Venezuelan currency hits record low as bankers join strike against president

08:45 PM EST Jan 08

CARACAS (AP) - Venezuela's currency reached a record low against the U.S. dollar Wednesday after banks said they will close for two days to support a 38-day-old strike seeking President Hugo Chavez's ouster.

Demand for dollars soared on speculation Chavez's government, facing a fiscal crisis because of dwindling oil and tax revenues, would devalue the bolivar to balance its budget. Nervous depositors wanted dollars before the banks closed, not knowing what the bolivar would be worth when banks reopen next week.

Jose Torres, president of Fetrabanca, the umbrella group for bank employees, said banks will shut down Thursday and Friday, adding weight to a strike that has dried up oil income in the world's fifth-largest oil exporter.

The bank strike underscored the intransigence of both sides, despite international pleas for them to help the Organization of American States negotiate a solution to the standoff.

The bolivar plunged by as much as 13 per cent before its official close at 1,510 bolivars to the dollar, down six per cent, said the Central Bank, which uses an average of all the day's trading prices. Previously the lowest close was 1,492 to the dollar on Sept. 15.

Earlier Wednesday, the government tried to raise money by offering 40.5 billion bolivars in government bonds, worth at $29 million US at that point. There were no takers.

National guardsmen fired tear gas Wednesday to disperse pro-Chavez street activists throwing objects at the National Elections Council building, where opposition leaders were holding a news conference.

The strike leaders are calling for a Feb. 2 non-binding referendum on Chavez's rule and want him to schedule an election in 30 days if he loses the referendum.

Chavez insists the constitution only requires him to respect a possible recall referendum next August, the midpoint of his six-year term.

Chavez has gone so far as to threaten nationalizing striking banks, which have opened just three hours a day since Dec. 9. Thousands line up each morning outside Caracas banks that are splattered with graffiti reading: "I want my money!" and "Banker thieves!"

Before Wednesday, the bolivar's value had fallen by more than 45 per cent since Chavez abandoned exchange controls last year to curb capital flight. Venezuela spent $6 billion US in 2001 to support the bolivar.

The strike briefly sent international oil prices above $30. The state oil company is seen as gradually picking up activity but is still operating well below normal. Crude output is estimated at about 400,000 barrels a day, compared with the pre-strike level of three million barrels a day. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Chavez has managed to somewhat stabilize domestic gasoline supplies through imports. Caracas streets were jammed with traffic Wednesday and many businesses were open. However, international franchises, large malls and many factories were closed, emptying industrial parks. Public schools opened for the new year Monday but some private schools have delayed classes.

Three Venezuelan navy ships were collecting Colombian rice, beans and other staples to alleviate strike shortages in Venezuela.

Late Tuesday, Energy Minister Rafael Ramirez threatened to crush the strike by decentralizing the oil monopoly, where 30,000 workers are on strike.

Chavez's government will cut jobs at the Caracas headquarters of the company, a hotbed of dissent where 7,000 are employed, Ramirez said. His government is systematically firing strikers at the giant company.

The strike has all but shut Venezuela's oil industry, which contributes one-half of government income. Other revenue is down because thousands of businesses closed, affecting tax collection. The government is cutting its 2003 budget by 10 per cent.