Venezuelan president plans price controls

www.ctv.ca Associated Press

CARACAS — Venezuelans awaited details of probable strict new currency controls Sunday and President Hugo Chavez warned of price controls to ease their effects.

"So that these (currency) controls do not hurt the poor, we will also institute price controls," Chavez told an assembly in Porto Alegre, Brazil, where he was attending the World Social Forum.

Chavez gave no specifics about what products could face price controls or when they might be put into place. Exchange controls, which Chavez suggested could be part of a long-term plan, are expected to be announced this week.

Oil production, meanwhile, continued to creep up.

Production and Commerce Minister Ramon Rosales told El Nacional newspaper importers and exporters who don't back a crippling strike that began Dec. 2 will have priority for access to U.S. dollars.

"The party's over," Rosales told "coup-mongering businessmen" who oppose Chavez.

That would drive many businessmen to a new but flourishing black market for the U.S. currency, sending already-rising prices even higher.

Rosales said dollars will be guaranteed for food, health, education and raw materials for agriculture.

Chavez suspended foreign-currency dealings for five business days last Wednesday and said he will announce new currency controls to halt the rush of nervous Venezuelans trading in their currency, the bolivar, for dollars. But exactly what the new controls will involve or when they will be announced is the subject of speculation.

On Sunday, Chavez he said he will soon propose a tax on all financial transactions in Venezuela, saying it would be "a kind of Tobin tax." Tobin taxes, named after Yale University economist and Nobel-laureate James Tobin, are designed to tame currency market volatility.

Chavez did not provide more details but said Venezuela's dollar-based reserves dropped by $3 billion US in December and January.

Economists estimate capital flight -- money sent out of Venezuela for safekeeping -- at $1.8 billion US since the strike began. The rush to dump bolivars is blamed for at least part of the currency's loss of 30 per cent of its value this month alone.

The 56-day-old strike has hobbled oil production in Venezuela, the world's fifth-largest exporter and a major supplier to the United States.

Chavez said Sunday production has risen to 1.32 million barrels a day. But dissident oil executives put the figure at about 957,000 barrels, up from 855,000 barrels Friday. Pre-strike production was about 3.2 million barrels, and fell as low as 150,000 barrels early in the strike.

Ali Rodriguez, president of the state oil monopoly, was quoted Sunday saying production is "well over" one million barrels.

Venezuela admits to having lost some $4 billion US in oil revenue since the strike began.

Oil accounts for 80 per cent of the country's foreign exchange and one-third of its gross domestic product.

Dollars are needed to buy food -- about one-half of which is imported -- medicine and other essentials, some of which already are in short supply.

Venezuela is having to import gasoline.

Opponents of Chavez blame him for hurting business and scaring off foreign investment. They tried to schedule a non-binding referendum on his presidency Feb. 2, hoping the results would embarrass him so much he would step down.

But last week, the Supreme Court cancelled the February vote on a technicality.

The constitution allows a binding referendum only midway through Chavez's six-year term, which will be in August.

Members of the opposition circulated petitions at an anti-Chavez rally Sunday seeking to cut the presidential term from six years to four.

A defiant Chavez arrived at Porto Alegre, Brazil, on Sunday for a two-day visit to the World Social Forum, called to protest against global capitalism. He repeated he has no intention of stepping down.

"Our struggle against the terrorists and fascists has further strengthened the will of the Venezuelan people," Chavez said.

"It is one thing is try to get rid of me and another thing to succeed. I have the popularity to remain in power."

Although he had not formally been invited to the forum, which generally excludes heads of state, he received a warm welcome from many of the 100,000 people attending.