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Chavez nationalizes Bank of Venezuela

Banco Venezuela/Grupo santander, HQ, Caracas

CARACAS,Aug 01, 2008

Leftist President Hugo Chavez on Thursday said he will nationalize the Bank of Venezuela, one of the country's largest, and has asked the bank's Spanish owners, Grupo Santander, for a meeting to set a price for the deal.

" We're going to nationalize Bank of Venezuela. I'm calling on (Grupo Santander) to come and start negotiating," Chavez said in a speech on television and radio.

"They wanted to sell the bank to a Venezuelan banker, and as head of state I'm saying no. Sell it to the government, to the state.

"We're going to recuperate Bank of Venezuela. We're very much in need of a bank of that magnitude," Chavez said.

Chavez said the Santander group withdrew its offer to sell the bank to a private banker once the government expressed interest. He said he had a "copy of the pre-agreement document" between Santander and the banker, whose identity he did not disclose.

Chavez said he expected a backlash from Spain.

"There'll be headlines in the Spanish press, 'Is Chavez harming Spain'... to undo the (diplomatic) relations we've just mended," he said, alluding to his meetings last week in Spain with King Juan Carlos and Prime Minister Jose Luis Rodriguez Zapatero.

The meeting closed a diplomatic spat over a verbal squabble between Chavez and the king at a Latin American summit in Santiago in November, during which the king told Chavez to "shut up."

Reports point to Victor Vargas, owner of the Banco Occidental de Descuento, as the unnamed banker in question. Vargas is also a relative of the king of Spain.

Bank of Venezuela president Michel Goguikian in June denied his bank was up for sale after bank shares jumped on the Caracas stock market on rumors of an impending transaction.

Grupo Santander, Latin America's largest banking concern with 4,500 branches, drew one third of its profits in 2007 from the region. In its annual report it said its Venezuela operations were at risk.

"Political events in Venezuela pose an increased risk the Venezuelan government might nationalize or in other ways intervene in the operations of our Venezuelan subsidiary," the Santander statement said.

Bank of Venezuela was nationalized during the country's 1994 financial crisis and sold two years later in public auction to Grupo Santander for 351.5 million dollars.

With more than 300 branches across Venezuela, the bank's estimated assets are 891 million dollars. In 2007 it made 325.3 million in profits.

Since last year Chavez, a populist president first elected 10 years ago, has nationalized power, telecommunications, oil and cement companies, several of them foreign-owned.

The nationalizations, so far, have been reached after financial agreements with company owners.

During his recent trip to Europe, Chavez said that Venezuela will sell Spain up to 10,000 barrels of oil per day at 100 dollars a barrel in exchange for imports of medical equipment and other goods.

Chavez said he had also agreed during the visit to allow the Spanish oil company Repsol to boost its presence in the Orinoco oil belt in eastern Venezuela. The state-owned oil firm PDVSA estimates there are a total 235 billion barrels of crude in the Orinoco belt.

Story from AFP
AFP 01 0136 GMT 08 08

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