The Venezuelan Government announced yesterday that it had agreed to buy Banco de Venezuela for US$ 1.05 billion, a waste of money as the Government is likely to slowly destroy the capabilities of the institution as revolutionary managers are put in place. The amount is in fcat much higher as the Government will also give Banco Santander US$ 122 million in dividends at the official rate of exchange of Bs. 2.15 per US$.
Banco Santander makes out like a bandit in the deal, the Venezuelan baking system is not worth ten billions dollars as the transaction suggests. Additionally, Santander paid for the bank in its privatization some three hundred million dollars and in the Chavez years, it was making 50%-plus returns on equity.
Thus, despite what The Economist says that Venezuela is ranked 81 out of 82 for the enviroment for businesses, some businesses do better than others and Santander and its shareholders certainly did well getting out early. Well, hopefully getting out, as Santander will receive US$ 630 millions in July and the rest in two IOU’s for 210 million payables in October and December.
But perhaps Santander’s best deal is that it is getting money out, something that will get more and more difficult if oil prices do not rbeound. Were Chavez to nationalize the whole financial system, for example, you can be sure nobody would get paid. Of course, Santader leaves now in the hands of the revolutionary Government all of the databases of the bank, which will certainy make some people very nervous. I would be too, fortunately, I have not had an account there for years.