Billionaire Escotet benefiting from Socialism in Venezuela

, Bloomberg


Juan Carlos Escotet

Last January, when he was still making the marathon speeches that are his trademark, Venezuelan President Hugo Chavez took to state television and threatened once again to nationalize his country's banks. Pointing into the camera, he addressed one banker by name: Juan Carlos Escotet.

Chavez called on the owner of Banesco Banco Universal CA, Venezuela's second-largest lender, to comply with his demand that the financial industry hand over cash to the government for agriculture loans.

"Escotet, let me know if you can," Chavez said on his weekly "Alo Presidente" program, since suspended for this year's presidential campaign and a fresh round of cancer treatments. "If not, give me the bank, compadre. Tell me how much the bank costs, and we'll nationalize it right away."

Chavez, who has carried out more than 1,000 government takeovers since taking office 14 years ago, didn't follow through on his threat. In fact, his reign has proved a boon to banks, which thrive on the currency controls and high interest rates that have sunk much of Venezuela's productive economy. Spanning across the Caribbean to Miami and Panama, Escotet's closely held financial empire has allowed him to amass a fortune worth at least $1.3 billion, according to Bloomberg research.

His holdings include Banesco USA in Coral Gables.In early May Banesco took over Security Bank of North Lauderdale, which had been closed by U.S. regulators. Baneso USA operates six branches in Miami-Dade and Broward counties.

Escotet, 53, started getting calls from Chavez on live TV when he became head of the country's banking association in 2010. Since stepping down last year, he's kept a lower profile. He has never appeared on an international wealth ranking, and he declined to comment for this account.

21st Century Socialism

"The threat is not against banks as an industry, but against the banker as owner of the bank," said Francisco Faraco, a Caracas-based financial-risk consultant. "It's undeniable that bankers are at risk because of their wealth and their name."

As part of the project he calls 21st century socialism, Chavez has imposed price caps on companies that include Procter & Gamble Co. and Colgate-Palmolive Co. Amid currency controls in place since 2003, companies such as armored-car provider Brinks Co. resorted to the parallel market to buy dollars and repatriate dividends until Chavez banned the practice outright in 2010.

The scarcity of dollars for imports, combined with shrinking local industry, means that Venezuelans often face shortages of basic foodstuffs such as sugar and milk. Chavez also has shut down brokerages and jailed bankers. One of them, Ricardo Fernandez Barrueco, has been in prison for more than three years as he awaits trial for allegedly misusing depositor funds.

Still, Chavez's socialist project depends on capitalist banks. He needs institutions such as Escotet's to fund Venezuela's ballooning public debt, according to Faraco. That's what feeds the social programs that have cut poverty and made the president popular, carrying him to re-election by more than 10 percentage points in October. Even with Chavez in Cuba, recovering from his fourth cancer surgery since last year, his allies won 20 out of the 23 gubernatorial races in regional elections this past weekend.

What's being said

Comments are not moderated. To report offensive comments, click here.

Preparing comment abuse report for Article# 1202582317546

Thank you!

This article's comments will be reviewed.