv was state-owned until 1991, when it was partially sold to a group of investors led by GTE Corp. The company lost its monopoly on fixed-line and long distance services in 2000. Today it sells Internet, voice, data transmission, fixed-line and wireless services. The company's subscribers jumped 69 percent in the 12 months ended in September.

Verizon, Carlos Slim Cantv said in a statement that it is aware of the nationalization plan and that the government hasn't contacted the company yet. Verizon Communications Inc. is seeking to offload its 28.5 stake in Cantv to America Movil SA, Latin America's largest wireless carrier, as part of a purchase agreement signed last year.

[Malikshah]

1. OMG-- it's 1956 all over again.... :)

Gamal Abdel Chavez this time.

Where's Anthony Eden chewing his liver? ;)

[frylock]

11. lol!

Too funny. I just finished Donald Neff's 'Warriors at Suez'.

[Viva_La_Revolution]

2. bummer for them...

Viva Chavez!

[KoKo]

9. Agree....and the US used to have "Utilities Regulation."

But, we will have screams of Socialism...Invade Venezuala!" soon from the Bush Co's and some Dems.

[peacetalksforall]

15. Are you sure we should be shouting - though we know that

trickle down doesn't work - the money stays at the top with the wealthy - these moves might hit those of us at the bottom with a severe blow and move more from the middle down with hardly a trickle up affect to the very rich.

Where does one get a good opinion that is not from right wing corporate war manufacturer tv?

[crikkett]

16. Don't worry, Chavez will make it better by selling you oil for cheap.

:hi:

[xchrom]

3. CHAOS -- MAYHEM --

meh -- not so much.

they'll get used to it -- and go screw some other country.

[zanne]

5. True.

They're nothing if not adaptable.

[endarkenment]

4. Cue anti-chavez crowd:

1, 2, 3 ...

[Robbien]

6. No wonder BushCo hates Chavez.

Chavez isn't letting the rich elite jackels feed off the Venezuelan people.

[Future Principal]

7. good. I've been screaming for public ownership of utilities for years

but you see, i'm a bernie sanders type of guy.

[wtmusic]

10. It's getting harder and harder for the Ken Lay types to make a buck

:nopity:

[roamer65]

8. Bravo Hugo!

Good on 'ya.

[Mika]

12. OMG! Investors will have to look elsewhere to screw someone. n/t

[Junkdrawer]

13. CNN has the stock up $0.43 ....

http://money.cnn.com/quote/quote.html?pg=qu&sid=182435&symb=VZ&time=1dy&uf=0

[crikkett]

17. Yeah, I don't see anything tanking

unless it's in another market...

[KoKo]

18. It's what the CNBC Reporter was "breathlessly" announcing and I should

have put a :sarcasm: thingy there so that folks would understand. The reporter was acting like it was the end of the world for American Companies and Globilization that Chavez was doing this to Verizon, AES and one other company that I didn't write down.

Thanks for posting...

[KoKo]

23. Here's a link from Bloomberg News about it.........

Chavez May Nationalize Venezuela Phone, Oil Companies (Update5)

Currency, Shares Plunge

The currency, pegged to the U.S. dollar at a rate of 2,150 bolivars, posted its biggest plunge in unregulated trading since at least 2004 on the president's remarks, falling to 4,062 bolivars to the dollar. The currency shed 54 percent in the past six months.

Trading of Cantv's American depositary receipts was halted after Chavez spoke. Cantv fell 14.2 percent to $16.84 in New York when trading was halted at 3:04 p.m. New York time. The company's local Class D shares rose 0.8 percent to 9.780 bolivars in Caracas, where trading ended before the speech. Each ADR is equal to seven Class D shares.

``What was surprising is that for the first time he named a specific company. It was frightening,'' said Richard La Rosa, a stock trader with Activalores Casa de Bolsa CA. ``The question is, how are we going to be compensated? No one doubts Chavez's intentions at this point.''

Cantv was state-owned until 1991, when it was partially sold to a group of investors led by GTE Corp. The company lost its monopoly on fixed-line and long distance services in 2000. Today it sells Internet, voice, data transmission, fixed-line and wireless services. The company's subscribers jumped 69 percent in the 12 months ended in September.

Verizon, Carlos Slim Cantv said in a statement that it is aware of the nationalization plan and that the government hasn't contacted the company yet. Verizon Communications Inc. is seeking to offload its 28.5 stake in Cantv to America Movil SA, Latin America's largest wireless carrier, as part of a purchase agreement signed last year.

