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Venezula: Chávez blames banks

When former paratrooper and failed coup leader Hugo Chávez was elected president of Venezuela in December promising to do whatever was necessary to improve the lot of the bulk of the population, the country's bankers weren't sure what kind of treatment they could expect. They are beginning to find out.

Venezuela is in deep recession. Its GDP was 9.9% lower in the first half of this year than in the same period last year. The president has repeatedly blamed the banks for making the recession worse.

Chávez says they are overcharging for credit and wants interest rates reduced to no more than 35% - compared with an average of around 38% early last month. The message to Venezuela's bankers was clear: reduce interest rates voluntarily or a cap on rates will be introduced.

"The government is sending out all the wrong signals on interest rates," says ING Barings' analyst Michael Henry. "It says it wants rates brought down into line with inflation. But, first, that is just the government's inflation forecast, it's not where the market thinks inflation will be. And second, the government is assuming there will be a rapid recovery from recession.