Venezuela to open "socialist" securities exchange

Mon Nov 15, 2010 2:42pm EST

* System to finance state-run companies

* Chavez bringing financial markets under state control

* Hopes to win-over middle-class voters

By Frank Jack Daniel

CARACAS, Nov 15 (Reuters) - In what President Hugo Chavez described as a blow for "vampire" capitalism, Venezuela will next month open a state-run stock and bond exchange aimed at financing public companies and wooing middle class voters.

The government's official gazette on Monday published the law ordering the creation of the new market, which will be run by the finance ministry.

In recent weeks, Chavez has accelerated his drive to increase the hand of the state in all sectors of the economy including finance, housing and food production. Oil and heavy industry is already largely government run. [ID:nN12121425]

"The public securities exchange system has been born," Chavez said on his weekly TV show on Sunday in a speech peppered with references to capitalist "vampires" and "vultures." He said it will open in December.

"This is not the capitalist exchange, Dracula, this is the socialist exchange. The state and the republic guarantee your money and it will have a good yield."

Chavez already has his eye on 2012 presidential elections, where he will need the support of some middle-class voters as well as his poor base to win another 6-year term. He says the exchange as well as recent moves against home-builders accused of corruption will favor the middle class.

Savings opportunities in Venezuela are limited, with negative real interest rates and inflation of 27.5 over the past 12 months. As a result, Venezuelans are high spenders.

"When you get your three month bonus, don't spend it all, let's organize, we'll invest it in the exchange," Chavez said. Some Venezuelan workers receive a triple pay check at Christmas.

Many Venezuelans are used to investing in government bonds via private brokerages as a way of accessing dollar and receiving high yields.

But this year the government has overhauled Venezuela's capital markets, closing dozens of brokerages and creating a new state-run currency exchange. [ID:nVENEZUELA]. Both moves restricted investment opportunities for the middle class.

Lawmakers are expected to pass a law in the next few days that would make it easier for Chavez to nationalize banks and would force them to hand over 5 percent of profits for social groups. [ID:nN11201237].

Chavez said the new exchange will be housed in the former offices of Econoinvest, the country's leading brokerage which the government shut earlier this year on charges of fraud.

State oil company PDVSA last week sought permission to trade $3 billion of bonds on the public bourse. Chavez said state companies such as telecoms giant CANTV could raise capital on the market.

(Reporting by Frank Jack Daniel and Eyanir Chinea; Editing by Diane Craft)

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