Strike May Ease as Venezuela Prepares Forex Curbs
reuters.com Tue January 28, 2003 04:40 PM ET By Pascal Fletcher
CARACAS, Venezuela (Reuters) - Venezuela's opposition offered on Tuesday to ease their 8-week-old strike by exempting education and food production as the government prepared to introduce a fixed exchange rate to contain the economic impact of the shutdown.
Although oil workers were maintaining their crippling stoppage in the world's No. 5 petroleum exporter, opposition leaders were rethinking their grueling campaign to try to force leftist President Hugo Chavez to hold early elections.
With the oil-reliant economy reeling from the impact of the strike, Chavez's government has chopped back budget spending and suspended currency trading to halt capital flight while it prepares to introduce foreign exchange controls next week.
Finance Minister Tobias Nobrega said late Monday the government was considering a single fixed exchange rate.
Two days before the arrival in Caracas of a six-nation delegation which will lend its weight to peace efforts, opposition negotiators said they were prepared to halt the strike in the sensitive areas of education and food output.
"Our proposal is we should lift the strike in these two sectors as a gesture of goodwill," Timoteo Zambrano of the opposition Coordinadora Democratica group told local radio.
Nobrega late Monday extended the suspension of foreign exchange trading for another week. Government and banking sources said the foreign exchange controls mechanism being discussed foresaw a single exchange rate lasting for four months, adjustable monthly, to be followed by a dual rate.
As businessmen and consumers braced for the foreign exchange controls, analysts said that while such curbs could initially stem capital flight, they would also add to the country's economic turmoil by hiking prices and encouraging corruption and the creation of a currency black market.
This occurred in Venezuela in 1994-96. Other previous experiences in Latin America with currency controls had rarely provided lasting solutions to economic emergencies, they said.
Opposition leaders fear the government will use the measure to punish striking firms by restricting access to dollars.
STRIKE SUPPORT SLIPPING
In recent weeks, support for the strike has slipped and many shops, restaurants and businesses have reopened. Private banks were due to meet Wednesday to decide on returning to normal opening hours, a government source told Reuters.
Opposition leaders are struggling to sustain the momentum of the shutdown. They are debating easing the stoppage in some non-oil areas to give hard-pressed private businessmen and consumers a breather after 58 days of a protest that has triggered an economic crisis but failed to oust Chavez.
The president said Sunday the foreign exchange controls were necessary to protect the bolivar currency and international reserves against what he called an "economic coup" being attempted by businessmen opposed to his self-styled "revolution."
The government and private banks were discussing fixing an exchange rate somewhere between a minimum of 1,500 bolivars and a maximum of 1,850 bolivars to the U.S. dollar. The bolivar closed a week ago at 1,853 bolivars to the dollar.
Chavez's foes accuse him of ruling like a dictator and of trying to drag the oil-rich nation toward Cuba-style communism. He portrays them as a rich, resentful elite defending their privileges against his efforts to implant social justice.
Besides slashing oil exports, the shutdown has also caused unprecedented shortages of gasoline and some food items. Despite complaints from parents, private schools and universities have also joined businesses in staying closed.
ELECTIONS DEADLOCK
In a daily war of words with his foes, Chavez has used these disruptions to try to turn public opinion against the opposition. The outspoken former paratrooper, who survived a coup last year, has refused to negotiate with strike leaders he calls "terrorists, fascists and coup mongers."
Chavez has used troops to partially restore strike-hit oil production, which is still at around a third of normal levels.
Envoys from the United States, Brazil, Mexico, Chile, Spain and Portugal are due in Caracas on Thursday to back ongoing efforts by Organization of American States Secretary General Cesar Gaviria to broker a deal on elections.
The six-nation "group of friends" was formed to try to help break the deadlock in the Venezuelan crisis, which has pushed up oil prices at a time when the United States is considering a war on Iraq. Before the strike, the United States was receiving more than 13 percent of its oil imports from Venezuela.
Rejecting calls for early elections, Chavez insists his foes must wait until Aug. 19, halfway through his current term. After that date, the constitution foresees a binding referendum on his rule, which is scheduled to last until early 2007.
Opposition leaders say the nation cannot wait until August. They are collecting signatures for a constitutional amendment to trigger early elections, an option proposed by former U.S. President Jimmy Carter, who is backing the peace talks.