Chavez inauguration chills investors

Venezuelan President Hugo Chavez waved the socialist banner broadly at his inauguration ceremony on Jan. 10, but comments from his finance committee eased some market concerns.

Chavez — who won 63% of the vote in December elections — not only restated his commitment to the socialist path, but fed investors’ worries with his usual cascade of firebrand polemics.

“Socialism or death — I swear it,” he said with his right hand in the air.

The inauguration ceremony came two days after a Chavez speech that helped to slash the Venezuelan stock market index by 19%.

The drop came after Chavez pointed to the country’s electricity companies and its largest telecommunications firm, CA Nacional Telefonos de Venezuela (VNT-N), as targets for nationalization.

CA Nacional Telefonos de Venezuela (CANTV) was privatized just 16 years ago.

Four big oil projects run by the likes of Exxon Mobil (XOM-N), Chevron (CVX-N) and Conoco- Phillips (COP-N) are also considered likely targets.

But Jan. 10 also brought comments from the head of the country’s congressional finance committee, who said the government would pay compensation to any companies that would be nationalized.

Those words gave the Venezuelan currency a rebound in the unregulated market as the currency rose 8% the same day.

By focusing on the media and utilities, Chavez is believed to be trying to secure sectors that would best solidify his control.

As for the mining sector, it’s still a question mark.

“He didn’t refer to mining. . . so it seems mining is going to be untouched,” says Luis Rengifo, the president of the mining commission at the Venezuelan American Chamber of Commerce. “But who knows.”

The extent of nationalization will be largely determined by the price of oil. If prices go higher or remain at current levels, Chavez will have more resources to “nationalize whatever he wants,” Rengifo says. “Everybody is concerned.”

And that concern may well be long lasting.

Not only does Chavez enjoy the broad support of the nation’s numerous poor, but he plans to seek an extension on the limit of presidential terms. Currently beginning his third term, Chavez would be unable to run again when it ends in 2013. He was first elected in 1998.

Toronto-based Crystallex International (KRY-T, KRY-X) — which has been trying to develop the Las Cristinas gold project in the country — saw its shares get hit hard. On Jan. 10, shares were trading at $3.63 — down 21% from its $4.65 trading price before Chavez’s Jan. 8 speech.

Other miners with significant assets in Venezuela are Gold Reserve (GRZ-T, GRZ-X) and Hecla Mining (HL-N).

Gold Reserve lost roughly 14% on the news, before rebounding in Toronto on Jan. 10 by 2.4% to close at $4.61.

Hecla shares have dropped by 6% since the speech. Hecla’s La Camorra gold mine in Venezuela is one of its four producing mines, the others being in Mexico and the United States.