UATEMALA CITY (AP) – Venezuelan President Hugo Chavez’s radical policies pose ‘substantial risk’ for private firms and are expected to drive down the South American country’s economic growth in 2007, the world’s leading banking organization said Sunday.

The Institute of International Finance presented the doom-and-gloom outlook for Venezuela in its annual Latin American Regional Overview report released at a conference on the sidelines of the Inter-American Development Bank’s annual meeting, which ends Tuesday.

The report called Chavez ‘the all-powerful president,’ noting that his supporters entirely control congress, and said his ‘hostility toward markets poses substantial risk to private firms.’

The institute, which represents 375 banks, said Chavez may turn to more extreme policies as the economy worsens, though it did not explain why it expects such a turn toward more radical stances. It predicted Venezuela will continue struggling with high inflation and will be forced to devalue the bolivar in 2007 as oil prices decline. Venezuelan officials have said they do not plan to devalue the currency.

The institute forecast Venezuela’s economic growth at 7 percent, down from 10.3 percent in 2006. High world oil prices have in recent years boosted the economy of Venezuela, a major producer.

Venezuelan officials could not be reached for comment Sunday about the report.

Chavez has said his government wants to maintain a flourishing private sector and will fully respect private property rights. While Chavez has moved to nationalize key companies in areas such as telecommunications and electricity, his government has struck deals with affected companies to pay investors for their shares.

Charles Dallara, general manager of the institute, said the ‘radicalization of Chavez is suffocating’ the country’s already deteriorating democratic institutions.

He has justified the nationalizations as necessary to give the government control of sectors ‘strategic’ to Venezuela’s interests.

The report said: ‘As Chavez seeks to convert Venezuela into a socialist state, it is likely that he will extend the nationalization drive to other sectors and increase state intervention by, for example, capping private sector earnings and imposing mandatory contributions to finance social programs.’

The institute said that, overall, Latin America recorded a year of rapid growth in 2006, but economic growth is forecast to lose momentum in 2007.

Argentina is expected to have the strongest economic growth in 2007 at 7.2 percent, but that is down from 8.5 percent in 2006. The report said the biggest risk to Argentina’s economic growth is the government’s non-market approach to economic policy.

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