Analysis; Chavez's First Act of Nationalization Hits Close Argentine Ally

Article excerpt

Byline: HELEN POPPER Reuters

BUENOS AIRES -- Venezuela's first nationalization of a company from an allied nation -- an Argentine steelmaker -- will test close ties between President Hugo Chavez and fellow leftist leader Cristina Fernandez.

Argentina's government has stayed silent since Venezuela said on Wednesday that Ternium Sidor would be taken back into state hands. Last week, Chavez's announcement that the cement industry would be taken over saw Mexico make a fierce defense of Cemex, a major Mexican firm.

Fernandez, who took office as Argentine president in December, has a friendly relationship with the Rocca family that owns Ternium Sidor's parent company Ternium through its Techint conglomerate.

But it will be harder for her to openly criticize Chavez's nationalization of the steel company because of her close ties with the socialist leader.

Argentine daily newspaper Clarin said Techint's chairman and chief executive Paolo Rocca quickly wrote to Fernandez asking her to "intervene with the Venezuelan government in defense of national capital."

Ternium's New York-listed shares have dropped more than 13 percent since the nationalization was announced.

The Argentine Industrial Union (UIA), a powerful group strongly influenced by Techint and close to the government, said officials had already responded.

"The UIA recognizes the efforts the government is making to defend the Ternium Sidor project," it said in a statement that also warned of "the negative consequences of this initiative in terms of the commercial and productive integration of Argentina and Venezuela."

An Argentine government source, who asked not to be named, said the nationalization move had surprised the Fernandez administration. "It's very complicated. There are no chances of agreement," the source said.

UNCOMFORTABLE

Appeals to the presidential palace for help have proved useful for Techint in the past.

Former President Nestor Kirchner, Fernandez's husband, is said to have telephoned Chavez on Ternium's behalf when Caracas threatened to take over the firm last year. …