WEB-ONLY Venezuela's Chavez Warns Of Price Controls As Opponents Seek His Ouster
By JOSEPH B. FRAZIER | Associated Press 01/27/2003
Venezuelan President Hugo Chavez gestures during a press conference in Porto Alegre, Brazil on Sunday Jan. 26, 2003. - AP |
CARACAS, Venezuela—President Hugo Chavez said he would put in place price and currency controls as Venezuela's economy heads for a tailspin stemming from an opposition strike, which was entering its ninth week Monday.
"So that these (currency) controls do not hurt the poor, we will institute price controls," Chavez said Sunday in Porto Alegre, Brazil, at the World Social Forum. He did not give details of the controls.
Hundreds of thousands of his foes occupied a central Caracas highway for the entire weekend to protest a Supreme Court decision suspending a Feb. 2 referendum on Chavez's rule.
After extending the protest well beyond the 24 hours planned, protesters finally rolled up their national flags - and, in many cases, their tents - and let traffic flow again.
Opposition leaders said instead of the referendum they would collect signatures Feb. 2 petitioning for Chavez to quit, for his term to be cut and for pro-Chavez lawmakers to be replaced.
A coalition of business, labor and political groups called the strike Dec. 2 to pressure Chavez into accepting the referendum.
Although the referendum wouldn't have been binding, opponents had hoped a negative outcome would have embarrassed Chavez into quitting.
Cutting his term through a constitutional amendment would pave the way for early elections. The amendment would involve cutting Chavez's six-year term, currently due to run until 2007, to four.
Amending the constitution requires a popular referendum. Citizens can demand such a vote by collecting signatures from 15 percent of Venezuela's 12 million registered voters.
Chavez suspended foreign currency dealings for five business days last Wednesday to halt the rush of nervous Venezuelans trading in their bolivars for dollars. The currency has lost 25 percent of its value this year alone.
On Sunday, 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 US$3 billion in December and January as a national strike dried up oil exports.
Dollars are needed to buy food - about half of which is imported - medicines and other essentials, some of which already are in short supply.
Venezuela must import gasoline, which is so hard to find that lines at the few open stations sometimes stretch for a mile (1.6 kilometers) or more.
Oil provides 80 percent of the government's foreign exchange and makes up a third of gross domestic product. Before the strike, Venezuela was the world's fifth-largest supplier.
Chavez said Sunday that oil production has risen to 1.32 million barrels a day. But dissident oil executives put the figure at about 957,000 barrels. Pre-strike production was about 3.2 million barrels, and fell as low as 150,000 barrels early in the strike.
Many small businesses that joined the strike at its outset Dec. 2 have since returned to work but thousands of others have refused to open up, despite the damage being wreaked on the economy.
Exchange controls will help protect the bolivar and the government's depleting foreign reserves. But they will hurt many businesses as dollars are needed to buy food, about half of which is imported, medicines and other essentials, some of which already are scarce.
The Santander Central Hispano investment bank has warned that Venezuela's economy could contract as much as 40 percent in the first quarter of 2003. It shrank by an estimated 8 percent in 2002. Unemployment is 17 percent and inflation, fueled by a 46 percent devaluation of the bolivar last year, is 30 percent.