Chávez Warns Banks and Steel Firm May Be Nationalised

Venezuela's president, Hugo Chávez, said he might nationalise the country's banks and a major steel producer in the next stage of his socialist revolution.

Mr Chávez said the state would take over the companies if they did not contribute more to the local economy, opening a new front in his campaign against international financial institutions.

"Private banks have to give priority to financing the industrial sectors of Venezuela at low cost. If banks don't agree with this it's better that they go, that they turn over the banks to me, that we nationalise them and get all the banks to work for the development of the country and not to speculate and produce huge profits."

Mr Chávez also said that the government might take over Sidor, a steel producer owned by the Luxembourg-based Ternium SA, because it exported most of its output, obliging local developers to import pipes. He ordered his mining minister, José Khan, to visit the company's headquarters and to report back within 24 hours.

"If they do not accept right now a change in the process, then they are going to force me to nationalise the company just as I did with [telephone company] CANTV."

The announcements, made during a televised speech late on Thursday, caught investors by surprise. Ternium's US-traded shares tumbled by nearly 3.9% on the New York stock exchange.

But the fact that the warnings were conditional, and that no formal deadline was set, prompted some analysts to suspect the president wanted the banks and the steel company to change their behaviour, but not necessarily to take them over.

"I don't think it'll happen immediately; they're just threats," Franklin Rojas, director of Caracas-based economic institute CIECA, told Reuters. It was not clear if the threats were directed solely at Venezuelan banks, such as Mercantil Servicios Financieros CA and Banco Provincial SA, or also at big international banks with subsidiaries in the country, such as Citigroup.

Mr Chávez, a former army officer who was elected to a third presidential term last year, has promised to spend Venezuela's vast oil revenues to reduce poverty and wean the country off global capitalism.

Critics say the drive towards "21st-century socialism" is an effort to perpetuate authoritarian rule and edge Venezuela towards Cuban-style communism.

Earlier this week the government seized control of the last remaining oil projects which had been controlled by US and European energy giants.

In an apparently spontaneous move, Mr Chávez also vowed to leave the International Monetary Fund, branding it a tool of US imperialism which had hurt Latin America's poor. The government insists it will honour all its commitments but quitting the IMF could expose Venezuela to a $21bn (£10.5bn) debt default, leaving analysts wondering if Mr Chávez had run ahead of reality.