Venezuelan president announces currency controls

CARACAS, Venezuela -- After suspending the sale of dollars for two weeks because of a crippling general strike, President Hugo Chavez announced a new fixed currency exchange rate to help bolster the country's flagging foreign reserves.

The new policy goes into effect Thursday and fixes the currency rate at 1,596 bolivars to the U.S. dollar, Chavez said during a televised address late Wednesday. Chavez said the freeze on foreign currency trading would end with the establishment of the new system.

The bolivar closed at a record low of 1,853 on Jan. 21, the last day of currency trading.

"We've made the ideal decision for defending the Venezuelan economy and to defend the international reserves," Chavez said. He added that exchange controls would help Venezuela pay its foreign debt.

The fixed rate will be flexible, changing periodically when and how the executive branch and central bank see fit.

Venezuelan businessmen warned Wednesday that plans to restrict access to foreign currency will bury the reeling economy, which is highly dependent on imports.

The strike had choked off Venezuela's income from abroad by hobbling the state oil company, by far the nation's biggest exporter.

Chavez on Tuesday lashed out at business leaders who had led the strike, saying the "coup plotters" were stashing billions of dollars abroad.

Analysts say the economic woes caused by the failed two-month strike to oust Chavez will close more than 20,000 businesses and leave 200,000 people jobless.

Strike leader Carlos Fernandez, head of the Fedecamaras business federation, said Chavez was trying to impose control over the struggling private sector, which relies on imports for 60 percent of its supplies and raw materials.

Lope Mendoza, president of the Conindustria business chamber, urged citizens to buy Venezuelan products to keep the economy afloat. "The industrial sector isn't going to please the president, who wants to see a cemetery of businesses," Mendoza said.

Chavez's government suspended dollar purchases on Jan. 22 after the bolivar lost more than 30 percent of its worth during the strike, which began Dec. 2 and ended in all sectors but oil this week.

Oil production was rapidly recovering, Chavez said late Tuesday. He said production would soon reach 2 million barrels per day. Pre-strike production was around 3.2 million barrels.

Foreign reserves dropped by $2 billion in part because the government was spending $60 million a day to prop up the bolivar.

The bolivar last traded at 1,850 to the dollar. On the black market, it's 2,500 per dollar. The decline, in turn, sent inflation past 30 percent, and many economists forecast a 25 percent recession this year.

Finance Minister Tobias Noriega said a fixed rate -- between 1,600 and 1,850 bolivars per dollar -- will be adopted for imports of food, medicines and government transactions.

It wasn't known how many dollars the government would make available to citizens and businesses, what conditions they must meet to buy dollars nor how many dollars they could buy.

Some newspapers speculated Wednesday that citizens would face restrictions on the amount of dollars they can buy for business travel abroad.

Also Wednesday, the government opened an investigation into a fifth private television station, Venevision, for allegedly breaching a broadcast law by supporting the strike.

Chavez accuses Venevision, Globovision, Radio Caracas Television, Televen and a regional station in the southwestern state of Tachira of supporting efforts to overthrow him. The stations could be fined or barred from broadcasting.

On Tuesday, the government said it would investigate whether some radio stations should have their broadcast licenses revoked for airing "violent propaganda."

The government is preparing a media content law governing what and when radio and TV stations can broadcast.

Media owners accuse Chavez of inciting his followers to attack journalists and abusing a law that allows presidents to interrupt private programming to broadcast speeches or government messages.

December 16, 2001 -Venezuela's Chavez Threatens to Nationalize Banks [Full Text] CARACAS, Venezuela (AP) - President Hugo Chavez threatened on Saturday to nationalize banks that fail to observe legislation requiring them to lend at least 15 percent of their loan portfolio to small farmers. ``We can nationalize any bank that does not observe the law,'' Chavez said in a speech in Venezuela's National Assembly. ``Not only can we nationalize any bank, any banker that does not abide by the law could go to jail.''

Last month, Chavez' government used ``fast-track'' legislative powers to decree 49 laws affecting industries from oil to agriculture. Under the new legislation, banks must lend at least 15 percent, rather than the previous 8 percent, of their portfolios to poor farmers in need of credit. Another contentious law opens the way for the expropriation of ``idle'' farmlands and the distribution of small plots to farmers.

Chavez made the statements during a ceremony to commemorate the second anniversary of the approval of the new constitution. To protest the laws, Fedecameras, the country's leading association of businesses, brought Venezuela to a virtual halt with a one-day nationwide strike earlier this week. It is also challenging the laws in Venezuela's highest court and pushing for amendments in the legislature.

