Venezuela suspends currency dealing - Chavez seeks to prevent collapse of the bolivar in the face of political turmoil

www.guardian.co.uk David Teather in New York Thursday January 23, 2003 The Guardian

Venezuela yesterday suspended foreign exchange trading in an effort to stem the exodus of capital and prevent its crippled currency, the bolivar, from falling further.

The central bank has closed the markets for five days amid the economic and political turmoil that has gripped the Latin American country for the past few months. The bolivar has declined by 25% so far this year after losing almost half its value during 2002.

Venezuela has been brought to a grinding halt by a seven-week old general strike aimed at forcing President Hugo Chavez into resigning or calling early elections.

US-owned multinational corporations including Microsoft and Ford have begun to close local offices and pull people out of the country as street protests have turned into often violent clashes between opponents and supporters of the president. One person died and more than 20 were injured on Monday.

The central bank has been trying to prop up the currency, and Venezuela's foreign reserves are falling fast, currently standing at just over $11bn.

The strike has caused oil production in Venezuela to dry up - before the stoppage, the country was the world's fifth largest oil exporter; the country has lost more than $2bn in sales. The state-owned oil industry provides 70% of export revenue and half the government's income.

There are growing food and fuel shortages and inflation is rampant.

Opposition leaders called the strike, accusing President Chavez of tilting the country into recession.

President Chavez has refused to bend to the demands and maintained that under the constitution a referendum on his leadership can not be held until August - the midpoint of his six-year term.

The central bank said it would announce a new currency policy next week, likely to impose restrictions on the amount of dollars that can be bought and the transfer of funds into foreign accounts.

Opposition and government negotiators are studying proposals from former US president Jimmy Carter to end the deadlock.

The Nobel peace prize winner put forward two plans earlier this week. The first would entail calling a general election and the second would call for a binding referendum on the presidency in August.

A group of six countries with close links to Venezuela, including Spain, the US and Brazil will also meet in Washington tomorrow to consider other means of ending the standoff.