[jsamuel]

14. He is going about this the wrong way.

According to what I heard on NPR, he is doing this be "decree" rather than by laws passed by the legislature. In other words, he is becoming a dictator, even though he was reelected.

[crikkett]

19. "decree" = "executive order" = "signing statement" ??

I mean, how many times does the man need to be reelected before he's not a dictator?

[LynnTheDem]

21. Until the US governemnt tells Americans he's not a dictator.

We the Sheeple.

[originalpckelly]

31. I don't approve of signing statements. Do you?

Why would you use them as a justification for Chavez in this case?

[ShaneGR]

45. Because for some people its ok to wield absolute executive power if you agree with them...

But not ok if you don't agree with them.

[crikkett]

65. Part of the democratic process and 1 example of exec's ability

to 'decree'

I don't like how signing statements have been abused, but they've been around since the beginning.

[HamdenRice]

75. First you have to figure out Venezuela's legal system

Just because he is doing it by decree doesn't mean it's dictatorial. The question is whether he is doing it consistent with Venezuelan law.

Not every country -- in fact precious few countries -- operate the way the US does. For example, you might be shocked and horrified by the power wielded by a British Prime Minister or any prime minister in a parliamentary system. Because a person only becomes PM by gaining a majority in parliament, the PM is guaranteed that every law she/he proposes passes. In other words, PM's have virtually unlimited lawmaking power.

If the PM fails to pass a law it's because his party is in revolt and the government "falls" prematurely. In other words, if a PM fails to pass even one law, the government falls and new elections are called. Most Americans would be horrified by that kind of concentration of power.

In the US many "laws" are passed almost unilaterally by the executive branch, so long as they are called "regulations" or "rules" rather than "laws." After notice and hearing (which few attend except for lobbyists) most executive departments can pretty much write their own rules.

My understanding is that Venezuela adopted a constitution and certain enabling laws that granted Chavez quite extraordinary powers compared to previous presidents. The idea was to get around a calcified bureaucracy that served the interests of the rich.

I suspect that his "decrees" are perfectly legal under Venezuelan law, whatever you think of the wisdom of the policy.

[Missy M]

20. Perhaps Chavez is doing this for the good of the....

Venezuelan people. I wish it was the way in this country. I am tired of being screwed by the utilities. Also, he was elected and reelected by the people, in a fair election.

[jsamuel]

26. Doing good by becoming a dictator will hurt his country in the long run.

What happens when someone who isn't Chavez takes over? It will happen eventually. Then that person could reverse everything Chavez has done by "decree" as well. Then that dictator could rationalize everything by saying it has precedent.

[WinkyDink]

28. Just like Bush! Oh, wait; Bush was appointed, and Chavez was ELECTED.

The rich are so not with the game plan.

[jsamuel]

29. So were Hitler and Mussolini,being a dictator is about more than whether or not elections take place

Being able to make laws by decree after taking more and more power away from the legislature is one of the signs of a dictatorship. In this, Bush and Chavez are very similar. I would say Chavez's goals are much more noble, but that does not change the means.

[Missy M]

33. I hardly think nationalizing the utilities makes Chavez a dictator,...

if it is helping the people and they want it. Chavez is looking out for the interests of Venezuela, not American companies like Verizon, Exxon-Mobil, etc. I personally don't believe much of what NPR has to say anyway.

[originalpckelly]

34. May I ask how an undemocratic action will democratize the economy...

of Venezuela? Government is not solely about the ends, it is also about the means of achieving the ends.

[Missy M]

35. So you think the "undemocratic" action will not help the....

economy of Venezuela, whereas American companies running the utilities will democratize the economy. Will you please explain to me how Verizon helped the economy of Venezuela? When my daughter lived there it was a nightmare calling sometimes. Also, she was always losing electricity, water and such. Just because the companies were American or private doesn't mean they worked.

[originalpckelly]

38. Why couldn't he have worked with the legislature to pass a law...

which required Venezuelan ownership of such vital infrastructure?

[crikkett]

66. imagine paying what it actually costs to run a telephone service

An argument could be made that publicly owned utilities are more democratic than our privatized system here, which is a badly maintained network of monopolistic utilities who keep the entire population over a barrel.

