By Jeremy Morgan
Latin American Herald Tribune staff

CARACAS -- Prosecutors and police raided a stockbroking company Wednesday in connection with Finance Minister Ali Rodriguez Araque's decision last month to place four commercial banks under state control.

Only hours later, President Hugo Chávez issued a stern warning that he was prepared to nationalize the entire private banking system in the country if that were necessary. The warning was framed in a speech that suggested he might actually have already all but taken the decision to do so.

There was no immediate official explanation of the reasons behind the raid on Interbursa's head office in the upmarket district of La Castellana in central Caracas. Officials said that "elements of criminalistic interest for the investigation" had been found during the raid, but gave no further detail.

Interbursa is the second financial company to have been raided by officials since Rodriguez Araque announced that he was "intervening" the Canarias, Confederado, Bolivar and Provivienda (Banpro) banks on November 20. Five days later, Stockbroker Casa de Bolsa U21 was the target of a raid similar to
Wednesday's action.

Since then, a court has barred 16 directors from three of the intervened banks from leaving the country. Business executive Ricardo Fernández Barrueco, who owns a majority shareholding in all four banks, is being held on custody on charges including misuse of investors' funds, along with a lawyer named as José Camacho Uzcátegui.

The move on Interbursa coincided with steps to allow customers to have access to their funds at two of the intervened banks, Banco Canarias and Banpro. The situation at the Banco Confederado and Banco Bolivar remained unclear in the absence of any reference to them in a statement issued by Banco de Venezuela, which was appointed to handle the resumption of transactions at the other two intervened banks, but Rodriguez had earlier indicated that they would be sold off once the government was finished with them.

Initially, Rodriguez Araque said all four banks would be allowed to continue operating normally with "open doors" but he later ordered them to close. The decision to bring in Banco de Venezuela -- one of the four big commercial banks in the country, and formerly owned by Grupo Santander of Spain until
it was nationalized by President Hugo Chavez -- was seen as an at least partial reversal of the minister's closure order.

Transactions and transfers involving accounts at Banco Canarias and Banpro were limited by government order to BsF10,000, the ceiling set on theofficial guarantee being provided by Fogade, the state institution
overseeing the interventions.

The statement indicted that priority would be given under a detailed timetable for visiting Banco de Venezuela to elderly customers at Banco Canarias and Banpro. Uncertainty continued over the outlook for customers and employees at all four banks.

In the wake of the raid and in a speech which – as is customary – was televized nationally, Chavez reiterated an earlier warning that he could revive his original plan for the state to take over the banking system as a whole. “We have the radar beamed on to another Group of Banks,” he declared. “They can be sure that if I feel obligad to intervene all the Venezuelan private banking, I’m going to do it."


The president urged the people to have confidence in the banking system and not to believe rumors that, in his view, were being sown by “certain sectors to diminish the popularity of the government.”

Those rumors might prompt the collapse of the private banking system, but not of the government, Chávez continued. The four Banks had been taken over because the owners had not been able to demonstrate where their money came from, and those who had to go to prison would do so, the president promised
in uncompromising terms.

“We’re going to learn a lot with all that’s happening with a group of Venezuelan banks , I’ve taken the decision to intervene all of them," he said. "With this I want to say that a bank that doesn’t perform will be
intervened.”

Chavez indicated that it wasn’t just banking that was in his sights. “I’ve got in view a group of companies, some good because they’re in food. Here, we’re going to strengthen everything. These companies are going to be for the people, we’re going to convert them into socialist companies.”

Customers of Banco Canarias and Banpro would receive interest of 14 per cent if they decided to keep their accounts at Banvo de Venezuela, rather than the 12.5 percent they would have received from the banks, he announced.

Chavez couched all this in terms that came straight from the orthodoxy of classic class war. Elements of the bourgeoisie still remained inside the state, but the constitution was set on the road to a transition to a socialist state of rights and justice.

“The bourgoise state is being extinguished, like a light that’s going to be switched off,” he intoned. “Here, no reconciliation is possible.”

This was the second time in a matter of days that Chavez had made it known that he’d gone back to square one on bank nationalization. On November 30, he signalled that he was more than willing to revive his policy of nationalizing the banking sector.

In itself, that statement apparently gave lie to speculation that he'd had second thoughts about this in the wake of the world financial crisis, global recession, and doubts about Venezuela's economic outlook in the light of lower oil oil export demand and earnings.

To date, only Banco de Venezuela has been taken under state ownership – and that takeover was depicted at the time as a re-nationalization on the grounds that the bank had been acquired by Santander amid the wreckage wreaked by the banking collapses that swept Venezuela in the mid-1990s with the failure of Banco Latino in 1994.

Following that, the takeover trail appeared to go cold in the banking business as Chavez's attention switched to other key sectors of the economy such as cement, oil and natural gas, petrochemicals, telecommunications and steel, among others. It was suggested that he'd become wary of getting too
deeply immersed in banking during the fall-out from the collapse of Lehman Brothers last year.


This view would now seem to be a case of the old adage, that was then, this is now. Speaking last weekend during his regular Sunday radio and television broadcast, Alo Presidente, Chavez declared: "I don't have any problems with nationalizing banks" if the bankers didn't abide by the constitution and
didn't extend loans to the "people."

Coincidentally with that speech, prosecutors secured the orders preventing the directors of three of the intervened Banks from travelling outside the country. Of the 16, eight were said to be on the board at Banco Confederado, six were at Banpro and the other two at Banco Bolivar. Prosecutors also
called in a former president and owner of the other bank put under state control, Banco Canarias.

