Chavez seeks gain from Venezuela bank purge

December 8, 2009

By Andrew Cawthorne

CARACAS, Dec 7 (Reuters) – President Hugo Chavez on Monday sought to reassure a nervous public and maximize political gain from an ongoing purge of Venezuelan banks that has cost him a close ally and unsettled the financial sector.

“We have a solid bank system,” Chavez told an audience of leading bankers and financial officials summoned to his Miraflores presidential palace to hear a speech.

Chavez sacrificed one of his closest political allies — Science Minister Jesse Chacon — over the weekend after¬†Chacon’s brother was implicated in mismanagement at one of seven banks the government has closed in the last eight days.

The resignation of Chacon, a fellow retired military officer who took part in failed 1992 coup aimed at bringing Chavez to power, was the biggest political casualty in a cleanup that began last Monday and has seen the closure of seven banks and arrest of eight bankers.

“A group of irresponsible bankers, of citizens crazed by ambition, started to use the public’s money, private and public money in their banks, to commit crimes,” Chavez said.

Jesse Chacon did nothing wrong, Chavez said, but his brother Arne’s rapid rise to wealth from being a “nobody” to a millionaire was highly suspicious.

While the president is trying to present the cleanup as a political plus, Venezuela’s opposition says socialist Chavez is to blame for allowing a new class of mega-rich businessmen with close ties to government to buy and abuse banks,

With a national assembly vote next September and a presidential election looming in 2012, the stakes are high.

“The bank scandal has turned Chavez into an anti-corruption hero,” pro-opposition newspaper El Universal noted wryly, arguing Chavez was successfully but deceitfully exploiting the mini-crisis in the bank system for personal political gain.

“Any attempt to wash his hands, alleging he knows nothing, is a false argument with no credibility.”

Over the weekend, Chavez promised to brook no illicit enrichment and urged people to inform him if ministers or others were seen gallivanting on yachts and flaunting wealth.



After twice threatening to nationalize the whole bank sector in comments that sent bond prices plummeting and weakened the bolivar on the parallel market, Chavez has softened his rhetoric in recent days.

The Venezuelan leader has stressed in a series of speeches since Thursday that his aim is regulate banks better and punish a group of “con men,” not nationalize the whole sector.

Chavez has expropriated large swathes of Venezuela’s economy during his decade in office, including parts of the OPEC member nation’s lucrative oil industry. But analysts say full-scale bank nationalization may be out of reach for him as it would cause panic and a probable run on funds.

While the full political impact of the cleanup is not yet clear, investors and depositors appear to be agreeing with Chavez that Venezuela is not on the verge of a big crisis.

“The conclusion among investors seems to be that this will not spread in the short term,” said IDEAglobal analyst Enrique Alvarez in New York. Venezuela’s benchmark global bond rose 2 percent on Monday in a sign of easing investor anxiety.

The seven banks closed last week represent 8 percent of Venezuela’s total deposits, and the government has vowed to return almost all the 1 million affected savers’ money this month. It plans to rescue and join some banks in a state firm.

Analysts say some smaller banks, mainly in the hands of government-linked businessmen, may face similar intervention but that big banks have healthy capitalization and profits.

“There are a number of zombie banks still around at the lower end of the sector, but systemic financial risk is unlikely,” said Russell Dallen, of BBO Financial Services in Caracas.

He said internal feuds within government circles, rather than a major privatization push, were the driving force behind the bank cleanup. “The socialist mafia are pushing out the capitalist mafia among the Chavistas,” he said.

On the street, Venezuelans, who remember bitterly a 1994 crisis that wiped out half the nation’s banks, were worried but not panicking. Longer-than-usual queues formed last week as some depositors switched money to bigger banks.

There are sharp divisions, however, along Venezuela’s polarized political lines over who is to blame.

“As usual, you talk to one person about this and Chavez is the savior riding in to tackle the nasty corrupt bankers, then you talk to another and he’s the devil incarnate who’s allowed all his acolytes to get out of control,” a diplomat said.

(Editing by Frank Jack Daniel and Cynthia Osterman)

((; +58 212 277 2700; Reuters Messaging:

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see