And I mean over a barrel! Remember last winter when people only had a month's warning that the price of natural gas was going to be increased 150%? In 2000 when California had brown-outs, I read about how PG&E wanted to tax people who *didn't* buy their electricity because they went onto solar power or some other alternative. It's just fascist how bad it is.

[originalpckelly]

32. Absolute power will corrupt anyone, even those with the best intentions...

and I highly doubt Chavez had/has the best intentions.

Where are the checks and balances on his power?

[endarkenment]

41. Why do you think he has absolute power?

That seems to be an unsubstantiated assertion on your part.

By the way, none of the articles I read on this indicated how the nationalization would take place. How do you know it will not follow the defined legal process in Venezuela?

[WinkyDink]

61. What is your real concern? Chavez isn't sending peones to Guantanamo,

is he? He isn't invading anywhere; he isn't torturing; he isn't giving obscene tax breaks to the wealthy. And he isn't threatening the U.S.

Chavez is a man of the people, of the poor, and he aims to make their lives better NOW, not 10 years from now. If that's "wrong", it's still right, morally.

[endarkenment]

22. Having read several articles reporting this event

I conclude that the NPR story was making shit up or you misheard them. All the reports I've read contain exactly no details on the exact process by which the utilities will be re-nationalized (yes they seem to have been privitized at some point in the past.) This was simply an announcement by Chavez that he is going to proceed with the agenda he laid out prior to his re-election.

[jsamuel]

24. well, like I said, that information was based on the report by NPR

[Double T]

25. What a great idea...nationalize the countries utilities..............

so the damn monopolies can't manipulate the prices of the energy and services while emptying our wallets.

[EFerrari]

27. Adelante.

:kick:

[originalpckelly]

30. Will Chavez require warrants to wiretap people?

:shrug:

[Missy M]

36. Do we under the current administration?

Bush can also read my mail now.

[originalpckelly]

40. I see a problem with that, and I am trying to stop that...

because I believe it is fundamentally undemocratic to have no checks on power.

[endarkenment]

43. And you have now asserted a new abuse of power

by Chavez. Do you have any evidence that Chavez is doing this?

[Missy M]

46. I fully agree with you that there should be checks on power....

in every country, specially powers that affect the people and their rights. I also think there should be checks on the power of the mighty corporations and the wealthy behind them that inevitably run countries.

[originalpckelly]

51. You're so willing to excuse tyranny when it comes from someone you support...

it's not possible for one person to have that much power. People are inherently disgusting horrible creatures, I refer you to the history of the world if you don't trust me. Government is instituted amongst people in order to check that horrible side of humanity.

Where are the checks on Chavez's power?

[nolabels]

44. * makes it okay for others to do things that are beyond conventional

If someone gets enough negative energy attracted to them they too will eventually become negative in their reactions.
(see six plot synopsis of Star Wars movies for more simplistic explanation :+ )

[On the Road]

37. The Government Does the Right to Nationalize Industries

but the US tends not to recognize that right if US corporations are being taken over.

Chavez does need to pay fair compensation. I suspect that's going to be the critical issue.

[Missy M]

42. I agree Venezuela should pay fair compensation....

but bear in mind that much of the infrastructure was in when privatization took over.

[On the Road]

48. Oh, So The System Was Privatized?

I didn't know that. That makes it more reasonable to take it back under government control.

Now to be perfectly equitable, the same principles should be used for valuing the assets when they're nationalized as when they were privatized. For example, the previous sale price plus the value of new investment and increased customer growth. Corporations probably got a sweetheart deal on privatization and will probably howl, but fair's fair.

[endarkenment]

49. This fact is mentioned in passing in the articles I read.

And I agree that it puts this all under a different light.

[Vidar]

39. Booting American corporations is a great idea.

[Nederland]

47. In the long term this will screw them

While oil remains strong this will work, but in the long term this is a bad idea. Chavez just insured that Venezuela will be a pariah state for foreign investment for decades to come. In the long run, that will hurt the people much more than this temporary redistribution of wealth will help them.

[endarkenment]

50. Not really, or rather it depends.

We are talking about utilities that, for at least some of them, were privitized not too long ago, and there is no information about how the nationalization will work. If there is fair compensation I don't see why this will make Venezuela a pariah state. Also, there is no indication that their oil is running out any time soon, so for now at least, this pariah state theory is on hold.