Chavez evidently didn't consider the travel ban sufficient, saying he would have liked to see the bank directors in custody so that they didn't go anywhere. "They've got little aircraft and private airports, they'll go," he warned.

The president quite also appeared to be convinced of the guilt of the accused. "These are bankers who have been enriching themselves with the money of the people," he declared. "All those who have to go to prison shall go to prison."

As for other errant private bankers, he was going to take them out, too, however big they were. He alluded to "irregularities" at the state-owned Andean promotion bank, Banfandes. This, he said, was holding onto
deposit "gigantic sums" of money from private banks which were earning interest on those funds.

"Why is this happening?" the president wanted to know, adding that he and his officials were looking for answers to that very question. Again, he seemed convinced he already knew the answer. "This is an administrative irregularity that has to be combatted with all weapons. I already ordered an investigation."

Until this presidential outburst, Rodriguez Araque had played down his decision to place the four banks under state control. He had, presented this as a technical measure on the grounds the banks had not complied with required procedures and in order to protect the financial system. He also emphasized that all four were being allowed to continue operating, and that their doors were still open to the public.

On Monday, there was an abrupt about-turn on this. The minister announced that from now on, the banks were being "intervened behind closed doors" and were closed to the public.

This, he explained, was because the banks had sufferred such damage that their solvency was "seriously compromised." However, this did not entirely dispell the impression that the minister was taking a new cue from the much more overtly political tone adopted by the president the day before.

That said, Rodriguez Araque was still out to reassure the public. Procedures were being overseen by the state-run Bank Guarantee and Banking Protection Fund (Fogade), he said; the intention was to "liquidate" the banks with the aim of their "possible recovery and recuperation" and to protect the rights of their employees, depositors and creditors.


In the case of Banpro, he said, 457,000 people were involved, representing 97 percent of depositors, the comparable figures for Banco Canarias were 268,000 and 92 percent, and "relatively less" numbers of customers were involved at the other two banks. Fogade would cover depositors' funds for the next 21 working days, he added.

While the minister was trying to keep the lid on public concern, by then it was quite clear that the takeovers had become a political issue at the president's behest. The question was why, and what had made this happen at this precise moment?

It's suggested that the spark for Chavez's proclamation may have been a statement last week by a National Assembly legislator whose social democratic party, Podemos, used to be allied with Chavez but crossed to opposition two years ago. Deputy Ismael Garcia has become a frequent thorn in the government's side since abandoning the Chavez ship, amd his remarks focused on businessman Ricardo Fernandez Barrueco, who is said to be the majority shareholder in all four banks.

Fernandez Barrueco was arrested even as the interventions were announced, and after a raid on his home by officers from the state security service, DISIP. The following Monday, continued Garcia, Fernandez Barrueco was brought before a court and formally accused of "diverting" clients' funds, unlawful use of loans and "forming a gang" -- a catch-all charge that can pave the way for an all-encompassing allegation of conspiracy.

Garcia, who has established a reputation for not mincing his words since he split with Chavez, alleged there was a connection between Fernandez Barrueco's arrest and a four-cornered fight within the top echelon of the president's powerbase, colloquially known as Chavismo. Garcia claimed that four alleged "political and economic" groups all had links with prominent members of the president's inner circle.

According to Garcia, one of the groups linked Fernandez Barrueco and the president's brother Adan Chavez, a former education minister, another involved Public Works and Housing Minister Diosdado Cabello, while Science and Technology Minister Jesse Chacon headed a third and former Vice
President Jose Vicente Rangel was prominent in the fourth.

Cabello is regarded as arguably the second most powerful figure in the government after the president, and tends to be seen as the government's resident muscle man. Chacon is also said to have the president's ear, having held a string of ministerial positions over the years. Both ministers are
former military officers, and both are said to have played parts in the failed coup d'etat which first brought Chavez to public notice in 1992.

Rangel, a former communist guerrilla and journalist by profession with his own early Sunday morning interview program on state television, is said to retain a degree of influence with the president. He regularly defends the government in characteristically pithy language in a newspaper column, and despite the occassional critical note his pro-Chavez position is in little doubt.


Garcia went on to assert that all four groups had competed against each other for power inside the upper reaches of the government, and he implied there had been some switching of allegances as the dispute developed.

Fernandez Barrueco's arrest had been made at the behest of Cabello in his battle with Rangel's group and the other "mafias" with links to the presidential palace, Miraflores, all of whom had already made themselves millionaires, the legislator claimed.

The maverick deputy was not finished even then. He went on to say that the president knew Fernandez well and that members of the Chavez family had travelled in Fernandez's private plane, and that one of his associates in the supposed squabble had fled the country at some stage.

Just for good measure, Garcia also threw General Hugo Carvejal, a top official at the Military Intelligence Directive (DIM), into an ever more convoluted equation. "How is it that a general is participating in
fraudulent financial operations of this nature?" Garcia asked aloud.

Fellow Deputy Carlos Escarra, a senior figure in the president's ruling United Socialist Party of Venezuela (PSUV), tried Monday to dismiss Garcia's claims as a no more than typically over-the-top bluster from yet another politician.

"For Ismael, whom I like personally, politics is something pragmatic, which is oriented to taking personal positions in accordance with your own ambitions," Escarra intoned. "I don't share that concept."

Garcia, he continued, "always comes out with a few stones in the hand, it doesn't matter to him how he throws them nor whose reputation he might destroy." However, this was the first public reaction to Garcia's claims from a senior government figure, and it came in a interview with the conservative newspaper, El Universal, whose opposition to Chavez is open for all to see.