Business groups fear the Land Law violates the right to private property and will scare off investors. Some bankers have said they would rather pay a fine for disregarding the new laws than provide more loans. It was not immediately clear how much banks could be fined for ignoring the laws. Chavez, a leftist former paratrooper, claims the package of laws will consolidate his so-called ``revolution'' aimed at bringing social justice to Venezuela's poor majority.***

___________________________________________________________________

January 10, 2002 Venezuela Banks Face Major Probe [Full Text] CARACAS, Venezuela (AP) - Venezuela President Hugo Chavez has ordered an investigation into almost 4 trillion bolivares ($5 billion) in losses reported by 40 banks last year. Chavez on Wednesday some banks may have registered false losses to avoid paying taxes. He complained that businesses have ``robbed Venezuela for decades. That's how large fortunes were made.''

Venezuela has 79 financial institutions, 40 of them commercial banks. More than 40 percent of assets held by the Venezuelan banking sector are tax deductible because they are held in government bonds, according to a study by private financial firm Softline Consultores.

Tax collection in 2001 totaled 7 trillion bolivares ($9 billion), 23 percent higher than 2000, tax authority Trino Alcides announced Wednesday. The government has launched an aggressive effort to reduce tax evasion. Only about half of the 650,000 people who declare taxes actually pay them.***

_____________________________________________________________

February 2, 2000 Venezuela Alert: Chávez Dominates Political Scene*** Under terms of the new constitution, which has already gone into effect, Chávez will be the most powerful president in the democratic era of the country. He could surely be reelected for a six-year term this year under the new constitution, which means that he would remain in power for 13 years since this constitution permits the immediate reelection of a president. With the attention of the nation focused on the mudslides that killed 10-30,000 Venezuelans on the north coast (some estimates are as high as 50,000) and left as many as 150,000 homeless, President Chávez and his allies in the Constituent Assembly have moved ahead to implement changes they say are authorized by the new constitution-eliminating congress, replacing the supreme court and hand-picking top judicial and other officials. The army has been mobilised to help the rescue operation - President Hugo Chavez briefs paratroopers before they go into action.

The assembly dissolved congress and appointed a 21-member "mini-congress" of Chávez backers (including his brother Adan) which will legislate until elections are held for the new National Assembly. New elections for president, mayors, governors, and the legislature, originally scheduled for March, have been postponed until May 28 because of the disaster. President Chávez probably would have preferred an earlier date, but given the massive cleanup and reconstruction effort underway which requires the undivided attention of the government, it is doubtful that electoral officials could have been prepared much sooner. Chávez is well aware that he could suffer if the elections are delayed late into the year as continued high unemployment (now about 18 percent) and economic stagnation could damage his popularity, still running at over 70 percent.

The assembly also named a new Supreme Tribunal of Justice (replacing the Supreme Court), comptroller, public prosecutor, national electoral council, and other officials. Critics have called the appointments backroom politics at their worst. But Chávez supporters stress that the appointments are temporary and say the assembly acted quickly to help the government cope with the national crisis. The former comptroller, Eduardo Roche Lander, has issued a scathing report criticizing the president, saying he has worsened a recession, trampled the rule of law and done little to achieve his stated goal of eliminating corruption. According to Roche, there is rampant corruption in the Bolivar 2000 program, the government's centerpiece public works program. "Lamentably, the president of the republic used all of his time and power to obtain his political objectives, ignoring his basic obligations to a country that had elected him, fundamentally to lead a process of social and economic recovery," he said. Chávez' supporters said Venezuelans recent approval of the new constitution required Roche's removal, but the former comptroller called the move "arbitrary and of very doubtful legality."

The New Constitution - The new constitution calls for the vast overhaul of Venezuela's political institutions. Among the most important changes: · The president's term is extended from five to six years, and the ban on immediate reelection for a second and final term is lifted; The Senate is eliminated, leaving a single chamber National Assembly which will have 166 members; The president can dissolve the National Assembly if it rejects his appointment of a vice president (a new position) three times; The country's name is changed from the Republic of Venezuela to the Bolivarian Republic of Venezuela in honor of 19th century independence hero Simon Bolivar, a change originally opposed by the Constitutional Assembly but reinserted at Chávez' insistence; Civilian oversight of the military is reduced by eliminating the right of congress to vote on military promotions (giving such power to the president), and soldiers gain the right to vote; News organizations are required to publish "truthful, opportune and impartial" reports-a clause critics say could lead to press censorship; Social security benefits and free health care and education (including university) are guaranteed to all Venezuelans; Housewives win the status of workers and qualify for social security benefits, including a $169 monthly check when they reach retirement age (article 88 of the new constitution calls them "creators of added-value riches and social well-being"); The government's ownership of shares in PDVSA is given constitutional status, but some private investment in the oil industry is permitted.

