Chaves pays down foreign debt. Can he manage his nation's Capital Infrastructure Investments?

Contrary to the deceitful babble of the corrupt American "capitalist" media lords, Hugo Chavez IS playing by the rules of capitalism and "free trade," and in this case paying down Venezuela's foreign debt from $27 to $21 billion this year.

Chavez pledged just days ago to NATIONALIZE some of Venezuela's critical infrastructure industries, that he would take control of telephone, power and oil companies. Of course this has international investors crying foul, those who like to make PROFITS on another nation's critical infrastructure - preferably the more profit, the better, even if those profits come from MONOPOLY ( NOT "free-market") CONTROL of a given sector of a nation's critical infrastructure. i.e. the "Economic Hit-Man" model of predatory "investment," lending, finance, and politically supported economic extortion.

Now free-market capitalists at the Wall St. Journal, Investors Business Daily, and others (probably including Bloomberg, the publisher of this particular report) will say that "INVESTORS _DESERVE_ an honest return on their investments" for creating - building, financing, and managing - portions of a nation's infrastructure.

Later in this Bloomberg article, some bond-holders lament that Chavez is SPENDING so much money that, given low oil prices, Venezuela may go deeper into debt, and not pay down its foreign debts and bonds.

BUT, WHAT is Chavez SPENDING Venezuela's declining (for now) oil revenue on..??

ans.- "A surge in spending on health care, food programs for the poor and infrastructure projects may leave Venezuela short of funds should oil keep falling, Kastner said."

AS IN, "a SURGE in INFRASTRUCTURE spending."

Clearly, you do not have to be a Wall St. capitalist to INVEST in a nation's infrastructure, especially in a nation that makes billions exporting oil. And "feeding the masses" is actually not that expensive a proposition, not if a nation is purchasing food stocks at commodity prices, and distributing those food programs efficiently and without two much parasitic corruption.

Clearly, Venezuela's challenge is to EXECUTE its capital, infrastructure investments in an effective, productive and efficient manner... which goals depend on developing a technically competent workforce and managerially competent management.

Going by the China capitalist model, neither of the above in insurmountable - technically competent workers or competent management.

Chavez certainly presents an interesting case study as to whether "the little neighbor to the South" can withstand the predatory instincts of the "big gringo to the north."

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Chavez tells el Gringo d'el norte to "Go to Hell."
http://www.usatoday.com/news/world/2007-01-21-chavez-us_x.htm?POE=NEWISVA

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Pimco, ING, Axa Say Venezuelan Bonds Will Rally, Chavez to Pay Off Bonds
By Agnes Lovasz
Jan. 23, 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTNkYbFkaRkQ&refer=home

Jan. 23 (Bloomberg) -- Pacific Investment Management Co., ING Groep NV and Axa SA, the three largest owners of Venezuelan dollar bonds, have faith in President Hugo Chavez.

The companies, which hold a combined $1.6 billion of the country's debt, say Venezuela will repay the bonds even after a drop in oil prices reduced revenue and Chavez pledged to seize assets from international investors. The country's securities are the second-worst performers among emerging markets this year.

``The ability to pay is tremendous,'' said James Barrineau, who helps manage $11 billion of emerging-market debt at New York- based Alliance Bernstein, a unit of Axa, Europe's second-biggest insurer. The country ``has always promised to pay the debt and that hasn't changed.''

The 32 percent decline in oil prices in the past six months and Chavez's announcement on Jan. 8 that he would take control of telephone, power and oil companies, have hurt stocks and bonds. Venezuelan debt has fallen 1.1 percent since that date, according to figures compiled by JPMorgan & Co. The Caracas Stock Exchange Stock Market Index lost 29 percent.

Pimco, ING and Axa say the bonds are undervalued because Chavez, 52, vowed on Jan. 13 to pay down debt this year. Axa, based in Paris, owned about $808 million and Pimco, in Newport Beach, California, held $204 million of Venezuelan securities, according to filings with the U.S. Securities and Exchange Commission. Amsterdam-based ING said the firm holds $600 million of the notes.