[Nederland]

52. "Fair compensation"

The definition of "fair compensation" is a price that both parties will voluntarily agree to. If Chavez was willing to do that, why would he need to pass a law? He could simply sit down with the owners and negotiate a price...

[endarkenment]

53. We do this all the time here with eminent domain

and fair compensation in those cases are determined by the state and voluntary has nothing to do with it. Consider this an act of eminent domain. Now what's your problem? Are we a socialist dictatorship?

[Nederland]

54. I have a problem with eminent domain too

As I have a problem with any instance in which a government compels an individual to do something that they would not do of their own free will.

[endarkenment]

55. So we are a socialist dictatorship?

A pariah state? What?

You have to be pretty far out on the libertarian right to think that there is no justification for taking private property for the public good.

[Nederland]

57. No

There is a huge difference between a government giving a property owner market value for their property so they can build a library, and a government that seizes the assets of an company simply because they want to run it instead of the current owners. In the former case you are seeking a different use, in the later you are just shifting power.

[endarkenment]

56. How is this any different from eminent domain? nt.

[Nederland]

58. Here's how

Eminent domain seeks to use property in a different manner that its current use. Tearing down a house to build a library or a road for example. In this case, the use of the property is staying the same, its ownership is merely shifting hands.

[endarkenment]

59. That would be a distinction without a difference.

The common definition makes no such distinction.

Definitions of Eminent Domain on the Web:

The power to take private property for public use by the state or municipality with just compensation.
www.courts.mo.gov/osca/index.nsf/0/8b69295b674dde2186256e15004ea27f

The right of a government or municipal quasi-public body to acquire private property for public use. It is acquired through a court action called condemnation in which the court determines the use is a public use and decides the price or compensation to be paid to the owner.
www.officefinder.com/glossary.html

The power of the government to take private property for public use through condemnation.
courts.delaware.gov/How%20To/court%20proceedings/

A Government right to acquire private property for public use by condemnation, and the payment of just compensation.
www.prefmtg.com/terms.htm

http://www.google.com/search?hl=en&lr=&rls=com.microsoft:en-US&defl=en&q=define:Eminent+Domain&sa=X&oi=glossary_definition&ct=title

[Nederland]

60. Question

Do you own your own business?

[endarkenment]

62. Actually yes I do.

However my business is not a public utility such as the Venezuelan telephone system. Certainly by some stretch emininet domain could be used to take my business, and I would be upset, and would undobutedly feel that an injustice had been done. However it simply is not a stretch at all to see that there is a legitimate public good involved in a utility like telephone service, and that de-privitaztion is as proper a course of government action in this case as privitazation of this utility was when the right was running Venezuela.

[Nederland]

63. What type of business do you engage in? (nt)

[endarkenment]

67. Why would that be any of your business?

Or relevant to this discussion?

Did you have a point?

[Nederland]

68. This is why

You are arguing that the seizure of the phone companies and oil companies is justified given that those companies are "public utilities". First, oil has never fit the definition of a public good. Second, recent technological advances means that telecom services no longer fit the definition of a public good either. Therefore, I am wondering what business you engage in and why you believe that business does not fit the definition of a public good. What makes your business immune to the threat of government seizure? Why is it ok for the government to seize other people's businesses, but not yours?

[Selatius]

70. You're coming uncomfortably close to invoking the slippery slope argument

As it stands, most of Venezuela has no phone service. Most are too poor to afford it. That might actually be one reason to this situation.

The issue here is the nationalization of company X. We are not talking about Y, which here would refer to Endarkenment's business.

[Nederland]

71. Fair Enough

Let's drop the whole question of what business Endarkenment engages in. I was merely trying to establish that his opinion may be biased by the fact that his business would not be subject to seizure. However, I admit that the question of bias is not really the important issue here, so let's drop it.

What I am trying to get at is the criteria for seizing a company's assets. Endarkenment is claiming that seizure is justified because telecommunications and oil are public goods. They are not. Public goods refer to goods that are non-excludable as well as non-rival, and neither oil nor telecomunications fit those criteria.

[endarkenment]

72. Actually if I said that I misspoke.

"In the public good" is not the same as the strict economic definition of "a public good". Eminent domain is utilitarian: it operates in the public good even though it is to the detriment of those whose property is condemned. This encompasses a broad range of private property and is certainly not restricted to those things that are strict public goods.

