Chavez threatens banks, steelmaker with takeover

CARACAS, May 3 (Reuters) President Hugo Chavez threatened to take over Venezuela's private banks and its largest steelmaker today, raising the prospect of a widened nationalization drive by the leftist leader.

After taking over utility companies earlier this year and seizing control of the last privately run oil operations in the OPEC nation only two days ago, Chavez suddenly opened new potential fronts for nationalization.

But in the cases of the banks and the steelmaker Ternium-Sidor, Chavez made his threats conditional, saying they could avoid takeover if they adapted their businesses to better take into account what he calls the national interest.

The banks need to prioritize making domestic loans and the steelmaker should focus more on supplying the local market with cheap products, he said.

''If they do not accept right now a change in the process, then they are going to force me to nationalize the company just as I did with (telephone company) CANTV,'' Chavez said, referring to Ternium-Sidor in a speech.

The announcement immediately worried investors.

The share price of Latin America's largest steelmaking group Ternium, which owns Ternium-Sidor, fell into negative territory after Chavez's threat, almost touching a two-month low.

There has been a worldwide nationalization trend in industries exploiting natural resources. But Chavez, who calls Cuban leader Fidel Castro his mentor, is generally at odds with mainstream economic policies in Latin America, a region that has spent years privatizing most state-run companies.

Chavez underscored his disdain for most of the international economic community by also saying Venezuela did not need the IMF, although he did not directly repeat his vow this week to withdraw from the multilateral lender.

''This is madness,'' said a Venezuelan banker, who asked not to be further identified for fear of reprisals against his company. ''The president is not measuring his words nor the effect of his announcements -- you just have to look at how the debt has been affected.'' Most economic analysts think Chavez said he would leave the International Monetary Fund without realizing it would trigger a potentially costly default. Venezuela's debt value has fallen this week on international markets due to the uncertainty.

Since coming to office in 1999, Chavez has railed against capitalism, which he says is an evil spread by the United States. But it is this year, after a landslide re-election, that he has taken his boldest steps against private ownership.

American companies have been the most affected.

Today, Chavez said he was reluctant to take over Sidor because its investors were from Latin America.

Still, while his threats against the banking sector and the steelmaker were conditional, he took a similar position against CANTV for months before announcing definitively he would nationalize it earlier this year.

REUTERS PBB BST0300