VÍCTOR SALMERÓN
EL UNIVERSAL

Ending 2006, the head of the Venezuelan Stock Exchange Commission, Fernando de Candia, trumpeted what he branded as "the unprecedented growth of the capital market," claiming that President Hugo Chávez' economic policies "favored the environment" for investors to trade massively at the Caracas stock market.

In fact, faced with restrictions to purchase foreign exchange freely and meager savings interests, small investors turned to stocks and the Caracas stock market recorded all-time highs, with profits surpassing 100 percent.
 
But now the future looks gloomy. President Hugo Chávez started his second straight term in office by announcing new economic strategies under his so-called revolution. The Venezuelan ruler is moving to nationalize private companies, take away autonomy from the Venezuelan Central Bank (BCV) and reform the Constitution to adopt socialism. In this scenario, investors chose to sell their stocks massively, thus leading the market to tumble.

On January 9-16, the Caracas stock exchange index dropped 32.6 percent from 62,012 points to 41,748 points.

Losses are spreading quickly. Workers' savings funds and small investors -whose investments in mutual funds purchasing stocks at the Caracas stock exchange amount to nearly USD 36.65 million- have started to experience negative results.

In 2006, mutual funds recorded gains at around 26.35 percent. Over the last week, amidst crumbling stock prices, they have reported a negative yield of 2.89 percent.

Short-circuit
Lured by the slogan "pass on good energies" and "democratization of capital," in June-July 2006 60,000 investors purchased 15 percent of the stocks of La Electricidad de Caracas (EDC), Venezuela's main private electricity firm. Shares traded back then at USD 23 cents.

On January 9-16, following the Government's announcement that it would nationalize the utility company, EDC shares accumulated losses amount to 38 percent, from USD 35 cents to USD 22 cents.

Small investors are panicking. Experts, however, believe the best decision is to remain calm. "We do believe this is not the best time to make decisions. We have to wait until the mechanisms for nationalization are outlined. The Government said it would respect small investors and pay" a fair price for their stocks, claims Alfredo Puerta, analyst with investment firm Econoinvest.

"While there has been a significant downfall in the Caracas stock exchange, we have to remind that growth exceeded 100 percent last year, and therefore this tumble could be seen as a correction."

No ring tone
Meanwhile, the shares of Cantv, which is Venezuela's major telecommunications firm and which has 54,000 small investors, are also slipping back.

Following the Government announcement that it is to resume majority control over the firm resulted in investors stampeding and pushed shares down 22.8 percent in January 9-16 from USD 4.55 to USD 3.52.

On January 16, 17 shares lose ground and five closed unchanged.

vsalmeron@eluniversal.com

Translated by Maryflor Suárez R.
msuarez@eluniversal.com