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Wealthy Hugo Chavez plans to invest heavily in Uruguay

By Tony Pagliaro

13.03.06 | Hugo Chávez continues to advance in connection with a series of very different investments to be made in Uruguay. First, he is looking into a participation investment in “Pluna”, the small Uruguayan airline. The idea is to buy -through “Conviasa”, the State-owned Venezuelan airline- 49% of “Pluna’s” stock, which is now held by the Brazilian airline “Varig”. “Varig”, like “Pluna” is also in deep financial trouble.

Truth is that “Pluna” is almost belly-up. It is, in fact, barely able to continue flying because Uruguay (i) allows its State-owned oil and gas company “Ancap” to deduct from its taxes the amounts of unpaid fuel supplied to “Pluna”; and (ii) because “Pluna” does not pay its insurance premiums to another State-owned Uruguayan company: “Banco de Seguros del Estado”, to which it owes about 10 million US Dollars.

Second, Chávez is about to invest in “COFAC”, an Uruguayan credit cooperative which is also in deep financial trouble. In fact, it does not operate since February 1st.

Its depositors are collecting their monies through the “Fondo de Garantía de Depósitos” (FGD), a deposit insurance entity also controlled by the Uruguayan State. Venezuela will -apparently- invest to “resurrect” the coop. It will do so through an investment of about 22 million dollars. In reciprocity, the Uruguayan State will allow the coop to be “converted” into a fully fledged Uruguayan commercial Bank, to be controlled by the Venezuelan State-owned Bank: “Banco de Desarrollo Económico y Social” (Bandes). The States, all over, as anybody can see.

Third, Venezuela will invest in “Ancap’s” down-stream horrible investment in Argentina, known as “Petrolera del Cono Sur”, which owns about 172 gas stations in Argentina (originally the network of gas stations had 247 individual units).

This, a 150 million dollars bad investment, was made by “Ancap” in 1988-89. In 2004 only, it lost 24,7 million dollars; and in 2005 it added another impressive loss of 28,7 million dollars.

Daniel Martínez, “Ancap’s” President, was recently quoted saying “It will take us 150 years to recover our investment in Argentina.” Why the losses? Simple, because “Petrolera del Cono Sur” has to import its fuel into Argentina and can only resell it in Argentina’s retail business at a big loss, for domestic prices have been “capped” by populist Néstor Kirchner at will, as part of his “voodoo” economic “management” of Argentina.

One wonders why is Hugo Chávez willing to make this triad of difficult to recover investments.

Populism? Maybe not. A strong foot, from which he will be able to “operate” behind a legal “façade” in the Río de la Plata region? Maybe yes. Venezuelans, if ever asked about the investments would -in all likelihood- say: please, don´t do them. But Hugo Chávez, has all the answers. And above everything, he simply does not care.

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