At any rate, the Venezuelan telephone company was privitized not so long ago, so apparently it was in venezuela perfectly appropriate just recently for it to be owned and operated by the government, and there is no reason to believe that it is now somehow inappropriate for it to return to its former state. Which is to say, I do not see why these sorts of transactions to or from private status are acceptable one way only.

[Nederland]

73. Ok

Then I think we need to clarify what criteria you believe needs to be met in order for a company to be eligible for state seizure. How is "in the publics good" defined? Is it defined by the price at which a service is provided?

Let's look at the telcom aspect of this move, because that happens to be the industry in which I work and am most familiar with. If the argument for seizure is that state ownership will provide better prices or service, the argument for seizing the telecommunications company falls apart. The United States has a well regulated, but privately owned telecommunications infrastructure with lots of competition (IMHO, the best combination). Consequently it enjoys the lowest communication rates in the world. The time it takes to get a phone line and make calls in the US is far far lower than any country that has a state owned telecommunications system. Given that price and service is better when this type of infrastructure is state regulated but privately owned, what is Chavez's argument for seizure?

I suspect that both of these seizures were undertaken simply because both of these things will be excellent sources of revenue for the government. It all boils down to money in the end.

[endarkenment]

74. The united states' phone infrastructure got where it is today

because it was a government chartered monopoly for a very long time. Asserting that it was the free market that was responsible for this is to simply ignore the history. You should know better.

[Nederland]

78. Not true

When you say that the United States phone infrastructure got where it is today because it was a government chartered monopoly, you are flat out wrong. The United States phone infrastructure got where it is today because it was created by multiple companies competing with each other for customers. I say this because AT&T was broken up in 1984, and literally 99% percent of the telecommunications infrastructure the exists today post dates that break up. Again, the phone infrastructure got to where it is today as a result of private investment and a highly competitive environment, not as a result of the actions of a government sanctioned monopoly.

Yes, AT&T was a government regulated monopoly for years, and prices were high for years. Then the government realized (wisely) that technology changed the economies of scale and barriers to entry and it was broken up. As a result, prices declined drastically and service improved enormously--to the immense benefit of the American people. Any government or person that advocates a telecommunications monopoly given today's level of technology cannot possibly have the people's best interest at heart--they merely wish to get their hands on a huge revenue stream.

[Judi Lynn]

64. As already posted, in LBN, the enabling law has been used since Carlos Andres Perez' presidency

from 1974 to 1979. It's been in use ALREADY in Venezuela. Please see DU'er Say_What's thoughtfully provided background:

1. Enabling law (ley habilitante), which Chavez referred to as the “mother law” of the project. This law would allow Chavez, over the period of one year, to pass laws on specified issues as decrees. This type of law has been given to Venezuelan presidents on several occasions before, such as during the first presidency of Carlos Andrés Perez (1974-1979) and early in Chavez’s presidency, following the passage of the 1999 constitution, to bring the country’s laws up to date to the new constitution.

Chavez said that part of this enabling law would be the nationalization of key industries that had been privatized under previous governments, such as the telecommunications company CANTV and the electricity companies. “All of that which was privatized, let it be nationalized,” said Chavez.
(snip)

http://www.venezuelanalysis.com/news.php?newsno=2187

As was pointed out, this is a move to RE-NATIONALIZE these operations. (You should recall the hideous disaster which raised the poorest Bolivian's water 200% when Bolivia allowed Bechtel to privatize their water, even to the point of trying to tax them for rainwater they tried to collect in rainbarrels. A bloody protest ensued before Bolivia RE-NATIONALIZED that utility. Similar things happened in Brazil, for those who took the time to read about it will recall.)

Original thread:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2680024#2680789

[Nederland]

69. Irrelevant

Your argument fails because it is entirely based upon the premise that if something was one way in the past it is ok and proper to return things to that previous state. This premise is false.

[killbotfactory]

76. Prepare for the propaganda war efforts to be redoubled

They'll try to make it Guatemala '54 all over again.

[ieoeja]

77. What currency conversion are they looking at?

Currency Conversion Rates

01/10/2007 - 2145.00000 Bolivars per US$
12/31/2006 - 2147.30000 Bolivars per US$
06/30/2006 - 2144.60000 Bolivars per US$

It isn't the lowest currency conversion THIS WEEK, much less the lowest in three years per this report. And while I did not do the math, a 0.40000 drop is certainly not 54% of the 2144.60000 rate from six months ago.