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President Chavez's nationalization plan rocks stock market

Investors spooked by President Hugo Chavez's nationalization plans rushed to sell off Venezuelan stocks on Tuesday, while US officials and financial analysts warned that increasing government control in the power, telecom and oil sectors is a mistake.

Chavez, who begins another six-year term on Wednesday after a sweeping election victory, announced plans on Monday to nationalize Venezuela's largest telecommunications company, electrical companies and four lucrative oil projects now run by foreign companies in the Orinoco River basin.

He also called for a constitutional amendment to strip the autonomy of the Central Bank.

"Chavez has singled out `strategic sectors' for now, but what could come next?" asked Pedro Palma, an economist at Venezuela's IESA business school.

He said Chavez has created "a climate of great uncertainty."

Chavez's plans to impose state control over oil upgrading projects in the Orinoco, now controlled by companies like Exxon Mobil Corp, Chevron Corp and ConocoPhillips Co, also prompted worries in the US.

"I think the goal here is to enforce the sanctity of contracts," US Energy Secretary Samuel Bodman said on Tuesday, expressing concerns that Chavez could "violate that principle."

"Nationalization has a long and inglorious history of failure around the world. We support the Venezuelan people and think this is an unhappy day for them," White House press secretary Tony Snow said.
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