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Venezuela: Chavez threatening to seize supermarkets

Venezuelan President Hugo Chavez threatened to nationalize supermarkets that sell meat above the government-set price as his administration struggles to stem a surge in the cost of basic foodstuffs.

Chavez told a gathering of pensioners Wednesday in Caracas, Venezuela, he's waiting for the "first excuse" to take over butcher shops and supermarket chains that manipulate stockpiles of beef and other foods to artificially boost prices. The government blamed manipulators for a 4 percent surge in the cost of food in January that pushed inflation to the fastest in two years.

"If they continue to violate the interests of the people, I'm going to take the meat markets and supermarkets," Chavez said. "I'll nationalize them." Chavez, who won re-election for a third term in December, is raising the prospect of seizures to push companies to support his social programs and transform the oil-rich nation into a socialist state. Chavez is completing state control of companies in the energy and telecommunications industries, which he deems a strategic part of his socialist plan.

On Tuesday, Venezuela signed deals to buy stakes in local companies owned by two U.S. corporations — Verizon Communications Inc and CMS Energy Corp. The companies' shares rose Tuesday after the apparently amicable deals eased investors' fears that Venezuela would not fully compensate the U.S. companies for their assets.

Energy Minister Rafael Ramirez and CMS Vice President Joseph Tomasik signed a memorandum of understanding Tuesday for Venezuela's PDVSA state oil company to purchase the Michigan-based firm's 70 percent stake in Seneca — a small power company operating in eastern Venezuela — for $105 million. The move came hours after Venezuela signed a similar agreement to buy New York-based Verizon's 28.5 percent stake in the country's largest telecommunications company, Compania Anonima Nacional Telefonos de Venezuela, or CANTV, for $572 million Monday evening.

The government's offer to Verizon amounts to $17.85 per CANTV American Depository Receipt. CANTV's ADRs shot 7.3 percent higher Tuesday to $17.25, and rose another 1.2 percent Wednesday. Verizon shares closed up 1.3 percent Tuesday to $38.04, and rose 1.6 percent Wednesday. CMS shares gained 0.7 percent Tuesday to $17.67 but fell 0.2 percent Wednesday.

The buyouts are among a series of takeovers announced by Chavez's leftist government last month in the electricity, telecommunications, natural gas and oil sectors that initially sparked fears of forced expropriations like those carried out by Fidel Castro, a close Chavez ally, during Cuba's communist revolution.

But the rapid and seemingly amicable negotiations with U.S. companies and compensation that analysts have described as reasonable have eased some of those fears. While U.S. officials in Washington have criticized the nationalizations, the American ambassador to Venezuela said Tuesday that the deals appeared fairly negotiated. "My government has said that it is always better when this is a process of negotiation in which both parties coincide on the outcome, and it seems in this case that has happened," U.S. Ambassador William Brownfield told reporters Tuesday.

Venezuelan officials have said the government worked with the companies to reach the prices. "We'd like to say our negotiations were professional, balanced and friendly," Tomasik said. "The agreement represents a compromise between the two sides." Verizon has said it was pleased to have completed the negotiation quickly and to have given shareholders the opportunity to sell their interests in CANTV. Arlington, Va.-based AES Corp., too, described its $739 million deal last week to sell its controlling stake in Venezuela's top electricity company to the government as "fair" and respectful of investors' rights.

Bloomberg News and the Associated Press contributed to this report.

CANTV president Gustavo Roosen resigned on Tuesday "to facilitate a quick transition that guarantees smooth operations at the company," CANTV said in a statement. Vicente Llatas, who has served as the CANTV's vice president since 1998, will replace Roosen. Chavez's government is now set to take control of the company raising its stake to 35 percent from the 6.5 percent it already owned. Remaining shareholders in the company include Spain's Telefonica, public stockholders and employees and retirees.

Telecommunications Minister Jesse Chacon told Union Radio on Tuesday that the government "is obligated" to buy CANTV shares from any of the remaining stockholders at the same price it has offered to Verizon. That could help the government obtain not just majority control of CANTV, but as much as, "80, 90 or 100 percent of the company," Chacon said. CANTV was privatized in 1991 and now has 13,000 employees, 3.25 million fixed-line customers, 6.76 million cellular customers and 592,000 Internet subscribers.

Meanwhile, business leaders such as Eduardo Gomez Sigala, the head of Caracas-based business panel Conindustria, said that regular shortages of meat, sugar and milk worsened this year because government-set prices imposed by Chavez almost four years ago don't allow any profit.

Economists such as Alberto Ramos of Goldman Sachs Group Inc. say that price regulations and a host of other controls, including a crackdown on businesses buying foreign exchange outside the legal, government channel, are rendering the production of a large number of foods unprofitable, leading to a decline in supply and, as a result, spurring inflation. Venezuela's annual inflation rate rose to a two-year high in January as a depreciation of the country's currency boosted import costs. Consumer prices increased 18.4 percent in the 12 months through January, the fastest pace in Latin America.

On Tuesday, the government raised the prices it sets on food staples, such as milk and eggs, to ease hoarding that has sparked shortages. Prices on beef and chicken were also raised by the Light Industries and Commerce Ministry.

The government on Tuesday also eliminated the value-added tax on foods such as cheese, meat and cooking oil. Venezuela imports 6 of every 10 goods consumed in the country. On Wednesday, Chavez also reiterated his pledge to reduce the work day from eight hours and force private companies to allow employees to devote time to studying socialism at the workplace.

On Tuesday, a Venezuelan judge fined a Caracas journalist and his publisher 10-and-a-half months of salary for a 2005 editorial addressed to Rosines Chavez Rodriguez, Chavez's young daughter, El Nacional reported. The paper, Tal Cual, is published by Teodoro Petkoff, who ran for president last year before dropping out to support opposition candidate Manuel Rosales.