In January the Assembly ratified Chávez' choice of Diego Castellanos, a former economics professor and head of the Foreign Trade Bank, as the new president of the Central Bank. Little is known about his policy inclinations and he is expected to broadly follow Chávez' directions. The appointment only served to emphasize critics' concerns that the new constitution seriously undermines Central Bank autonomy.***

__________________________________________________________________

February 13, 2002 -Venezuela's currency collapses as Chavez acts to stem billions in capital flight- [Full Text] CARACAS, Venezuela - Venezuela's currency plunged 19 percent against the U.S. dollar Wednesday as President Hugo Chavez abandoned exchange controls to try to stem capital flight and restore investor confidence in the ailing South American nation's economy.

Venezuela's bolivar closed at 980.50 to the dollar after a long holiday weekend compared to 792.50 on Friday. Chavez also announced a drastic 22 percent budget cut and tapped a dlrs 6 billion rainy-day government fund to close a projected dlrs 8 billion gap in the new dlrs 25 billion budget for 2002 - down from an original dlrs 33 billion.

Government attempts to support the bolivar have caused Venezuela's foreign reserves to drop to dlrs 13 billion from dlrs 19 billion in November. The measures reflect a new economic reality of low oil prices, investor jitters toward Latin America after Argentina's financial crisis and the slumping global economy after the September terrorist attacks in the United States, Chavez said late Tuesday. IMF spokesman Thomas Dawson praised the decision to abandon exchange controls as a step "in the right direction."

Central Bank President Domingo Maza Zavala warned the measures won't work unless Chavez comes through with austerity measures and calms a volatile political climate. Chavez has sparred viciously with business, labor, the news media and the Roman Catholic Church. Labor and business staged a successful general strike in December to protest economic laws decreed by Chavez without their input.

Protests last week to support two military officers who demanded Chavez step down added to the political instability and sent more dollars abroad. Capital flight last year was an estimated dlrs 10 billion. Maza Zavala said Wednesday that the central bank won't spend more money to keep defending the bolivar unless it enters a relentless free-fall. Currency turmoil is likely to ease in a few days, he said. Finance Minister Nelson Merentes said the government won't impose foreign exchange controls.

Share prices on the Caracas Stock Exchange jumped 10 percent on the announcement of the new exchange trade system, traders said. The IBC General Stock Index rose 622 points to 6,692. Chavez appealed for "patience" and "cooperation" among Venezuelans and foreign investors. "I ask everyone to help me sheath my sword," he said. Chavez vowed that decisions about government spending - which has fueled economic growth during his three-year presidency - won't affect "social programs" that benefit the 80 percent of Venezuela's 24 million people who live in poverty. But a weaker currency could hurt the poor by raising inflation, which at 10 percent last year was the lowest rate in 16 years.

"This is actually a devaluation and Venezuelans now should get used to higher prices," said Janet Kelly, professor of public policy at the Caracas Graduate Institute of Advanced Management. "Things are getting tough. It's going to affect the middle class the most. People who want to send their kids to study abroad will have a hard time," insurance broker Estaban Castro said while waiting to make a deposit at a Caracas bank. A price hawk within the Organization of Petroleum Exporting Countries, Chavez has been able to stop the spread of poverty and spur economic growth through government spending sustained by high oil prices.

But Wednesday's actions highlight Venezuela's extreme dependence on petroleum. A leading supplier of crude to the United States, Venezuela has seen its oil revenues plummet since Sept. 11. Oil exports account for a third of Venezuela's dlrs 100 billion gross domestic product and 40 percent of government income. Venezuela's 2002 budget was originally based on a price of dlrs 18 per barrel - down from a high of dlrs 27 a year ago. Venezuelan oil now sells for dlrs 15 per barrel. The country loses dlrs 1 billion per each dollar drop in the price. "I think the bolivar will fall very quickly over the coming days," said Jose Toro Hardy, an economics professor at the advanced management school and a former director of the state oil company. "If customers, banks and businesses don't think it (Chavez's plan) will work, the bolivar will go down abruptly."[End]

_______________________________________________________________

Chavez 1999 consolation of power timeline

February 27, 2001 - Chávez's school plans ignite furor in Venezuela *** CARACAS -- With lawsuits and posters saying ``Our Children are not Cubans,'' Venezuelan parents are battling President Hugo Chávez's latest effort to turn the country's schools into indoctrination centers for his leftist ideology. ``We don't want a Communist or Chavista education,'' said Sonya Agudo, mother of two grammar school students and activist in one of the dozens of parents' groups formed recently to fight the president's plans.

