Chavez sends new wave of chills down investors’ spines

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 re-stated his commitment to the socialist path, but fanned the flames of investor worry 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 comes two days after a Chavez speech which 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) had been privatized just 16-years earlier.

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

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

Those words gave the Venezuelan currency a rebound in the un-regulated market as the currency rose 8% on Wednesday.

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

But what of the mining sector?

“He didn’t refer to miningso 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 maintain current levels, Chavez will have more resources to “nationalize whatever he wants,” Rengifo says. “Everybody is concerned.”

And that concern may carry on for a long time into the future.

Not only does Chavez enjoy the broad support of the nations numerous poor, but he plans to seek an extension on the limit of presidential terms. Currently Chavez would be unable to run after 2013.

Toronto-based Crystallex — who 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% since they closed at $4.65 on the Friday before Chavez’s Jan.8 speech.

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

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

Hecla has lost 6% since the speech. Hecla’s La Camorra gold mine in the country is one of its four producing mines, the others being in Mexico and the United States.