Venezuelan President Hugo Chavez said he is creating a “socialist” state-run Public Bond Market that will offer local investors high yields to stimulate saving and allow nationalized companies to seek financing.

The Public Bond Market, which will begin operations in December, will allow state-run companies to sell debt to finance operations and individuals to seek investment opportunities, Chavez said.

Chavez tightened his grip on the financial industry this year by closing more than a dozen banks and 40 brokerages that he said committed “fraud” and set artificial exchange rates. He said investors will have their investments guaranteed by the state. Caracas’s private stock exchange has seen trading plummet since 2007 after the nationalization of companies including Cemex SAB and Cia Anonima Nacional Telefonos de Venezuela, known as CANTV.

“The banking and brokerage crisis has allowed us to draft this law,” Chavez said yesterday on state television during his Alo Presidente program. “Don’t spend all your year-end bonuses, invest in the bourse, and the state will guarantee your money with good yields.”

Yields Rise

The government’s average dollar-bond yield rose 20 basis points, or 0.2 percentage point, to 13.23 percent on Nov. 12, according to JPMorgan Chase & Co. indexes.

In addition to state companies, joint ventures, community councils and private companies will be authorized to sell debt, according to the law that was published in the Official Gazette on Nov. 13. The market will operate under the jurisdiction of the Finance Ministry, the Official Gazette said.

Chavez plans to use the new bourse as a way to finance government enterprises, said Alejandro Grisanti, Latin America analyst for Barclays Capital. The weak financial condition of many of Venezuela’s state-owned companies will give little incentive for investors to participate in the bond market, he said.

“In my opinion there is no way that a private investor will go there,” he said in a telephone interview from New York.

The Securities Regulator authorized state oil company Petroleos de Venezuela SA to sell $3 billion of bonds due in 2017. The bonds were sold Oct. 25 and will be traded in the secondary market through the Public Bond Market, according to a statement.

CANTV, the state-run telecommunications company, will be able to sell shares to local investors through the market, Chavez said.

The government has assigned a headquarters for the bourse, Chavez said, without providing the location.

“The Public Bond Market has been born as a product of the terminal crisis of Venezuelan capitalism,” he said from the Miraflores presidential palace.

To contact the reporters on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Charlie Devereux in Caracas at cdevereux3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

could a 'bourse' be socialist? I'm only vaguely aware of the concept, from when Iran was doing some bourse thing with the Euro rather than the dollar that was controversial a few years back.

But it is about capital investment and making money out of money. How is that socialist?

Just as Lenin resorted to the NEP in necessity and Cuba is making it's recent 'adjustments', ya do what ya gotta to keep the revolution alive.

It is so easy to fall into the 'Trot trap', expecting real world revolutions to measure up to what amounts to an 'utopian ideal', I sure as hell am suspect when it comes to environmental matters. Course, ya gotta know when to call a spade a spade too.

That said, I have no real idea what Hugo is up to, but it could be something like that, theoretically.

that's good, ha. It makes sense, I see what you mean.

I'm mostly trying to wrap my head around the concept.

As for Chavez and this particular scenario, well, I tend toward the suspicious at this point. Maybe it's necessity, but maybe it's just neoliberalism masquerading as 'Socialism for the 21st Century'.

I need some of those Trot traps. They are crawling all over the place - its an infestation. Are they live traps, or do they kill 'em? With live traps, you have to figure out where to release them.

You bait them with either Magical Thinking or Self Interest. Depending upon which size ya got, drown the whole trap in a bucket or barrel of Reality.

A handful of Trots were dominating Common Dreams until recently, much praised and admired by the liberals and new agers - they were so polite, so calm, so academic and authoritative. Then some "rude" Union people showed up and started talking conditions and class struggle and Labor versus management and "which side are you on," and the Trots all disappeared a couple of weeks ago.