`Wouldn't Hold Stocks'

Venezuela's $4 billion of 9.25 percent bonds due 2027 have fallen 1.4 cents on the dollar since Jan. 8. They were quoted at 123.25 cents yesterday, yielding 7.09 percent, JPMorgan data show.

``I wouldn't hold stocks or do any private business there, but we don't have to cut positions as a sovereign bondholder,'' said Tim Haaf, who helps manage $7.8 billion in emerging-market assets at Pimco in Munich, where the fund management company's parent, Allianz SE, is based.

Venezuelan dollar bonds have fallen less than the 6.9 percent drop in Ecuador's debt, where a new president has pledged to default, JPMorgan data show. Indonesia's 8.5 percent bonds due in 2035, which have the same BB- credit rating from Standard & Poor's as Venezuela, yield 6.61 percent.

Chavez, a critic of the U.S. who calls President George W. Bush "the devil,'' roiled stock investors again on Jan. 21, when he said the government won't pay the market price for shares in CA Nacional Telefonos de Venezuela, the nation's biggest phone company. The shares fell 11 percent yesterday.

Reassuring Bondholders

Venezuela earned $57.8 billion in revenue from oil in 2006, according to government figures. That's about 16 times the $3.5 billion that Citigroup Inc. estimates the country needed to pay in interest on its bonds. Oil makes up about 90 percent of the country's exports and more than half of government revenue.

The administration started using the money to reduce foreign debt last year, buying back $3.9 billion of Brady bonds -- securities named after former U.S. Treasury Secretary Nicholas Brady, who helped arrange a 1990s restructuring.

Chavez reassured bond investors by telling the National Assembly in Caracas on Jan. 13 that ``we could pay our entire foreign debt with the reserves we have.''

He pledged to reduce the debt to $21 billion this year, from the $27 billion that the government said was outstanding on Sept. 30. The extra yield investors demand to hold Venezuelan dollar- denominated debt rather than U.S. Treasuries has since narrowed to 2.14 percentage points, from 2.22 points on Jan. 9, according to JPMorgan indexes.

Oil Dollars

Banco Central de Venezuela's foreign-currency reserves grew an average 26 percent in the past four years to $37 billion, data from the bank shows. Oil income will boost foreign-currency reserves, including funds held for welfare and infrastructure projects, by more than 20 percent to $66 billion this year, according to Merrill Lynch & Co. estimates.

``We're confident Chavez is willing to pay down debt,'' said Robert Drijkoningen, who manages $10 billion of emerging market debt at ING Investment Management in The Hague. ``And there's the capacity because of an abundance of oil dollars.''

Not all investors share that confidence. Oliver Kastner, who manages $7 billion in emerging-market debt at Deka Investment GmbH in Frankfurt, said he started unloading Venezuelan bonds when oil prices weakened and would keep selling in response to Chavez's ``investor unfriendly'' proposals.

``It's negative for stocks, for the corporate sector and the government bond market,'' Kastner said. ``Chavez should realize investors won't be able to stay in the country for long if he says such crazy things.''

Spending Binge

A surge in spending on health care, food programs for the poor and infrastructure projects may leave Venezuela short of funds should oil keep falling, Kastner said.

Chavez, who won re-election in December, boosted spending 56 percent in the first 10 months of last year after increases of 43 percent in 2005 and 61 percent in 2004. The jump in spending fueled growth above 10 percent for the six quarters through Sept. 30, 2006, making Venezuela the fastest-growing economy in Latin America.

``They are spending a lot and if oil prices decline, they will be in trouble,'' said Alberto Ramos, an economist at Goldman Sachs in New York.

Crude oil dropped more than a third to $53 a barrel since it peaked on July 14. It would have to slump almost another 50 percent to reach the $29 a barrel that Venezuela assumed in drafting its $54 billion budget for this year.

Chavez, while referring to its debt as ``immoral,'' has made payments in tough times. He paid the debt in 2003 after a three- month nationwide strike almost shut down the country's oil industry. The economy shrank 9.4 percent that year, following an 8.9 percent contraction in 2002.

To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net