Chávez has kept Venezuela in a state of high turmoil since his election 25 months ago by pushing for his ``Bolivarian revolution'' -- profound yet peaceful changes across virtually every sector of the oil-rich nation. But the former army officer who led a failed coup in 1992 has touched an especially raw nerve by insisting that the reforms in the education sector should be aimed at ensuring the ``irreversibility'' of his revolution.

Parents and teachers' unions complain that Chávez is not merely fixing problems, but rather trying to establish a Cuba-like system of political indoctrination for young minds. Among the controversial actions: A new constitution written by Chávez supporters requires all schools to teach ``Bolivarian principles'' ---- a code phrase for Chávez's brand of leftist populism ---- and the pro-Chávez majority in the legislative National Assembly is preparing a bill laying out the exact curriculum.

Last month, the president issued Decree 1011, creating a corps of ``itinerant inspectors'' empowered to close schools and fire teachers that don't follow government-set procedures and standards. ``Political commissars,'' Agudo called them. Jaime Manzo, head of the national teachers' union, called it ``a sword hanging over the head of any teacher who refuses to sing Chávez's praises in the classroom.'' Parents' groups and the teachers' union have appealed to the Supreme Court to block the decree and submitted to the assembly an alternate education reform plan that guarantees a ``pluralist education'' and bans ``partisan politics'' from the classroom.

New history texts for fourth- and sixth-graders published in 1999 praised Chávez's coup attempt and branded as ``corrupt oligarchies'' the two parties that ruled Venezuela since the late 1950s, Democratic Action and COPEI. Chávez has also greatly expanded a system of paramilitary classes in public high schools that had long been on the books but were seldom held, portraying them as ``the founding stones of the new Venezuelan man.''

``He is promoting militarism, infecting texts with viruses that foster class hatreds ... and speak against globalization and privatization,'' Raffalli said in an interview. Chávez recently signed a deal with Cuba under which Havana will train Venezuelan teachers and provide educational materials, and Education Minister Hector Navarro last year approved a nationwide essay competition on the life of Argentine-born Cuban revolutionary Ernesto ``Ché'' Guevara. ***

______________________________________________________________

July 12, 2001 - More Cuban Trainers in Venezuela *** CARACAS, Venezuela (AP) - President Hugo Chavez welcomed 270 Cuban sports experts who will train Venezuelan athletes as part of an oil-for-barter pact. Some 600 Cuban trainers, physical therapists, sports psychologists and doctors are in Venezuela, a baseball powerhouse that struggles in sports like soccer, boxing and track and field. Thirty Cuban doctors also arrived in Caracas Wednesday to serve the needy in rural Venezuelan provinces.

It's part of a deal in which Venezuela sells Cuba oil at preferential rates in exchange for Cuban expertise in tourism, sugar, medicines and other areas. Venezuela provides Cuba 53,000 barrels of oil a day - by some estimates worth $500 million a year. Cuban ambassador German Sanchez Otero said Cuban trainers work at schools and with athletes in 20 of Venezuela's 24 states. He stressed a ``synergy'' between Fidel Castro communist Cuba and Venezuela's leftist government. Cuban trainers are sought by many states, including Puerto Rico, a U.S. commonwealth that has its own Olympic team. Alberto Juantorena, Cuban gold medalist in the 400 and 800 meters at the 1976 Olympic Games in Montreal, accompanied the contingent Wednesday. ``If we keep going as we are, we're convinced that Venezuela's sports movement will grow,'' said Juantorena, vice president of Cuba's Sports, Physical Education and Recreation Institute.

Venezuela, with a population of 24 million, hasn't won an Olympic medal since the 1984 Los Angeles Games. It's most renowned athletes are baseball players like Andres Galarraga, Omar Vizquel, Edgardo Alfonzo, Luis Aparicio, Dave Concepcion, Ozzie Guillen and other past and current major league stars. In addition to the trainers, more than 170 Cuban doctors have been working in the Caribbean state of Vargas since flooding killed an estimated 15,000 people there in 1999.***

______________________________________________________

Chavez refused U.S. aid and relief work after the flood and deadly landslides.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.