CARACAS, Venezuela, Jan. 13 (UPI) -- Venezuelan President Hugo Chavez has threatened to take drastic action against the private banking sector, unless the banks agree to stop observing the national general strike, which entered its 43rd day Monday.
Most banks have been opening for no more than three hours a day to show their support for the general strike, which is seeking to force the leftist president to submit to a referendum or to call new elections.
Several of the oil-rich country's largest banking groups closed entirely Thursday and Friday, although almost all returned to their limited working day Monday.
Speaking during his weekly address to the nation Sunday, Chavez warned that the banks were on a collision course with his “social revolutionary” government.
He said banks refusing to work as normal would face hefty fines and could even be taken over by the government.
"We will fine those banks that are not complying with the law and if they still refuse to comply with it, we will have to remove their directors or intervene in them," Chavez warned.
The president also announced he would be ordering Venezuela's influential armed forces to withdraw any funds they hold in Banesco, one of the banks participating in the strike.
"I can't leave soldiers' salaries, the accounts for tank maintenance, the accounts for frigate maintenance, for the navy, the accounts which pay for tires for military vehicles or for the troops' food in a bank that has assumed a stance linked to the conspiracy," Chavez said.
The loss of the military accounts will hit Banesco, Venezuela's fourth largest bank, extremely hard. Banesco President Juan Escotet confirmed in a televised interview Monday that military deposits account for around 10 percent of the bank's total deposits.
Venezuela's Banking Regulatory Authority, Sudeban, had ordered all private-sector banks to work normally -- from 8:30 a.m. until 3:30 p.m. -- but the vast majority of branches are only opening in the mornings.
The limited opening times have led to giant queues outside banks and a general shortage of cash in ATMs. The banks' support for the strike has also made business extremely difficult for those mainly small and medium-sized companies that are still trading despite the ongoing strike.
The head of Sudeban, Irving Ochoa, said he would be meeting with senior bank directors later Monday to try to reach a new agreement on quality of service, security and operations during the general strike.
Ochoa said he was hopeful the government and the banks will strike a deal acceptable to both sides later this week, despite the tough line taken by Chavez.
The financial services sector is likely to take the president's warnings seriously. The Chavez government has already showed by its treatment of state-owned energy giant PDVSA that it is not afraid to take tough measures in order to break the general strike.
The government has dismissed striking oil workers' spokespeople and has threatened to dismiss all those PDVSA employees that do not return to work. The government has begun to restart a small proportion of the company's operations using contract workers, loyal employees and technicians brought in from abroad.
PDVSA is, however, a state-owned company under government control, and it is unlikely that Chavez would actually risk intervening in the private banking system, which is largely owned by foreign companies.
Venezuela's two largest banks are both owned by Spanish groups. The Santander Group and the Banco Bilbao Vizcaya Argentaria own the Banco de Venezuela and Banco Provincial respectively. U.S. banking giant Citibank is also a major player in Venezuela.
At a time when his beleaguered government is extremely reliant on foreign support, it would be very damaging diplomatically for Chavez to intervene in banks owned by powerful foreign groups.
A more likely scenario is that the president's threats were intended to dissuade the banks from any further full-day shutdowns. It seems likely Sudeban will broker a deal between the sector and the government that will commit the banks to continue opening at least partially every day in exchange for an end to government legal proceedings against them.
It is also in the banks' interests to remain open partially, as the financial services sector has been one of the sectors worst affected by Venezuela's economic slowdown and cannot afford to lose any more business than is inevitable given the effects of the general strike.
Throughout 2002 banks suffered the lethal combination of a dramatic decrease in borrowing, a wildly fluctuating exchange rate and a lack of investor confidence in the government's ability to manage the economy.
Large numbers of investors pulled their money out of Venezuela in response to the worsening political and economic situation, which led to an estimated fall in gross domestic product of around 8 percent in 2002.
Defaults on loans have also risen sharply as the economic contraction forces many smaller companies into bankruptcy, while the prospects for 2003 remain dismal as the effects of the ongoing general strike, and in particular, the dramatic decrease in oil revenue make themselves felt.
"We should prepare for a difficult year. The enemies of the fatherland are going to continue to try to destabilize the country," Chavez warned Sunday.